N.V. Nuon Energy
Annual Report 2013
Continued
positioning
for tomorrow’s
energy market
About this report
The annual report of N.V. Nuon Energy is the integrated
representation of our company’s financial and non-financial
performance for the calendar year 2013. The scope of this
report comprises N.V. Nuon Energy and its subsidiaries.
Nuon’s consolidated accounts have been prepared in
accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union. The last section
of the annual report includes the auditor’s report and
the profit appropriation.
Qualitative information about the Vattenfall group and its
activities is included insofar as these activities affect Nuon’s
customers, employees or stakeholders. The qualitative reports
were provided by experts throughout the organisation.
‘We’, ‘Nuon’, ‘Nuon Energy’, ‘the company’, ‘Nuon Energy
Group’, ‘the Nuon Group’, ‘the group’ or similar expressions
are used in this report as a synonym for N.V. Nuon Energy and
its subsidiaries. The name ‘Vattenfall’ or similar expressions
refer to Vattenfall AB, the parent company of Nuon.
Contents
About Nuon
Key facts
1
Highlights 2013
2
Report of the Management Board
4
Market developments
4
Strategy
6
Operational performance
8
Financial performance
15
Outlook and challenges
20
Corporate governance report
22
Report of the Supervisory Board
31
Remuneration report 2013
36
Financial statements
39
Consolidated accounts
40
Notes to the consolidated accounts
46
Company accounts
86
Notes to the company accounts
88
Other
94
Independent auditor’s report
94
Independent assurance report
95
Declaration of Compliance with the Code of Conduct
for Suppliers and Metering companies
97
Profit appropriation
98
Ratios and definitions
99
Nuon at a glance
Nuon is part of Vattenfall
Vattenfall is one of Europe’s largest generators of electricity and the
largest producer of heat. Its main products are electricity, heat and
gas. In electricity and heat, Vattenfall operates in all parts of the value
chain: production, distribution and sales. In gas, Vattenfall is active
in sales. The company also conducts energy trading. The Vattenfall
group has approximately 31,800 employees (FTEs) and the parent
company, Vattenfall AB, is wholly owned by the Swedish State. In 2013,
main operations were conducted in the Nordic countries, Germany,
the Netherlands and the United Kingdom. As from 1 January 2014,
Vattenfall is organised in two regions: Nordic and Continental/UK.
Vattenfall’s operations in the Netherlands are carried out by
N.V. Nuon Energy and its subsidiaries (‘Nuon’). Nuon also has limited
operations in Germany and the United Kingdom. It produces and
supplies electricity, gas, heat and cooling offering its customers
a wide range of energy-saving products and services. Nuon has
approximately 4,800 employees (FTEs) and serves 2.1 million
customers, businesses and public and other organisations in the
Netherlands. With net sales of EUR 3.7 billion in 2013, Nuon holds
a top-three position in the Dutch energy market.
More information about Vattenfall can be found in the 2013 Annual
and sustainability report of Vattenfall AB at www.vattenfall.com.
As part of Vattenfall, Nuon’s financial and sustainability results are
included in this Vattenfall report. More detailed information about
Vattenfall’s work with sustainability is also available at
www.vattenfall.com.
Vattenfall is organised in two regions: Nordic and Continental/UK. Nuon is part of Continental/UK.
Nuon
■
Employees, full-time equivalents (FTEs)
■
Fossil-based electricity production
■
Renewable electricity production
■
Nuclear electricity production
■
Investments
■
Net sales
■
Loss for the year
Vattenfall Group
4,833
16.6 TWh
1.6 TWh
0.0 TWh
384 million
EUR 3,720 million
EUR 419 million
EUR
■
Employees, full-time equivalents (FTEs)
■
Fossil-based electricity production
■
Renewable electricity production
■
Nuclear electricity production
■
Investments
■
Net sales
■
Loss for the year
31,819
87.9 TWh
41.9 TWh
51.9 TWh
3,134 million (SEK 27,761 million)
EUR 19,379 million (SEK 171,684 million)
EUR 1,529 million (SEK 13,543 million)
EUR
A b o u t N u on
Key fa c t s
N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
1
Key facts
The energy sector continues to be under pressure from overcapacity,
■
■
lower demand, fierce competition and the increasing share of
sustainable energy capacity, the free cash flow is positive and
subsidised renewable energy coming from Germany;
The market will remain very challenging in the coming years, especially
■
amounts to EUR 28 million (2012: EUR -743 million);
■
for gas-fired power plants;
As a result of these circumstances, Nuon recognised an impairment loss
■
■
After several years of investing in the security of supply and
In 2013, Nuon invested EUR 89 million in sustainable energy
production capacity;
■
On 1 July 2013, Vattenfall acquired an additional 11.96% of the
of EUR 687 million in 2013, specifically on the value of our gas-fired
Nuon shares. Consequently, Vattenfall holds 79% of the Nuon shares.
production assets;
The remaining 21% of the shares, which are currently owned by Dutch
The underlying operating result decreased by 37% to EUR 210 million
provinces and municipalities, will be acquired by Vattenfall in 2015
(2012: EUR 333 million);
under fixed terms.
Nuon key facts
2013
2012
change in %
Financial (EUR million)
Net sales
Earnings before interest, taxation, depreciation and amortisation (EBITDA)
Underlying earnings before interest, taxation, depreciation and amortisation (EBITDA)1
Operating result
Underlying operating result1
Net result
Underlying net result1
Investments
Cash flow from operating activities
Free cash flow
Net debt
3,720
365
424
-536
210
-419
153
384
412
28
1,034
3,879
-16.2%
6.1%
46.0%
-24.9%
-34.9%
8.8%
-30.7%
48.8%
-5.7%
4,833
1.6
5,200
-7.1%
1.2
33.3%
16.6
1.6
444
13.3
24.8%
-4.1%
321
13.7%
515
-17.7%
-938
-42.9%
333
-36.9%
-716
-41.5%
280
-45.4%
778
-50.6%
32
1,187.5%
-743
-103.8%
1,028
0.6%
Ratios
Return on capital employed
Underlying return on capital employed1
Solvency
Employees (as at 31 December)
Number of own employees (FTE)
Lost Time Injury Frequency (LTIF)2 for own personnel
Electricity production and emissions
Fossil-based electricity production (TWh)
Renewable production (TWh)3
CO2 emissions per generated unit of electricity (g/kWh)4
1.5
7.2%
467
-4.9%
Sales volumes
Sales of electricity (TWh)
Sales of gas (TWh)
Sales of heat (TWh)
1
2
3
4
19.8
51.5
4.1
21.9
-9.8%
53.6
-3.9%
4.0
3.0%
For items affecting comparability and the impact from divestments, which are excluded from the underlying results, refer to the financial overview on page 15.
Number of accidents leading to sick leave divided by the total number of hours worked, multiplied by one million.
Electricity production by joint ventures and externally contracted capacity is fully included.
This relates to the CO2 emissions factor of the energy production fuel mix.
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A b o u t N u on
Contents
N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
High l ight s 2 0 13
Highlights 2013
May
July
City Partnership
Nuon to build new
wind farm in the UK
Nuon and the municipality of Amsterdam
agree to cooperate in a City Partnership:
in the coming years, both parties will
join forces to promote and realise energy
savings, using solar and wind power.
The city’s heat and cold network of
Westpoort Warmte, a joint venture
of Nuon and Afval Energiebedrijf
Amsterdam, expands to Houthaven,
the new climate-neutral district.
A decision is taken to build a
new wind farm in Southern Wales,
at an investment of GBP 384 million
(EUR 460 million). This wind farm,
named Pen y Cymoedd, comprises
76 wind turbines with a combined
capacity of 228 MW and is expected
to be commissioned in late 2016.
February
First electricity deliveries
from Magnum gas-fired
power plant
The Magnum gas-fired power plant (total
installed capacity of 1,311 MW) in Eemshaven
makes its first deliveries of electricity.
As a result of deteriorated market conditions,
starting in 2014 only one of the three units
is put into commercial operation.
June
September
Two new gas-fired
power plants
Inauguration of the
Princess Alexia Wind Farm
Two new Dutch gas-fired power plants are
opened: Hemweg 9 and Diemen 34. Both
plants have a high electrical efficiency of over
59%, making the plants more environmentally
friendly and among the most efficient in the
Netherlands. Diemen 34 also provides heat
to local district heating networks, increasing
its efficiency to maximum 85%.
The Zuidlob land-based wind farm in the
Netherlands, comprising 36 turbines with
a combined capacity of 122 MW, is officially
opened. Her Royal Highness Princess Beatrix
inaugurates the facility, changing the name
to that of her granddaughter:
Princess Alexia Wind Farm.
2
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A bout Nuon
A b o u t N u on
High l ight s 2 0 13
N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
3
November
Heat in Arnhem
Nuon decides to invest EUR 19 million
in the Arnhem region’s heat supply
by constructing an interconnector
between the heating networks of
Duiven, Arnhem and Westervoort.
Using this interconnector, homes
in Arnhem can be heated with the
residual heat from the AVR waste
and power plant in Duiven, which
will help to decrease CO2 emissions.
October
December
Nuon Solar Team wins
World Solar Challenge 2013
New office building
With a fully redesigned solar car, the Nuna7,
the Nuon Solar Team wins the bi-annual
World Solar Challenge across Australia for
the fifth time in seven attempts. In an exciting
final, the team, consisting of students of
the Technical University Delft, defeats
the defending champions.
December
Launch of customer
loyalty program
Nuon launches ‘Nuon Exclusief’, a customer
loyalty programme aimed at rewarding Nuon’s
loyal customers. The longer the customer stays
with Nuon, the greater the benefits.
Some 2,100 Nuon employees move into the
new office building in Amsterdam Zuidoost.
The fully renovated office offers 26,000 m²
of space for the employees, who were
previously spread across different locations.
The building has energy label ‘A’, a BREEAM
score of ‘very good’ and is easily accessible
by public transport. To celebrate the opening
of the new office, Nuon organises a large
St Maarten parade, together with nearby
primary school De Polstok. Approximately
500 children take part in the event.
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A b o u t N u on
Contents
N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
Repor t of the Management Board
Report of
the Management Board
The entire European energy industry is undergoing a fundamental transformation.
In recent years, prices have continued to fall due to a surplus of production
capacity, weak demand and subsidised renewable energy imported from Germany,
triggered by the ‘Energiewende’. We believe that the future energy landscape will
be more fragmented and local than in the recent years. Adapting to these changes
therefore means that we face a number of challenges in positioning our company
for tomorrow’s energy market.
Market developments
Electricity generation is part of a complex global system in which
production costs, regulation and sustainability aspects all interact.
Everyone in society needs access to power, at the lowest possible price
and with the least possible environmental impact. During the year,
it became even clearer that the traditional business model, based on
large-scale electricity generation in conventional power plants, is being
challenged. Awareness of the negative consequences of climate-affecting
emissions from coal has increased, while the expansion of renewable
energy continues with undiminished strength. At the same time,
increasing numbers of consumers want to be able to control and
have detailed information about their energy consumption.
These market conditions changed after the financial crisis in Europe,
and demand for electricity has since fallen. Some electricity-intensive
industry has been shut down or moved out of Europe. Meanwhile, large
amounts of renewable energy have been added as a result of political
policies, financial support systems and technological development.
New conventional power plants were built and commissioned. These
developments have resulted in overcapacity in the market which in turn
has led to lower prices on the electricity exchanges. Consequently,
conventional coal- and gas-fired power plants are not profitable all
hours of the day; in fact the number of hours per day that a gas-fired
power plant is profitable has decreased dramatically. Nevertheless,
these gas-fired power plants are still needed to provide flexibility
to compensate for the intermittent availability of renewable energy.
Surplus of production capacity
Changes in profitability between types of power
Up until only a few years ago, the general view in the market was that
electricity would be generated in large-scale power plants, providing
economies of scale. The price trend in both the spot and futures markets
pointed upward, largely owing to rising costs for CO2 emission
allowances. Demand for electricity in Europe was high, especially from
industry. As a result of this outlook, subsidies and support systems,
substantial new production capacity was added, consisting of both
conventionally operated power plants (hard coal and gas) and renewable
energy, such as wind power and solar energy. In addition specifically
the gas-fired power plants were expected to become vital for the stability
and reliability of supply into the electricity grid, as they offer the
flexibility to absorb the intermittent availability of renewable energy.
Electricity generation based on natural gas has lost competitiveness
against coal-based generation. In recent years, coal prices have fallen
globally – including in Europe. This is partly due to a drop in domestic
demand for coal in the United States, where the increased production
of shale gas has led to a greater supply of cheap gas. A large share of
the US coal surplus is being exported. Due to the growth of renewable
energy, gas-fired power is not needed as often as expected for balancing
power during hours when demand for electricity is highest (‘peak hours’).
Energy policy differences among the European countries, combined
with the declining significance of the EU Emissions Trading System
(EU ETS) for CO2 emission allowances, have resulted in a low price
for the allowances.
An industry in transformation
4
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A bout Nuon
A b o u t N u on
Repor t of the Management Board
N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
5
Clean Dark Spread (CDS) and Clean Spark Spread (CSS) in the Netherlands
€/MWh
40
30
20
10
0
-10
2009
CDS
2010
2011
2012
2013
CSS
Due to these developments, the margins for electricity generation based
on coal are higher than for gas. In January 2010, clean spark spreads
(the margin on electricity generation using gas, including the cost of
CO2 emission allowances), based on futures prices for 2014, were above
EUR 35/MWh. Three years later, this margin moved into negative
territory, while margins for coal-fired electricity generation remained
relatively stable.
Rising pressure on cities
Lower costs for new, renewable capacity
Changes in the value chain
Given today’s wholesale electricity prices, construction of new generation
capacity is not profitable for any type of power without subsidies or
support systems. At the same time, the cost to generate electricity from
renewable energy sources has decreased in recent years. This applies,
above all, to wind power and solar energy. For example, the production
cost of building land-based wind power-generating facilities in favourable
areas is among the lowest for all new construction alternatives.
Customers’ increased influence over their own electricity production
is leading to changes in the traditional value chain. Electricity no longer
flows only ‘downstream’, i.e. from large-scale power plants through
the electricity grid to end customers. Instead, it is increasingly being
generated by small-scale power plants or solar panels, where it is fed in
to local and regional networks. More customers are becoming so-called
prosumers (customers who are both consumers and producers), where
the flow between the traditional electric utility and customers is moving
in both directions.
The need for flexibility will grow
Since conventional power plants are not profitable during certain hours
of the day due to the increased generation of renewable energy, a need
has emerged to create the technical ability to start and stop plants
on short notice and at a low cost. Gas-fired power plants can provide
the production flexibility needed to compensate for the continuous
fluctuation in the supply of renewable energy, but are in turn affected
by the changes in profitability between different types of power.
Meanwhile, there will be an increased need to steer electricity demand
(referred to as ‘demand-side management’) in an effort to smooth out
consumption over a 24-hour period, improve price elasticity and better
conform to electricity generated from intermittent sources like solar
energy and wind power.
Sustainability is becoming increasingly important, and many cities are
setting their own sustainability targets. Cities like Amsterdam, Rotterdam,
Arnhem and Nijmegen are committing themselves to these targets.
This is generating opportunities for companies that can create
innovative energy efficiency products, heat and cold production
and transportation solutions.
Increased competition
Customer mobility, defined as the number of customers switching
between suppliers, has increased. This was accelerated by large-scale
energy auctions in which organisations tender for low prices on behalf
of groups of customers. Customers are also more engaged in finding
out the source of the electricity they use, and interest is rising in local
electricity generation and source-labelled electricity and heat.
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A b o u t N u on
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N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
New opportunities in the customer market
A new market for customer-centric services is emerging, as many
customers are seeking to be more active as consumers. Smart electric
meters make it possible for individual customers to have more influence
over their consumption patterns. In some cases customers even want
to be electricity producers themselves. These prosumers are creating
new business opportunities for the energy companies, which can offer
access and connection to the electricity grid for solar panels or other
self-produced electricity, provide assistance in handling the balance
between production and consumption, or provide the tools and services
that enable customers to influence their consumption. For the electric
utilities, positioning the brand in this new energy landscape represents
a major opportunity.
Political frameworks affecting Nuon
Nuon’s operations are governed to a high degree by political regulations
and frameworks. The EU’s climate and energy package for 2020 provides
guidelines on how much each EU member state must reduce emissions
by 2020 to ensure that the EU meets its climate targets. The 2020
framework will soon be followed up with goals and measures for 2030.
However, EU countries differ in their rules and regulations for achieving
their emission targets. In the UK, the Electricity Market Reform (EMR)
programme aims to bring about a shift to a secure, climate-friendly
electricity supply at a time when large parts of Britain’s aging power
system are in great need of renewal. In Germany the ‘Energiewende’
symbolises the transition to a sustainable economy by means of renewable
energy, energy efficiency and sustainable development. In the Netherlands,
the political situation for the past ten years has been characterised by
enormous volatility in energy policy plans. However, in September 2013,
the Dutch energy sector, government, trade unions and environmental
organisations signed the Energy Agreement for Sustainable Growth.
This commitment outlining policy and targets for renewable energy until
2023, is expected to bring more stability to the Dutch energy policy.
Under the agreement, the share of renewable energy in the Netherlands
(as a percentage of total energy production) must rise to 16% in 2013.
The idea is to significantly boost wind production capacity, both onshore
and offshore, to increase the co-firing of biomass in conventional power
plants and to close old and inefficient coal-fired power plants. This last
issue is not a concern for Nuon as our power plants are relatively
efficient. Furthermore, the Dutch coal tax, which was reintroduced
in 2013, will be abolished again in 2016. And in August 2013, the
‘Leveranciersmodel’ (supplier’s model) was introduced, with the aim
of offering customers a clear insight in their power and gas bills.
Repor t of the Management Board
6
Summarising these market developments, it can be said that the
breakdown of operating profit for the electricity industry as a whole
is expected to move away from the previous model, where large-scale
electricity generation accounted for the largest share of earnings.
An increasingly larger contribution is thus expected to come from sales
activities, including new products and services related to small-scale
electricity generation or energy efficiency improvements, and from
renewable energy production.
Strategy
Vattenfall faces a number of challenges and must adapt to the changed
market conditions. Its large-scale electricity generation must be modified
to fit a market situation in which electricity prices are considerably lower
than in the past. Costs must be lowered along the entire value chain, the
production portfolio must be restructured and flexibility must be increased
where technically possible. At the same time, new financing solutions
need to be found in order to increase investments in renewable energy –
mainly wind power. Demand from customers and society for new,
sustainable products and services must be met.
Vattenfall’s strategy, which was laid out in 2010 and modified in 2012,
continues to apply. Vattenfall will reduce its CO2 exposure, grow in
renewable energy, and build up a market position offering smart and
sustainable energy solutions. Vattenfall will continue to reduce costs and
develop operational excellence. Sustainability is an integral part of its
strategy and a prerequisite for the ability to deliver on its strategic focus
areas and goals. Nuon translates this strategy in such a way that it
contributes to overall value creation while fulfilling the needs of its
shareholders and local stakeholders.
New regional organisation
On 1 January 2014, Vattenfall adopted a new geographic organisational
structure, and has now been split into two regions – Nordic and
Continental/UK. In contrast to the former functional organisational
structure, a regional structure gives the company greater opportunities
to address national differences and changes in the energy market.
The new organisation also increases Vattenfall’s strategic and
financial flexibility.
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A bout Nuon
N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
Five strategic focus areas
Vattenfall’s mission is to generate a market rate of return by operating
a commercial energy business that enables it to be among the leaders in
developing environmentally sustainable energy production. As guidance
for the achievement of this objective, in 2012 the Board of Directors
established four strategic focus areas. In 2013, a fifth focus area was
added which defines Vattenfall’s strategy in the end customer market.
The focus areas described below outline Vattenfall’s strategy for shifting
its production portfolio towards more sustainable energy production
and offering customers sustainable and smart energy solutions. At the
same time, Vattenfall must be able to generate a market rate of return
and be a financially stable company.
Growth in renewables
Growth in renewable energy is important for Vattenfall. One of
Vattenfall’s main goals is to grow faster than the market with respect
to renewable energy capacity. This has to be balanced against limited
financial resources as well as limited scope and profitability of new
projects due to the difficult market conditions throughout the energy
industry. The challenge is therefore to recover capital and free up funds
for investments in renewable energy without burdening cash flow,
for example by realising growth projects in partnership with other
companies or inviting external financiers to become part owners of
projects that have already been commissioned. Expanding further in
district heating projects also provides valuable opportunities to expand
further in renewable energy, as district heating provides a significant
reduction of CO2 emissions in comparison with conventional gas-heated
boilers. Finally, the continuing growth of intermittent renewable energy
capacity will further increase the demand for flexibility of conventional
power plants, which fits well with Nuon’s work related to gas-fired
power plants.
Strong Nordic position
The Nordic countries are a natural focus area for Vattenfall given the
company’s strong market position in that region. Today, Vattenfall has
a leading position in the Nordic market throughout the value chain
and intends to further strengthen this position. This focus area of the
Vattenfall strategy does not directly affect Nuon, since Nuon does not
have any operations in Nordic countries. However, the Netherlands
is identified as a core market in the Vattenfall Group. Nuon therefore
strives to consolidate and, where possible, further strengthen its
position in the Dutch market.
A b o u t N u on
Repor t of the Management Board
7
Define measures to reduce Vattenfall’s CO2 exposure
Production costs are mainly affected by the type of fuel used and
the cost of any CO2 emission allowances. Despite setbacks due to the
low prices of CO2 emission allowances and a lack of political support
and acceptance for Carbon Capture and Storage (CCS), Vattenfall is
maintaining its goal to reduce its emissions to 65 million tonnes of CO2
by 2020. Measures currently planned for Vattenfall’s own operations
will lead to a reduction to 79 million tonnes of CO2 emissions. In order
to reduce the CO2 emission exposure by another 14.6 million tonnes,
operations must be partly or fully sold.
Offer smart and sustainable energy solutions
The changed market conditions in the end customer markets, where
customers are increasingly asking for energy-efficient and sustainable
energy solutions, represent a major opportunity. To capture those
opportunities Vattenfall aspires to be a ‘Smart Energy Enabler’.
This entails promoting energy efficiency (by mapping, advising,
measuring and visualising customers’ electricity, gas and heat
consumption) and developing energy efficiency improvement solutions
together with customers.
Stronger focus on Operational Excellence and cost-cutting
Vattenfall has been working to consolidate the company and reduce
costs since 2010. Annual costs have thus far been cut by EUR 1 billion
(SEK 9 billion). In 2013, Vattenfall decided to increase its costs
reductions for 2014 from EUR 0.2 billion (SEK 1.5 billion) to
EUR 0.3 billion (SEK 2.5 billion) and to set a new savings target of
EUR 0.2 billion (SEK 2 billion) for 2015. However, this will not be
achievable without substantial staff reductions. On 6 March 2013,
Vattenfall announced that the number of employees is expected
to decrease by approximately 2,500 by year-end 2014, including
a reduction of approximately 500 FTEs in the Netherlands. Vattenfall
will continue to focus on Operational Excellence and foster a culture
of continuous change, improve work processes and enable knowledge
sharing within the various operations. Activities that are not profitable
or not strategically important will be divested or discontinued.
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N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
Repor t of the Management Board
Operational performance
8
are hedged within the trading organisation. In addition, Nuon conducts
proprietary trading in these energy commodities. Risk mandates are set
for both hedging and proprietary trading.
Developments during the year – Energy generation
Energy generation covers the development and construction of production
plants and the production of electricity and heat. Operation of the plants
is optimised on the basis of the forecasted production spreads and the
variable power plant costs. Production spreads are affected mainly by
the price of electricity and heat, the type of fuel that is used and the cost
of any CO2 emission allowances. The electricity and heat produced along
with the fuels and CO2 emission allowances are traded on the wholesale
market, on exchanges and with bilateral counterparties. As part of
Vattenfall, the aim for Nuon is to reduce the impact of the volatility
of market prices of these commodities on group results. As such, part of
Nuon’s future electricity generation and required fuel and CO2 purchases
Generation activities
Nuon’s operations are primarily concentrated on three sources of energy:
wind, natural gas and coal, with approximately 5,834 MWe (electricity)
and 3,167 MWth (heat) of installed production capacity. The majority
of electricity is produced by gas-fired power plants. During 2013,
18.2 TWh of electricity, an increase of 25% compared to 2012, and
4.5 TWh (16.3 PJ) of heat were produced. Installed own wind capacity
increased by 25% to 471 MWe.
Installed capacity and production per energy source
Capacity1
2013
MWe
Hard Coal
Gas
Oil
Total Production Plants
Wind
Wind contracted externally
Hydro
Solar
Biomass
Co-firing biomass
Total Renewables
Total
1
2
Electricity
Production2
2013
2012
GWh
903
4,181
5,084
4,753
11,803
16,556
471
245
24
7
2
749
1,061
456
74
2
4
10
1,606
5,834
18,162
Heat
Production2
2013
2012
Capacity1
2013
GWh
MWth
TJ
TJ
2,947
213
3,160
16,115
41
16,156
1,484
7
7
147
147
151
14,750
3,167
16,303
15,824
5,636
7,630
13,266
823
472
75
4
6
104
15,307
366
15,673
151
-
Electricity capacity of production plants decreases with a higher heat supply capacity. The amount depends on factors such as the temperature of the outside air, cooling water
and heating pipelines. Wind capacity relates to wind parks in which Nuon has a majority or minority interest or which Nuon has contracted externally. For this capacity Nuon feeds
the electricity into the electricity grid via grid connection points. The pro rata Nuon ownership wind capacity amounts to 360 MWe.
Production of electricity comprises all electricity that Nuon, acting as producer and benefical owner, feeds into the electricity grid via grid connection points (for the UK wind farms
through Vattenfall).
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Fossil-based energy generation
The clean spark spread has decreased further and was around or
even below zero for most of the year. This is the result of structural
overcapacity, low CO2 emissions and coal prices and the growing share of
subsidised renewable energy imported from Germany. As a consequence,
both the profitability and the number of operational hours of our gasfired plants have further decreased. These market conditions are not
expected to improve in the foreseeable future, which increases the
business risk in the industry. As a consequence of this increased risk
profile and revised long-term outlook, Nuon recognised total
impairment losses on production assets of EUR 0.6 billion.
In late February, the first deliveries of electricity were made from the
Magnum gas-fired power plant in Eemshaven, Groningen. The total
installed capacity amounts to 1,311 MW. This additional capacity
was expected to be required and decided upon before the effects
of the economic crisis and the ‘Energiewende’ became apparent.
However, as a result of the deteriorated market conditions it was
decided, starting in 2014, to put only one of the three units of the
power plant into full commercial operation. This decision was made
in response to the increasingly difficult market position of natural
gas-fired power plants in the European energy market.
The Willem-Alexander power plant in Buggenum was closed in March.
The 253 MW power plant was taken into operation in 1993 as a coal
gasification demonstration plant. Due to the rapidly changed market
conditions and the cost structure of the plant, its operations were no
longer profitable. Plans to co-fire biomass on a large scale proved
inadequate to change this situation.
In June 2013, Nuon officially opened its new Hemweg 9, Diemen 34
and Magnum gas-fired plants. Both Hemweg 9 and Diemen 34 are
highly efficient gas-fired power plants (STEG power plants), offering
an installed electricity capacity of 435 MW. In addition, Diemen has
a heat capacity of 260 MW. These new gas-fired power plants were
developed anticipating market circumstances were the flexibility to
absorb the intermittent availability of renewable energy would become
increasingly important. By offering this flexibility they make a major
contribution to maintaining the reliability of the energy supply in
the Netherlands.
Renewable energy generation
In line with Vattenfall’s strategic objective to continue growth in
renewable energy production, and despite the difficult economic
circumstances affecting the energy industry as a whole, Nuon invested
in developing new wind farms.
9
Investments in renewable energy capacity | RA-verified
Amounts in EUR million
100.3
100
88.8
0.2
0.2
80
60
88.6
100.1
40
20
0
2 012
2013
Wind
Solar
Hydro
In 2013, the total installed wind power capacity, including externally
contracted wind farms, amounted to 716 MW. The total annual wind
electricity production was 1,517 GWh, which was 15% more than in
2012. Wind levels in 2013 were comparable to 2012. In July and August
there was less wind compared to previous years, but this negative effect
was offset by the strong autumn winds in October and December.
Despite comparable weather conditions, Nuon’s wind farms generated
238 GWh more electricity in 2013. This was due to the contribution
of the new Princess Alexia Wind Farm, which produced electricity
for the first time in 2013. The Princess Alexia Wind Farm consists
of 36 wind turbines, with a combined capacity of 122 MW. In total,
Nuon’s onshore wind capacity, spread over 28 wind farms, offers an
installed capacity of 363 MW. The only offshore wind farm, near the
coast of Egmond aan Zee, adds another 108 MW to the overall installed
wind capacity. The remaining 245 MW capacity relates to externally
contracted wind farms.
In July, it was announced to invest in a new onshore wind farm in the
United Kingdom. The Pen Y Cymoedd wind farm in the south of Wales
will consist of 76 wind turbines, which will provide a combined installed
capacity of 228 MW. This is enough to supply 140,000 homes with
renewable energy. Construction starts in 2014 and is expected to take
approximately three years to complete. The total investment amounts
to approximately EUR 460 million.
Total investments in renewable energy generation in 2013 amounted
to EUR 89 million. The majority of the EUR 89 million was invested in
the completion of the Princess Alexia Wind Farm and the development
of the Pen Y Cymoedd wind farm. The remainder was spent on the
development of new wind farms in the Netherlands, including Beaufort,
IJsselmeerdijk and Wieringermeer.
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Nuon fuel mix energy production in the Netherlands
Repor t of the Management Board
| RA-verified
%
27.0%
Coal
25.9%
Natural gas CHP
22.6%
Natural gas power stations
15.7%
Blast furnace gas1
8.3%
Wind2
0.4%
Hydro
0.1%
Biomass
0.0%
Solar
Fossil-based energy
Renewable energy
CO2 emission rate
Radioactive waste rate
1
2
91.2%
8.8%
444.0 g/kWh
0.00000 g/kWh
At our power plants in Velsen, the residual gas released during the steel production of
Tata Steel is used as a fuel to produce electricity. In this way, this blast furnace gas is put
to good use by Nuon. The gas contains a high percentage of CO2. It has been agreed with
the Office of Energy Regulation of the Dutch Competition Authority that Nuon is to adjust
the CO2 emissions in the production fuel mix to avoid double counting. The CO2 emission
factor of blast furnace gas is calculated in this mix on the basis of the use of natural gas.
The wind energy production comprises all electricity that Nuon, as producer and beneficial
owner, feeds into the electricity grid via grid connection points.
Nuon energy production fuel mix
Despite the strong increase of electricity production by 25%, Nuon’s
CO2 emissions rate decreased by 5% to 444 grams per kWh, reflecting
the use of cleaner energy sources. The new gas-fired power plants
– Magnum, Diemen 34 and Hemweg 9 – have resulted in a higher share
of gas-fired electricity production compared to prior years. While the
closure of the coal-fired Buggenum plant in March reduced the share of
coal-fired electricity production. Both installed capacity and electricity
production from wind power increased significantly compared to 2012
as a result of the opening of the Princess Alexia Wind Farm. However,
the share of wind power in the fuel mix decreased due to the strong rise
in electricity production from the gas-fired power plants.
Developments during the year – Customers
Satisfied customers are a prerequisite for the success of the business.
Customer behaviour, driven by customer satisfaction and loyalty,
has a significant effect on Nuon’s results.
10
Increased customer mobility
The consumer market is fiercely competitive, resulting in higher
customer mobility. The growth of the number of large-scale collective
customer auctions continued in 2013, further accelerating the volume
of switches between suppliers. The number of Nuon electricity contracts
decreased from 2.2 million in 2012 to 2.1 million in 2013. In the same
period, the number of gas supply contracts also decreased, from
1.9 million to 1.8 million.
Dutch electricity sales to consumers and business customers decreased
from 17.8 TWh in 2012 to 17.2 TWh in 2013 and gas sales increased
by 0.4 TWh to 51.5 TWh. The higher gas volumes in early 2013, which
where due to the cold weather, were almost completely offset by the
relatively mild final months of the year. Financial results were also
impacted by higher costs due to the implementation of the new market
model. Energy suppliers are now responsible for collecting all meter
readings and the billing and collection of all network charges. Previously,
these tasks were carried out by the grid companies.
In addition to offering conventional and sustainable electricity, gas and
heat products, Nuon also aspires to be a ‘Smart Energy Enabler’ and thus
offers its customers energy efficiency improvement solutions. Besides
products like boilers, insulation and ventilation, solutions are also
provided in the form of energy advice, working with customers to help
them gain control over their energy bill.
Business solutions
In the B2B segment, the number of connections increased by 8,000 to
97,000 in 2013. Nuon’s energy experts offer business customers tailormade solutions that extend beyond the physical deliveries of electricity
and gas. These range from delivering sustainable cold and heat
solutions, to real-time monitoring of electricity use, tools for risk
management, market information and advice on reducing energy costs
as well as CO2 emissions. In 2013, Nuon also worked closely with
Amsterdam RAI and Amsterdam ArenA to help them install solar panel
roofs measuring 2,700 m² and 7,000 m², respectively.
Fuel mix energy supply
All electricity suppliers in the EU are legally required to publish the
fuel mix of their electricity supply to customers. Nuon’s supply mix
is shown in the figures on the next page, which illustrates that the
majority of supply in the Netherlands is sourced from natural gas.
The share of renewable electricity represents the number of Guarantees
of Origin (GoO) used for the green electricity supplied to end customers.
This share showed a slight decrease, from 15.9% in 2012 to 15.2%
in 2013.
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Fuel mix energy supply Nuon Group | RA-verified
District heating
Nuon is one of the largest providers of district heating in the Netherlands.
Nuon delivered 4.1 TWh of district heating in 2013, 2.5 TWh of which
went directly to consumers and business customers, while the remainder
was sold in the wholesale market. District heating fits well with Nuon’s
strategy, since it offers a 50% to 80% reduction of CO2 emissions compared
to conventional gas-heated boilers, depending on the source of the heat.
%
49.3%
Natural gas
25.5%
Coal
10.9%
Hydro
5.2%
Miscellaneous
4.8%
Nuclear
4.2%
Wind
0.1%
Biomass
0.0%
Solar
Fossil-based energy
84.8%
Renewable energy
15.2%
CO2 emission rate
397.5 g/kWh
Radioactive waste rate
11
0.00015 g/kWh
Nuon decided to invest EUR 19 million in the heat supply structure in
the Arnhem region, where the demand for district heating is increasing
as a result of newly constructed homes and local urban improvements.
By constructing a five-kilometer interconnector, the heating systems
of Duiven, Arnhem and Westervoort will be linked. This will mean that
in future, homes in Arnhem can be heated using the residual heat from
the AVR waste and power plant in Duiven. The interconnector is
expected to be completed by the end of 2014.
Nuon fuel mix energy supply business market | RA-verified
%
47.0%
Nuon also cooperated with Warmtebedrijf Rotterdam and the Rotterdam
municipality in a project called De Nieuwe Warmteweg. The project
involved the construction of a 26-kilometer heat pipeline to connect
the waste incinerator in Rozenburg with Nuon’s district heating system
on the south bank of the Nieuwe Waterweg. Nuon transports the heat to
city households, some 23,000 of which will be connected to the district
heating grid over the next few years. However, the ambition of the
municipality reaches even further. Ultimately, the aim is to provide
150,000 homes throughout Rotterdam with district heating.
Natural gas
24.3%
Coal
17.1%
Hydro
5.0%
Miscellaneous
4.6%
Nuclear
1.9%
Wind
0.1%
Biomass
0.0%
Solar
Fossil-based energy
80.9%
Renewable energy
19.1%
CO2 emission rate
378.7 g/kWh
Radioactive waste rate
0.00014 g/kWh
Nuon fuel mix energy supply consumer market | RA-verified
%
51.4%
Fossil-based energy
Renewable energy
CO2 emission rate
Radioactive waste rate
Natural gas
26.6%
Coal
6.2%
Wind
5.4%
Miscellaneous
5.3%
Hydro
5.1%
Nuclear
0.0%
Biomass
0.0%
Solar
At the end of 2013, Nuon started building a heat storage facility at its
location in Diemen. The 50-metre high heat buffer will have a maximum
capacity of 22,000 m3 and is expected to be finalised in 2015. The heat
buffer will enable residual heat from our two CHP plants in Diemen
to be stored. The heat is used in the district heating systems in Almere,
IJburg and Amsterdam Zuid-Oost. The new facility will mean that the
supply of heat to the district heating systems will be partially decoupled
from the production of heat and electricity. As a result the two power
plants can be run more efficiently, leading to fuel savings and lower
CO2 emissions.
As part of its ‘City Partnership’ with the municipality of Amsterdam,
Nuon has also developed several district heating initiatives in Amsterdam.
88.5%
11.5%
414.5 g/kWh
0.00015 g/kWh
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City Partnership
‘City Partnership’ is Vattenfall’s concept for contributing to cities’
efforts to shift to more sustainable energy use. The aim is to take a
comprehensive approach to urban energy systems and develop solutions
in which Vattenfall integrates various products and services. Vattenfall
has entered into City Partnerships with the municipalities of Uppsala,
Berlin and Hamburg. In the Netherlands, Nuon has started a cooperation
with the municipality of Amsterdam to promote and realise energy
saving among its inhabitants using more renewable energy sources.
Amsterdam has set the target of lowering its CO2 emissions by 40% by
2025 compared with 1990. In cooperation with the city, Nuon is making
a contribution by replacing gas-based heating with district heating and
has also invested in storage facilities for district heating. Nuon offers
district cooling to companies as well, using water that is cooled in
nearby lakes.
In 2013, the city’s heat and cold network of Westpoort Warmte, a joint
venture of Nuon and Afval Energiebedrijf Amsterdam (the municipality’s
Waste Energy Company), expanded to Houthaven, the new climateneutral district in Amsterdam. Houthaven is a model project for the
city’s aspiration to construct 100% climate-neutral buildings. The total
investment amounts to EUR 26 million. No other district has yet combined
district heating and comfort cooling, using cold surface water, on such
a large scale.
In 2013, Nuon and partner Heijmans also continued to expand their
public charging network for electric cars in the Amsterdam region, as
200 additional charging stations were installed. Close to 800,000 kWh
of green electricity have been supplied to electric vehicles, equalling
approximately 4 million electric kilometers.
Customer satisfaction
A key driver for Nuon’s sales operations is customer satisfaction.
The overall customer satisfaction index improved slightly in 2013 to 73,
compared to 72 in the previous year. In the last quarter of 2013, we
experienced challenges with the phone accessibility of our customer
contact centre. As a result, waiting times were temporarily unacceptably
high. A lot of effort and resources were invested in bringing quality and
performance back up to the desired level.
Repor t of the Management Board
In light of these developments we re-evaluated our branding strategy
and decided to stop the rebranding to Vattenfall, and instead to maximise
the benefits of the strong Nuon brand. We will launch new campaigns,
explicitly engage with our customers, focus on customer loyalty – for
example through our newly launched loyalty programme – and ensure
that we are clearly visible in the market.
Developments during the year – Human Resources
Focus on Nuon’s employees
As an employer, Nuon strives to give its employees opportunities to
develop their full potential as well as offering an attractive and inspiring
workplace. The company’s efforts in the area of diversity and equal
opportunity are a natural part of its operations. The goal is to be
an attractive employer, and to attract and retain the best talent.
At year-end 2013, Nuon employed a total of 4,833 FTEs
(2012: 5,200 FTEs). The decrease compared to 2012 was mainly the
result of a continuing focus on cost efficiency and the closure of the
Buggenum power plant. Of Nuon’s total workforce of 5,180 employees,
1,381 were female and 3,799 male. A total of 4,693 employees had
permanent contracts, compared to 5,035 employees at year-end 2012.
The number of employees with a temporary contract decreased from
520 in 2012 to 487 in 2013. In 2013, the average age of Nuon employees
in the Netherlands was 42.8, compared to 42.5 in 2012.
Diversity and equality
At Nuon, we are convinced that striving for diversity helps build a more
profitable, efficient and attractive company. Our overall ambition is
to firmly establish diversity as a natural part of our daily business by
increasing knowledge, acceptance and a willingness to work with the
diverse aspects of our business. Nuon aims to increase the number of
female managers in order to create more diverse management culture
in the organisation. Specific targets have been set to achieve this.
Gender diversity of employees
Number
100%
80%
1,785
1,629
1,504
1,492
1,381
4,693
4,576
4,358
4,063
3,799
60%
Branding
In 2011, the Vattenfall brand name and logo were used in the Dutch
market for the first time, under the header ‘Nuon, part of Vattenfall’.
In subsequent years, this new branding was used more widely. Nuon is
well known among Dutch consumers, but in anticipation of further
rebranding to Vattenfall, less was invested in the Nuon brand. This has
had an impact, both on the strength of the Nuon brand and on our
customers. Consumer behaviour in the Netherlands is changing, and
consumers are more inclined to switch suppliers than a few years ago.
12
40%
20%
0%
2009
Male
Female
2010
2011
2012
2013
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Diversity by age
Lost Time Injury Frequency (LTIF) for own personnel
% employees
Number of incidents/million worked hours
5
100
13
15
18
18
19
4
24
24
25
26
3.8
27
3
60
26
26
27
27
29
24
2.8
2
40
1.6
32
5
6
0
2009
28
30
2010
26-35 year
27
3
2011
36-45 year
3
2012
46-55 year
24
21
2
11
20 13 Dutch working
Energy
Related
Services
>56 year
2013
Health and Safety
Safety is one of Nuon’s core values; we believe that all work-related
injuries and occupational illnesses are preventable. Nuon continuously
strives to ensure safe and sound workplaces. The goal is to achieve zero
accidents in the workplace, have no workplace-related absences,
and provide all employees with a safe and inspiring work environment.
Safety risks shall be reduced as far as possible, and no work is so
important that it should be undertaken in an unsafe manner. When
a work situation is no longer considered to be safe, every employee is
required to stop work immediately.
Production
0.0 0.0
Heat
0.0 0.0
Projects
Nuon
Other
Nuon
Total
2012
Total registered safety incidents and near-incidents
Number
1,500
1,381
1,200
1,082
900
600
The Lost Time Injury Frequency (LTIF) is a measure of workplace-related
absence. It shows the number of work-related injuries per million hours
worked that result in absence. Nuon’s systematic focus on safety has
resulted in an improvement in our safety culture and performance.
Since 2010, the LTIF decreased continuously in almost all business areas
except for the Energy Related Services (ERS), supplied by the subsidiary
Feenstra. Due to a number of safety incidents at ERS, the LTIF increased
compared to 2012. This also fully accounts for the overall rise in Nuon’s
LTIF from 1.2 in 2012 to 1.6 in 2013. The development of the safety
performance within ERS clearly lags behind that of the other business
areas. The experience gained within these other businesses will
therefore be used to strengthen the safety culture within ERS.
0.0
0
population 2013
1.2
1.1
0.9
1
20
<25 year
4.8
17
80
23
13
733
648
549
300
6283
99 71
0
2009
Near-incidents
2010
158
33
2011
Incidents without lost-time
66
24
2012
55 21
2 0 13
Lost-time incidents
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Repor t of the Management Board
Rolling average sick leave1
%
5
4
4.2
3.9
4.0
3.9
3.6
14
Furthermore, a new Nuon Social Plan went into effect in 2013, following
negotiations between Nuon and the relevant employee organisations.
It defines and elaborates a number of social principles that will apply
during the processes of organisational changes within Nuon. The Social
Plan aims primarily to facilitate these processes in a socially responsible
manner and offers solutions for the redundancies that will arise.
3
2
1
0
2009
1
2010
2011
2012
20 13
Value for the Netherlands, excluding the energy related services companies, which are
not included as not all comparative figures are available.
Nuon’s health policy focuses on each individual, paying close attention
to feedback from our employees about their health and working
environment. In 2012, Nuon introduced a structured approach to health
issues and set up a quality management system for health management.
The system is organised in the same way as OHSAS, the international
standard for occupational health and safety management systems.
The approach includes three processes: medical examinations, targeted
health promotion and reintegration. Nuon works actively to improve
employees’ health by offering regular check-ups and preventive
measures. In addition, Nuon strives to increase awareness of health
issues. The rolling average of sick leave among Nuon employees
decreased from 3.9% in 2012 to 3.6% in 2013.
Employment terms and conditions
In 2013, a new Collective Labour Agreement (CAO) for the Dutch energy
production and supply sector was concluded, thus providing security for
both employer and employees on terms and conditions for the coming
period. The new CAO took effect on 1 May 2013 and will be valid until
30 April 2015.
To optimally facilitate its employees, Nuon offers a flexible
compensation and benefit arrangement platform called ‘my budget,
my choice’. Under this arrangement, employees can make their own
personal choices with respect to their flexible employment benefits.
They can opt to have those benefits paid out, purchase extra flexible
benefits, or reserve the benefits for payment later in the year.
New way of working
When moving to the new office in Amsterdam Zuidoost in December,
Nuon introduced employees to the new ‘Smart Working’ concept. This
flexible way of working is in line with the growing need of employees to
determine where and when they perform their activities. The concept
promotes a culture where flexibility, confidence and taking individual
responsibility to optimise work-life balance are central, leading to more
satisfied and motivated employees. It also leads to both improved
personal effectiveness and improved cooperation between colleagues.
Social engagement
Via the Step2work program, Nuon helps people who have lost ground
or a disadvantage in the labour market, giving them experience and new
working opportunities. To this end, Nuon facilitates 35 work experience
places within the various Business Units. Since 2006, more than
250 participants in this program have gained experience within Nuon.
The company has also established the Nuon Foundation as a platform
to encourage Nuon employees to participate in various social projects.
For example, Nuon employees volunteered to help out at the ‘Opkikkerdag’,
on outings organised by ‘De Zonnebloem’ and at fundraising events of
the Voedselbank. Via this platform, employees can also apply to Nuon
for financial sponsorship of their activities and projects.
Employee representation
A number of matters arose during the year in which the employee
representatives were closely involved. Among other things, discussions
covered the ongoing optimisation of the organisation and related topics,
such as the announced workforce reduction and the closure of the
Buggenum plant.
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15
Financial performance
Income statement
The table below shows the results for 2013 compared to 2012.
Financial overview
For the year ended 31 December
Amounts in EUR million
Items affecting
Reported
comparability
2013
3,720
30
-
Net sales
Other operating income
Underlying
Items affecting
comparability
and divestments
Reported
Underlying
2012
3,720
30
3,879
-
3,879
27
-
27
1,214
885
56
-
1,270
885
1,273
67
1,340
997
-127
870
365
59
424
321
194
515
901
-536
-687
746
214
210
1,259
-1,076
183
Operating result (EBIT)
-938
1,271
333
Net result
-419
572
153
-716
996
280
Gross margin
Operating expenses
Earnings before interest, taxation,
depreciation and amortisation (EBITDA)
Depreciation, amortisation
and impairments
18.2
19.8
51.5
Electricity production (TWh)
Electricity sales (TWh)
Gas sales (TWh)
14.8
21.9
53.6
Number of contracts
Dutch consumer market
2.1 million
1.8 million
- Electricity
- Gas
Net sales by product
Amounts in EUR million
4,500
3,600
3,879
3,720
657
651
1,811
1,853
1,252
1,375
2,700
1,800
900
0
2 0 13
Electricity
Gas
2012
Heat & other products
2.2 million
1.9 million
Net sales
Net sales decreased by 4.1% to EUR 3,720 million. This decrease was
mainly driven by lower customer numbers in both electricity and gas
due to increased competition, lower average electricity consumption
per customer and lower gas prices. This decrease was partially offset
by higher average gas consumption per customer due to colder weather
conditions in the first half of 2013.
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Gross margin
EBITDA
Amounts in EUR million
Amounts in EUR million
16
600
1,600
321
1,200
1,273
1,214
400
424
515
-59
-194
200
800
1,270
1,340
0
400
0
-56
-200
-67
-400
-400
2012
2 0 13
Underlying
365
2 012
2013
Underlying
Items affecting comparability
Items affecting comparability
Gross margin
Gross margin decreased by 4.6% to EUR 1,214 million. Underlying gross
margin decreased by 5.2% to EUR 1,270 million. This decrease was
mainly driven by a lower production margin due to decreased spark
spreads and the lower margin on gas sales. These effects were partially
offset by higher trading results and higher average gas consumption
per customer due to colder weather conditions in the first half of 2013.
Depreciation, amortisation and impairment charges
Depreciation, amortisation and impairment charges decreased from
EUR 1,259 million in 2012 to EUR 901 million in 2013 as a result of
lower impairment charges (EUR 0.7 billion) in 2013 than in 2012
(EUR 1.1 billion). In both years, the impairment charges mainly related
to the gas-fired power plants. Underlying depreciation, amortisation and
impairment charges increased by 16.9% to EUR 214 million due to the
commissioning of the Hemweg 9 and Diemen 34 plants in 2012 as well
as the Magnum power plant and Princess Alexia Wind Farm in 2013.
Operating expenses by category
EBIT
Amounts in EUR million
Amounts in EUR million
1,000
1,200
997
900
885
127
500
-536
378
431
0
600
123
99
300
0
-938
210
333
-746
-1,271
-500
388
416
-33
-47
-1,000
-1,500
-300
2 0 13
Personnel expenses
Sub-contracted work
2012
Other operating expenses
Items affecting comparability
2013
Own work capitalised
Operating expenses
Operating expenses decreased by 11.2% to EUR 885 million in 2013.
Underlying operating expenses increased slightly by 1.7% to
EUR 885 million, mainly driven by the commissioning of the new gas-fired
power plants. In addition, costs were higher due to the introduction of
the new market model and increased costs for bad debts resulting from
the economic crisis. Part of the operationally-driven increase in costs
was offset by lower personnel expenses. These expenses decreased by
EUR 28 million following the staff reductions in 2013, which were mainly
related to the closure of the power plant in Buggenum. The number
of own staff decreased by 7.1%, from 5,200 FTEs at the end of 2012
to 4,833 FTEs at the end of 2013. The decline was due to the closure
of Buggenum and the continuing focus on efficiencies and cost savings.
Underlying
2 012
Items affecting comparability
EBIT
EBIT (earnings before interest and taxes) increased from
EUR -938 million in 2012 to EUR -536 million in 2013.
This improvement was mainly driven by the lower impairment
charges in 2013 compared to 2012. Underlying EBIT decreased
by 36.9% to EUR 210 million, primarily due to lower spark
spreads and higher depreciation charges.
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Items affecting comparabilty included in the results
Overview of items affecting comparability included in the results
For the year ended 31 December
Amounts in EUR million
Gain on divestment of subsidiaries
Fair value movements on derivative contracts for own use
Costs associated with the unbundling
Impairments
Other items
2013
-56
-687
-3
Total impact on operating result (EBIT)
Tax included in items affecting comparability
Total impact on net result
Items affecting comparability in 2013 amounted to EUR -572 million, net.
These consisted mainly of the impairment of the gas-fired power plants.
The item ‘Fair value movements on derivative contracts for own use’
relates to the fair value movements on derivative commodity contracts,
which are held for the company’s own use. Nuon uses these contracts for
the physical sale and purchase of fuels for the generation of electricity
and supply to customers. In accordance with IFRS, the majority of these
2012
-67
-1,074
-130
-746
-1,271
174
275
-572
-996
contracts are measured at fair value. As these fair value changes are
recognised through the income statement (where cash flow hedging
cannot be applied) and do not reflect the underlying purpose of
these commodity contracts, the analysis of the results is distorted.
These fair value movements are therefore included in the ‘items
affecting comparability’. For 2013, these fair value movements
amounted to EUR -56 million (2012: EUR -67 million).
Balance sheet
Condensed balance sheet
As at 31 December
Amounts in EUR million
Non-current assets
Current assets
Cash and cash equivalents
2013
3,671
2,497
189
Total assets
Equity
Non-current liabilities
Current liabilities
Total equity and liabilities
2012
4,180
2,467
187
6,357
2,922
477
2,958
6,834
3,333
712
2,789
6,357
6,834
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Non-current assets
Non-current assets decreased by 12% to EUR 3,671 million at the end
of 2013. The investments in the new gas-fired power plants and the
Princess Alexia Wind Farm were more than offset by the impairment
charges in 2013. In addition, the derivative balances decreased
compared to 2012.
Current assets
Current assets increased by 1% to EUR 2,497 million. This increase
is mainly due to a higher derivative balance.
Cash and cash equivalents
Cash and cash equivalents increased by EUR 2 million to
EUR 189 million at the end of 2013. The positive cash flow
Repor t of the Management Board
18
from operations (EUR 412 million) was offset by investments
(EUR 384 million) and payment of dividend to class A shares
(EUR 76 million). Part of the cash outflow for investments is financed
by liquidity facilities from Vattenfall.
Equity
Equity decreased by 12% to EUR 2,922 million at the end of 2013.
This decrease was mainly driven by the net loss of EUR 419 million.
Non-current and current liabilities
Non-current liabilities decreased by 33% to EUR 477 million at
the end of 2013. The decrease mainly resulted from the payment of
the preferred dividend on A shares and lower derivative positions.
The current liabilities increased by 6% to EUR 2,958 million.
Net debt position and ratios
Reconciliation net debt position
As at 31 December
Amounts in EUR million
2013
189
Cash and cash equivalents
-162
Less: Restricted cash and cash equivalents¹
Total cash and cash equivalents
-147
27
83
974
4
Long-term interest-bearing liabilities
Short-term interest-bearing liabilities
Finance lease payables
1
2012
187
40
150
910
8
Gross debt position
1,061
1,068
Net debt position
1,034
1,028
Including clearing bank margin balances and collateral for certain bank guarantees issued but excluding bilateral margining cash balances.
Restricted cash is excluded from the cash and cash equivalents as this
relates to funds that are not at the free disposal of Nuon. In the ordinary
course of trading and in relation to the mitigation of credit risks, Nuon
receives and pays cash collateral to and from its counterparties. In
addition, Nuon holds cash balances on own bank accounts as collateral
for counterparties. This collateral impacts both Nuon’s cash balances
(restricted and freely available) and accounts receivable and payable.
The underlying ROCE decreased from 8.8% to 6.1%. The effect of lower
capital employed (resulting from impairments) was more than offset by the
effect on the operating profit of lower margins on our generating assets.
Solvency and ROCE
%
60%
48.8
46.0
The net debt position at the end of 2013 amounted to EUR 1,034 million,
compared to EUR 1,028 million at the end of 2012. The increase in
the net debt position is mainly due to an increase in restricted cash.
40%
20%
6.1
Solvency and ROCE
Solvency (equity/total assets) at the end of 2013 stood at 46.0%,
slightly below the year-end 2012 level (48.8%). The decrease was
mainly caused by the effect of the impairments, which resulted in
lower equity (through net result) and balance sheet values.
8.8
0%
-20%
-16.2
-24.9
-40%
2 012
2013
Solvency ratio
ROCE
Underlying ROCE
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Cash flow statement
Condensed cash flow statement
Amounts in EUR million
2013
395
Operational cash flow
2012
427
17
Movements in receivables and liabilities positions
Cash flow from operating activities
-395
412
32
-384
-26
2
-775
Cash and cash equivalents as at 1 January
187
299
Cash and cash equivalents as at 31 December
189
187
Cash flow from investing activities
Cash flow from financing activities
Cash flow for the year
Cash flow from operating activities
Cash flow from operating activities in 2013 increased to EUR 412 million
(2012: EUR 32 million) due to an improved working capital position and
movement in derivative balances.
Cash flow from investing activities
Cash flow from investing activities decreased from EUR 775 million in
2012 to EUR 384 million in 2013. This is the result of a EUR 394 million
decrease in investments in fixed assets compared to 2012.
The investments were significantly lower compared to 2012 as the
Hemweg 9 and the Diemen 34 plants came online in 2012, followed by
the Magnum power plant and the Princess Alexia Wind Farm in 2013.
Cash flow from financing activities
Cash flow from financing activities in 2013 amounted to EUR 26 million
negative (2012: EUR 631 million positive) mainly due to a decrease
in debt financed by the positive free cash flow for the year. In 2012, the
cash flow from financing was positive due to funding of the significant
investments through Vattenfall liquidity facilities.
631
-112
Dividend
Based on Nuon’s dividend policy, the Management Board, in consultation
with the Supervisory Board, proposes to pay out a dividend of
EUR 41 million on class A shares outstanding as at 31 December 2013
and to pay no dividend on class B shares. The Management Board
proposes to charge the loss of EUR 419 million to the Other reserves.
Adoption of the dividend proposal for 2013 is scheduled to take place
during the General Meeting of Shareholders on Friday, 23 May 2014
in Amsterdam.
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Outlook and challenges
Nuon is taking a number of measures to adapt to the changed market
conditions – what we call ‘the new normal’. As a part of Vattenfall,
we are focussing on costs efficiency, strengthening our cash flow as
well as developing new, sustainable and smart products and services
that society and our customers are demanding. We believe the future
energy landscape will be more fragmented and local than in the past.
It will also be strongly influenced by national political positions.
Therefore, Vattenfall is organised into two regions as from 2014.
We will leverage our international position to benefit our customers.
We will add to the stability of the energy system and the security of
supply through the flexibility of our gas-fired power plants. And we
will increase our efforts to reduce our CO2 emissions, both through
investment in renewable energy and by enabling the smart use of
energy by our customers.
In just five years, the scope for investment over the subsequent five-year
periods has been nearly halved. The challenge for Nuon is to find
opportunities to recover capital and free up funds for investments in
renewable energy without burdening cash flow (or by reducing the
impact of ongoing projects on cash flow). This could be achieved by, for
example, realising growth projects in partnership with other companies
or inviting external financiers to become co-owners of plants that are
already in operation.
Repor t of the Management Board
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As a result of the necessary ongoing cost-efficiency measures, Nuon is now
a company that is better equipped and stands up well to the competition,
even as the traditional business models are being challenged.
Given the current market circumstances, predictions regarding the future
are highly uncertain. In light of these circumstances, it is our policy to
refrain from making any specific statements about expected future results.
In the Management Board’s view, the long-term strategy remains firm.
We are confident that we will be able to carry out the necessary changes
to tackle the current challenges. We maintain our conviction that Nuon
will contribute to the realisation of Vattenfall’s strategic ambitions
without losing sight of the interests of our Dutch stakeholders.
A final word
Without the commitment and hard work of our staff, we could not have
achieved all that we have, nor hope to overcome the challenges that we
face. Therefore, we would like to take this opportunity to express our
gratitude to all our employees for their commendable work during an
eventful and turbulent year.
Amsterdam, 11 April 2014
The Management Board
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21
Details of the Management Board
Peter Smink (1965)
Peter Smink (Dutch nationality) is Chief Executive and Financial Officer of Nuon Energy as of 27 November 2013.
He is responsible for both the general and financial management of Nuon. As of 1 January 2014, Peter Smink
is also responsible for the financial management of the Business Region Continental/UK of Vattenfall AB.
Career
Peter Smink has been a member of the Management Board and Chief Financial Officer of Nuon since
1 January 2010. He joined n.v. Nuon in 2001 and has held several management positions, mainly
in the area of finance. From 28 October 2011 to 11 May 2012, Peter Smink was appointed acting Chief
Financial Officer of Vattenfall AB and became a member of Vattenfall’s Executive Group Management (EGM).
From November 2012 until the end of 2013, he was Head of Vattenfall’s Business Division Sustainable
Energy Projects. Prior to joining Nuon, Peter Smink held various management positions at KPN and
PricewaterhouseCoopers (PwC).
Peter Smink is a member of the Supervisory Board of Foundation Rural Energy Services (FRES) and
Yellow & Blue Clean Energy Investments B.V. In addition, Peter Smink is a board member at Vereniging
Energie-Nederland, the Swedish Chamber of Commerce (Dutch association) and Stichting Zuidoost Partners.
Martijn Hagens (1971)
Martijn Hagens (Dutch nationality) is Chief Operational Officer of Nuon Energy as of 1 January 2014.
He is responsible for the operational and commercial activities of Nuon and – more specifically –
for the activities of Sales, Heat, Production and Renewables in the Netherlands. As of 1 January 2014,
Martijn Hagens is also responsible for the Business Unit Heat of the Business Region Continental/UK
of Vattenfall AB.
Career
Martijn Hagens joined n.v. Nuon in 2003 and has held several management positions, including Head
of Nuon Customer Care Center, Head of Nuon IT and Programme Director of the Nuon unbundling process.
From 2010 until the end of 2013, he was Head of Customer Service of Vattenfall. Prior to joining Nuon,
Martijn Hagens held a management position at Accenture.
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Corporate governance report
Nuon has taken notice of the revised Dutch Corporate Governance Code
published by the Corporate Governance Code Monitoring Committee
on 10 December 2008 and effective from 1 January 2009.
Dutch Corporate Governance Code
The Dutch Corporate Governance Code (the Code) is specifically
applicable to Dutch listed companies and is designed to promote more
efficient supervision of the Management Board (the ‘checks’) and
a more balanced distribution of influence between the Management
Board, Supervisory Board and shareholders (the ‘balances’).
In view of the company’s size, the social role that Nuon plays in the
performance of its tasks in the field of energy supply and its strong
commitment to openness and transparency, Nuon voluntarily applies
the principles and best practices of the Code. The company’s articles of
association, by-laws and regulations are fully in line with the applicable
provisions of the Code.
In the table below, Nuon reports the departures from the best practice
provisions in the Code, stating the motivation for these departures
(the ‘comply or explain’ principle).
Departures from the Code
Code
III Supervisory Board
Departures from the code and motivation
Principle III.2.2: A Supervisory Board member shall be deemed to be
independent if the following criterion of dependence does not apply to him/
her. This criterion is that the Supervisory Board member concerned has been
a member of the Management Board of the company (including associated
companies as referred to in Section 5:48 of the Financial Supervision Act
(Wet op het financieel toezicht/Wft) in the five years prior to the Appointment.
The company strives to have a Supervisory Board composition which is a
good reflection of the different Business Divisions, representing commercial
activities within the company.
On 1 November 2012, Mr Anders Dahl was appointed Head of Business Division
Distribution and Sales of Vattenfall AB. To ensure that the composition of
the Supervisory Board is a good reflection of the different Business Divisions,
representing commercial activities within Nuon, Mr Anders Dahl was appointed
as a Supervisory Board member with effect from 6 December 2012. In addition
to his position as Head of Business Division Distribution and Sales, Mr Anders
Dahl has been appointed, among other positions, as Managing Director of N.V.
Nuon Sales, a subsidiary of N.V. Nuon Energy representing the Sales activities.
With the appointment of Mr Anders Dahl, the company deviates from
article 1.4 (a) of the bylaws of the Supervisory Board.
Principle III.4.2: The Chairman of the Supervisory Board may not be a former
member of the Management Board of the company.
Øystein Løseth was appointed in April 2010 as member of the Supervisory
Board by the shareholders following nomination by the Supervisory Board.
Subsequently, the Supervisory Board appointed Øystein Løseth as Chairman
of the Supervisory Board in line with the articles of association of the
company and Vattenfall’s grandfather principle.
Principle III.5: If the Supervisory Board consists of more than four members,
it appoints from among its members an Audit Committee, a Remuneration
Committee and a Selection and Appointment Committee.
The Supervisory Board has appointed a separate Audit Committee, whereas
the tasks of the Remuneration Committee and Selection and Appointment
Committee have been combined in a Remuneration Committee, since these
are closely linked.
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Departures from the Code (continued)
Code
Departures from the code and motivation
IV General Meeting of Shareholders
Principle IV.1: To the extent that the company is able to do so, it provides all
shareholders with distance voting facilities and the means to communicate
with each other.
Written powers of attorney are sent together with the notice to convene
shareholders’ meetings. In addition, all shares are registered. Because of
and with due regard to the above, distance voting contributes little to the
realisation of this provision.
Best practice provisions IV.3.1 to IV.3.4: About analysts’ meetings and reports.
These do not apply as Nuon’s shares are not listed, are not freely marketable
and/or are not prone to price-sensitive information. Despite the fact that
Nuon is not a listed company, meetings are held with shareholders following
the publication of financial reports. Nuon endorses the principle of
simultaneous dissemination of information to all shareholders, but deems
it too costly to put in place facilities that would enable all shareholders
to simultaneously follow all the meetings and presentations as envisaged
in the Code. Nuon does ensure, however, that following the meetings
concerned, the documentation is made available.
Best practice provision V.3: The Internal Audit department operates under the
responsibility of the Management Board.
The internal audit department has been integrated in the managerial
structure of Vattenfall AB and operates under the responsibility of the
Management Board to the extent this responsibility is not designated to
the Vattenfall Board of Directors.
Corporate Governance structure
Management Board
General
The Management Board is in charge of the company’s management.
The Management Board members are jointly responsible for the
management of Nuon.
On 1 July 2009, Vattenfall AB acquired 49% of the shares in the capital
of Nuon and obtained managerial control of Nuon. As a consequence,
Nuon was consolidated in the Vattenfall figures as of 1 July 2009.
On 1 July 2011, 1 July 2012 and 1 July 2013, Vattenfall AB acquired
an additional 15.00%, 3.04% and 11.96% of the shares, respectively,
bringing the total percentage of Nuon shares held by Vattenfall AB to
79%. The remaining 21% of the shares, which are currently still owned
by Dutch provinces and municipalities, will be acquired by Vattenfall AB
in 2015 under fixed terms.
Vattenfall AB is a public limited liability company with its registered
office in Stockholm, and is subject to the Swedish Company Act.
Nuon complies with the rules for large companies (‘structuur vennootschap’) referred to in articles 2:158 to 2:164 of the Dutch Civil Code.
As such, Nuon has a two-tier management structure, comprising
a Management Board and an independent Supervisory Board.
The Management Board is in charge of the day-to-day management of
the company, while the independent Supervisory Board supervises the
Management Board. Both the Supervisory Board and the Management
Board are accountable to the General Meeting of Shareholders for the
performance of their duties.
Since 2011, Vattenfall’s steering model has been based on a pan-European
business-led structure, meaning that each of Nuon’s activities has been
allocated to one of the five Business Divisions and, managerially, form
part of the respective Business Divisions. As a consequence, Nuon’s legal
and business governance structures are not fully aligned. To enable
the Management Board within the business-led structure to perform
its obligations towards the Supervisory Board and its stakeholders,
the Vattenfall management will ensure that all necessary tools and
assistance are made available to the Management Board in order to
perform its fiduciary duties in this respect.
As of 1 January 2014, Vattenfall’s steering model has changed from
a business-led to a regionally led structure, comprising two regions:
Nordic and Continental/UK. Nuon’s activities have been allocated to
the Business Division Continental/UK, which includes the Dutch,
German and UK activities of Vattenfall AB. As a consequence Nuon’s
legal and business governance structures are not fully aligned. To enable
the Management Board within the regionally led structure to perform its
obligations towards the Supervisory Board and its stakeholders,
the Vattenfall management will ensure that all necessary tools and
assistance are made available to the Management Board in order to
perform its fiduciary duties in this respect.
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Nuon’s Supervisory Board appoints the members of the Management
Board, which consists of at least two members. The Supervisory Board
determines the remuneration and other conditions of employment
for each member of the Management Board in accordance with the
remuneration policy adopted by the General Meeting of Shareholders.
Information on the remuneration of individual members of the
Management Board can be found in the Remuneration Report of this
annual report (page 36).
The company’s articles of association and the bylaws of the
Management Board which set out, for example, the procedures
governing the composition, tasks and powers, meetings and
decision-making, can be viewed on Nuon’s corporate website,
www.nuon.com/corporate-governance.
Supervisory Board
The Supervisory Board functions as the Management Board’s advisory
body and supervises the policy of the Management Board and Nuon’s
general performance.
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Supervisory Board members, and with reference to the principles in III.6
of the Code, the Supervisory Board member whose responsible business
area is influenced by a decision is excluded from the decision-making
in accordance with principle III.6.2 of the Code.
Committees of the Supervisory Board
The Supervisory Board of Nuon has two standing committees:
an Audit Committee and a Remuneration Committee. The task of these
committees is to prepare the decision-making of the Supervisory Board.
In general, each committee meeting is reported on in the Supervisory
Board meeting to serve as a basis for its decision-making.
Regulations have been drawn up for both standing committees.
These regulations specify, for example, the tasks, the composition
and the manner in which each of these committees performs its tasks.
The terms of reference for both the Audit Committee and the
Remuneration Committee can be viewed on Nuon’s corporate website,
www.nuon.com/corporate-governance.
Audit Committee
Pursuant to its articles of association, Nuon shall have a Supervisory
Board consisting of eight Supervisory Board members. The Supervisory
Directors A are to be appointed by the General Meeting of Shareholders
upon their nomination by the Supervisory Board following the
recommendation of the class A shareholders. They shall include two
persons recommended by the Central Works Council. The Supervisory
Directors B are to be appointed by the General Meeting upon their
nomination by the Supervisory Board following the recommendation
by the class B shareholders. The Chairman of the Supervisory Board
shall be nominated by the class B shareholders. At least five members
of the Supervisory Board will reside in the Netherlands. Please refer
to the table Composition of the Supervisory Board on page 31.
Members of the Supervisory Board are appointed for a maximum of
three terms of four years each. The Supervisory Board is made up in
such a way that it has at its disposal all the expertise required to ensure
the proper performance of its tasks, and that the members are able
to operate independently and critically in relation to each other,
the Management Board and any partial interest whatsoever. Within
the Nuon Governance structure, two members and the chairman of
Vattenfall’s Executive Group Management (EGM) are members of
the Nuon Supervisory Board. Vattenfall’s rationale in appointing EGM
members is to ensure a good reflection of the business and therefore to
bring knowledge to the Supervisory Board and to facilitate the exchange
of information. To avoid any potential conflict of interest for these
The Audit Committee monitors, among other things, the integrity
of Nuon’s financial statements, the operation of the internal risk
management and control systems, compliance with recommendations
and actions taken in response to comments of the Internal Audit
Department and the external auditor, the company’s policy in relation
to tax planning and the financing of the company.
The Audit Committee consists of at least three members, all of whom
must be members of the Supervisory Board.
Remuneration Committee
The Remuneration Committee prepares and provides advice on such
aspects as selection criteria and appointment procedures relating to
the members of the Supervisory Board and the Management Board.
It periodically reviews the functioning of the individual Management
Board members, submits proposals for appointments or reappointments,
submits proposals on the remuneration policy to be pursued regarding
members of the Management Board (this remuneration policy and any
material change to it is to be presented at the General Meeting of
Shareholders for adoption) and submits proposals on the remuneration
of individual Management Board members.
The Remuneration Committee consists of three members, all of whom
must be Supervisory Board members.
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Shareholders
The annual shareholders’ meeting is held each year no later than
six months after the end of the financial year. Other Meetings of
Shareholders can, if necessary, be held at the request of the Supervisory
Board or the Management Board. Shareholders who jointly represent
at least 10% of the issued capital have the right to request that the
Management Board or the Supervisory Board convene a Meeting
of Shareholders, stating specifically the business to be discussed.
Nuon’s shareholders’ meetings are generally not open to the public.
Nuon has two classes of shares, class A Shares and class B Shares as
held by the class A shareholders and class B shareholders, respectively.
The class A shareholders and class B shareholders entered into a
shareholders’ agreement (the Shareholders’ Agreement) that sets out,
for example, the terms and conditions of the sale of the shares in the
capital of the company and the course Vattenfall will take to acquire
full ownership of the company. One of the items agreed on is a six-year
lock-up period for the class A shareholders, which started as of
1 July 2009. During this period, the agreed conditions on offering,
selling and contracting to sell any shares apply.
Nuon Energy Public Assurances Foundation
As part of the transaction whereby Vattenfall initially acquired 49% of
the outstanding share capital from Nuon shareholders on 1 July 2009,
it was agreed that a foundation would be set up for a period of at least
eight years. This foundation is called ‘Nuon Energy Public Assurances
Foundation’ (‘the Foundation’).
The objective of the Foundation is to safeguard the so-called Nuon
Public Assurances as envisaged by the agreement governing the
acquisition and to render binding advice on the interpretation of
the Nuon Public Assurances.
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Co rp o ra te governa n ce re p o r t
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The management of Nuon will inform the shareholders and the
Foundation of any intended management decision or action that
deviates or causes a deviation from the Nuon Public Assurances.
An intended decision, action or omission of Nuon that could contravene
the Nuon Public Assurances can be submitted to the Nuon Public
Assurances Foundation for review by:
■ The shareholders (at least two shareholders collectively representing
5% or more of the outstanding and issued share capital);
■ Nuon (represented by a majority of the Supervisory Board members); or
■ One director of the Foundation within four weeks of becoming aware
of the (intent to take the) decision or action.
The Foundation can then decide whether or not to issue advice
to the management of Nuon. The Foundation can only advise to:
■ Take the decision or action; or
■ Reverse the decision or action, or, if not yet taken, not take such
action or decision and correct any non-compliance.
The advice is binding for Nuon’s management except, if in doing so, the
management would violate its fiduciary duties. If management refuses
to comply with the advice, the question of whether the management
was allowed to deviate from the advice can be submitted for review
to the Netherlands Arbitrage Institute.
The Foundation consists of three members. One member is nominated
by the class A shareholders and a second by the class B shareholders.
A third member, to be the Chairman, shall be nominated by the other
two members.
The articles of association of the Foundation can be viewed on Nuon’s
corporate website, www.nuon.com/corporate-governance.
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The role of auditors
Internal auditor
External auditor
Internal Audit is an independent function that provides additional
assurance to management, and to the Management Board in particular,
concerning the control, effectiveness, efficiency and compliance of the
business processes. In this context, Internal Audit systematically evaluates
the processes in relation to control, risk management and governance.
The external auditor, Ernst & Young Accountants LLP (EY), was appointed
by the General Meeting of Shareholders on 25 April 2012, based on a
motion drawn up by the Supervisory Board following advice received
from the Audit Committee and the Management Board. EY was appointed
as the external auditor for the entire Vattenfall group in 2012. The
appointment is for a period of one year, with the possibility of extension.
The Management Board and the Audit Committee report to the
Supervisory Board annually on the developments in the relationship
with the external auditor, particularly with regard to the external
auditor’s independence. Based on this and other factors, the Supervisory
Board prepares its motion to the General Meeting of Shareholders on
the appointment of an external auditor.
At least once every four years, the external auditor’s performance is
thoroughly evaluated and reviewed by the Management Board and
the Audit Committee. The principal conclusions of this review are
communicated in the General Meeting of Shareholders in order to
assist in its review of the motion to appoint the external auditor.
Generally, the external auditor attends the meetings of the Audit
Committee. In compliance with current legislation, the external
auditor reports on its audit activities to the Management Board and
the Supervisory Board and sets out the matters it wishes to bring to the
attention of these boards. These matters could include issues with respect
to the audit, the financial figures and the operation of the internal risk
management and control system (including the reliability and continuity
of the electronic data processing) and the quality of the internal
information systems.
The external auditor also attends the Supervisory Board meeting when
the financial statements are discussed. In addition, the external auditor
attends the General Meeting of Shareholders and may, on that occasion,
be asked to elaborate on its audit activities and its auditor’s report on
the reliability of the financial statements.
Nuon Internal Audit is an integrated part of the Vattenfall Group
Internal Audit that operates under the responsibility of the Chairman of
the Board of Vattenfall and the Audit Committee of Vattenfall. Twice a
year, Internal Audit presents the Management Board with an overview
of the Internal Audit activities related to Nuon. This overview is also
discussed with the Nuon Audit Committee. In this context, and for the
purpose of the planning and execution of the audit of the financial
statements, the Internal Audit department works in close collaboration
with the external auditor.
Measuring Corporate Social Responsibility
Corporate Social Responsibility targets are an integral part of
management and business unit targets. Performance is measured
periodically and remunerated as part of regular performance
management measures which are organised through the Vattenfall
Human Resources organisation.
Management scorecards contain the key performance indicators (KPIs)
that are important for Vattenfall and Nuon as a whole. These KPIs are
then cascaded down using scorecards through the organisation, including
all Nuon entities and employees. The scorecards incorporate financial
and non-financial KPIs, which are necessary to ensure that the company
operates and develops in line with the strategic and business plans.
Business risks and Risk Management
Risk management
Nuon is exposed to a number of risks that could have an adverse impact
on operations. A better understanding of and control over these risks
can potentially generate better results from the business activities.
The Nuon Management Board is responsible for the company’s risk
management and control system. Nuon strives for transparency when
it comes to risks and recognises all risks that may affect the company.
Nuon, as part of Vattenfall, applies the ‘three lines of defence’ model for
the management and control of risks. The first line of defence consists
of the business units, which own and manage risks. The risk organisation
makes up the second line of defence and is responsible for monitoring
and controlling risks. The internal and external audit comprise the third
line of defence.
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Three lines of defence
Business
Units
Risk organisation and
other control functions
Internal audit
and external audit
First line of defence
Ownership and
management of risk
Second line of defence
Risk management
and risk control
Third line of defence
Independent review
and oversight
Risks
The following paragraphs describe some of the main risks that Nuon
faces, as well as risk management efforts undertaken.
The Nuon Risk Management Framework
The objective of the Nuon Risk Management Framework is to provide
reasonable assurance that the achievement of strategic and operational
objectives is effectively monitored, that the financial reporting is
reliable, and that current laws and regulations are complied with.
The framework is part of Nuon’s Governance and designed to ensure
an acceptable risk exposure, based on a thorough and transparent
analysis of Nuon’s risks, thus facilitating the in-control situation and
risk exposure based on an appropriate assessment of the risk-reward
balance. The framework facilitates the monitoring of risks with a
potential impact on the organisation and is based on a set of best
practice policies, procedures and internal control mechanisms.
The Nuon Risk Management Framework focuses on ensuring that
the most important risks are identified and that appropriate control
measures are taken to manage these risks. The Nuon Risk Management
Framework is executed as an element of the Vattenfall Risk Management
Framework. The Framework is based on the COSO Enterprise Risk
Management (ERM) Framework.
The ERM is executed as a continuous process for identifying, assessing,
managing and following up risks at all levels of the business at an early
stage. Every quarter, an overall report is prepared for discussion at
Board level.
Important components of the Nuon Risk Management Framework are:
■ The Vattenfall Management System (VMS) which Nuon, as part of
Vattenfall, implemented and which contains regulations, guidelines
and procedures that are relevant for Vattenfall employees and for the
relationship between N.V. Nuon Energy and its subsidiaries, Business
Units, Staff Functions and other Vattenfall companies. VMS includes
the Vattenfall Code of Conduct and the Whistle-blower Policy, which
are publicly accessible at www.nuon.com. VMS also comprises the
IFRS accounting manual and the reporting manual;
■ The Vattenfall Code of Conduct, which sets the behavioural rules for
all employees. The Code of Conduct fosters an honourable business
culture in which the rules applicable to employees are clear. Breaches
of the Code of Conduct are not tolerated. If they come to the attention
of Vattenfall they will be investigated and may lead to sanctioning;
■ The Risk Management organisation, headed by the Chief Risk Officer
of Vattenfall, supports Nuon in applying Vattenfall’s risk framework.
The Risk Management organisation monitors market risk on a daily
basis, manages credit risk, oversees compliance with policies and
risk limits, and guides the group-wide reporting of significant business
risks. Together with other specialist risk stakeholders (for example
health and safety, information security), the Risk Management
organisation supports the Business Units in the identification,
quantification, mitigation, monitoring and reporting of risk;
■ The Nuon Internal Control department, which is responsible for
reporting on internal control aspects, such as the authorisation
matrices, the key controls (including authorisations for key systems)
and progress on the follow-up of audit findings;
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The Integrity department advises and reports on issues with regard to
competition, anti-bribery/corruption, conflict of interest, the whistleblowing function and inside information. In addition, the department
advises management on measures to enhance compliance and
monitoring compliance risks, and it stimulates awareness of the
Code of Conduct. Bi-annually the Nuon Integrity, Fraud and Incidents
report is submitted to Nuon Management Board and the Nuon Audit
Committee. This report focuses on integrity developments, fraud and
other incidents reported in the Netherlands and is a combined report
of Internal Audit and the Integrity department;
The Legal department, which submits the quarterly Claims & Litigation
report to Management Board and Supervisory Board of Nuon.
The report contains a summary of current and potential legal
proceedings and disputes;
The Nuon Business Control Framework, which contains the key
controls for the different business areas;
The planning & control cycle, in which annual budgets are assigned
for each organisational unit and the outcome of which is subsequently
discussed between the Management Board and the Business Units;
The periodic reporting on Business Units’ financial and operational
performance, partly based on the system of Key Performance
Indicators (KPIs);
The risk reports, highlighting the risks identified as having a
potentially significant impact on the business. These reports are
challenged by Risk Management and further reviewed in quarterly
sessions with members of the Management Board. These Business
Unit risk reports are used as the basis for Risk Managements’
formulation of the quarterly Enterprise Risk Report, which
summarises the most significant risks facing the organisation.
This report is discussed with the Audit Committee of the
Supervisory Board;
The Nuon governance reporting cycle, in which all aspects of
governance, such as risk, compliance, claims & litigation, integrity,
fraud and incidents, internal control and tax are reported based
on a COSO self-assessment of risk management and internal control
and the Nuon Business Units’ ‘Statements on Business Control’.
The Management Board discusses these statements annually with
the responsible management and the Audit Committee;
The responsible management’s confirmation at corporate and unit
level of the reliability of the financial reporting through signed
Letters of Representation;
The execution of audits by the Internal Audit department in
conformity with the annual plan, which is approved by the
Management Board and the Audit Committee. The outcome
of their audits are discussed with the Management Board and
the Audit Committee;
The follow-up of findings from internal and external audits by
the Business Units, which are periodically reported on to the
Management Board.
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Main risks and mitigation
This section describes the most important risks within Nuon. The defined
risk categories according to the ERM model are: market & financial,
technology, infrastructure, laws & regulations, personnel & organisation
and politics & society. Selected examples of risks to which Nuon is
exposed are described below.
Note [30] to the financial statements provides further qualitative and
quantitative information on financial instruments and financial risk
management.
Financial risk
Nuon’s financial risks arise in both the commodities and financial
markets. Vattenfall’s Board of Directors has given the CEO a mandate for
the Vattenfall Group, which is then delegated to the Business Divisions
and therefore to Nuon. During the year, the mandate structure was
reviewed and changed to improve risk governance in the operations.
The majority of the exposures in the proprietary trading portfolio are
valued based on market prices (mark-to-market). If market prices cannot
be observed, modelled prices are used (mark-to-model). Handling of
such valuation models is strictly regulated, and approval is required
from the risk organisation before they are allowed to be used.
Electricity price risk
Electricity prices are affected by fundamental factors, such as supply
(water levels, and available generation and transmission capacity),
demand (electricity use, which in turn is affected by weather and the
economy, among other things), fuel prices and the price of CO2 emission
allowances. Nuon hedges its electricity generation and electricity sales
through the use of physical and financial forward contracts and longterm customer contracts. The amount of future electricity generation
that is to be hedged, within the mandates prescribed by Vattenfall’s
Board, is decided by Vattenfall’s risk committee. To measure electricity
price risk, Vattenfall uses methods such as Value at Risk (VaR) and
Gross Margin at Risk along with various stress tests.
Fuel price risk
Fuel price risk is the short-term volatility and the long-term fundamental
change in primary fuel prices. It is minimised through analysis of the
various commodity markets and diversification of contracts with respect
to price model and terms. With regard to hard coal-fired and gas-fired
electricity generation, hedges on electricity and fuel prices are
co-ordinated to ensure a set fuel cost and thus the gross margin on
electricity generation.
Volume risk
Volume risk mainly arises in the sales activities as deviations between
anticipated and actual volumes delivered to customers. This risk is
contained by quantitative analysis as part of the forecasting process.
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Credit risk
Credit risk arises if a counterparty or contractor cannot or is not willing
to fulfil its obligations. Credit risk exists in Nuon’s commodity trading,
sales activities, treasury activities and investments. A consistent
approach to credit analysis and management is applied throughout
the organisation, whereby the degree of review undertaken varies
depending on the magnitude of credit risk in a transaction. Credit risk
is managed through established credit policies, regular monitoring of
credit exposures and application of appropriate mitigation measures
(such as by obtaining collateral).
Liquidity risk
Liquidity risk refers to, for example, the risk of not being able to pursue
the price hedging strategy due to insufficient liquidity in the electricity
and fuel markets. This risk is managed through hedging and by securing
an optimal number of trading counterparties. Liquidity risk also pertains
to the risk of not being able to finance the required capital needs.
Liquidity risk is mitigated through sufficient funding, which ensures
access to capital and flexibility.
Interest rate risk
Interest rate risk is the risk that the market value of a fixed-income
security or a fixed-rate loan will change due to a change in interest rates.
Furthermore, changes in short-term interest rates can impact the rate of
return on short-term cash investments.
Currency risk
Nuon is exposed to currency risk through exchange rate movements
attributable to future cash flows (transaction exposure) and in the
revaluation of net assets in foreign subsidiaries (translation or balance
sheet exposure). Nuon has limited transaction exposure, since most
electricity generation and electricity sales activities take place in the
local Dutch market. Sensitivity to currency movements is thus also
relatively low. The Business Units are required to hedge all contracted
transaction exposure in another currency when it exceeds the equivalent
of a maximum of EUR 0.1 million. Upon identifying a currency risk
above the limit, the risk is hedged with external counterparties through
spot and forward exchange contracts.
Operational risk
In the course of its operations, Nuon is exposed to numerous operational
risks in such areas as plants, infrastructure, personnel and organisation.
Operational asset risk
Nuon’s largest operational asset risks are associated with the operation
of power generation and heat production plants. An important part of
the company’s continuous risk management efforts involve a rolling
inspection programme and continuous control of plant conditions to
ensure effective maintenance. Nuon protects itself against economic loss
to the greatest extent possible through insurance.
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Security risk
Nuon works with loss prevention and mitigating security measures
to protect its assets, IT systems, data, personnel and continuity of its
operations. Nuon ensures that assets and data are protected from
improprieties and fraud through, among other things, adherence to the
so-called four eyes principle, entailing that decisions must be approved
by at least two persons unless an exception to this rule applies.
Personnel risk
Nuon works with preventive measures and adopts best practices in its
health and safety work. Nuon’s production sites maintain a high level
of process safety to ensure the safety of both employees and society at
large. In addition, Nuon takes a structured approach to succession and
competence planning, both in the near and long term.
Legal risk
Nuon mitigates legal risks by engaging Staff Function Legal Affairs
in the ongoing business activities and decision-making processes.
Strategic risk
Nuon is exposed to a range of external influences that are often difficult
to manage. To manage strategic risk, Nuon, as part of Vattenfall, not
only works with scenario analyses and business intelligence activities,
but diversifies risk in its generation and distribution portfolios with
respect to markets as well as energy sources.
Political risk
To protect itself from political risks, Nuon maintains contacts with
decision-makers. In addition, its parent company, Vattenfall, belongs
to various national and international trade organisations with a view
to safeguarding and promoting the company’s interests.
Investment risk
Nuon is a highly capital-intensive company which requires continuous
investments. Nuon applies a thorough project governance process of
which risk assessment is an integrated part. Before each material
investment decision, the risk unit performs an independent review
of obligations and transactions. In addition to a strategic investment
approach, a detailed five-year plan of investment projects is updated
annually to provide guidance in the investment decision process.
Sustainability risk
Vattenfall has structured its work with sustainability issues into seven
areas: the environment, human rights, working conditions, gender
equality, diversity, business ethics and anti-corruption. Integration of
these sustainability aspects with the continuing operations was intensified
in 2013. Both governance and content have been escalated to the level
of the parent company and a new advisory and co-ordinating function
has been established to ensure that Vattenfall and Nuon manage
sustainability issues in the best possible manner.
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Responsibility
Nuon’s Management Board is responsible for the design and operation
of our internal risk management and control system. During the year,
the design and operation of this system was evaluated, mainly based
on the business control information, the Internal Audit reports and the
management letter from the external auditor.
The Nuon Enterprise Risk Management Framework does not provide
absolute assurance as to the achievement of the corporate objectives,
nor does it guarantee that material errors, losses, fraud or violations
of laws and regulations will not occur in the operational processes
and/or the financial reporting.
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With due regard to the above, the Management Board is of the opinion
that the internal risk management and control systems provide a
reasonable assurance that the financial reporting does not contain any
errors of material importance and that the risk management and control
systems worked properly as regards the financial reporting risks in the
year under review.
Based on the above, Nuon is of the opinion that the company thus
satisfies the best practice provisions II.1.3, II.1.4 and II.1.5 of the Dutch
Corporate Governance Code.
The above was also discussed with the Audit Committee of the
Supervisory Board in the presence of the internal and external auditors.
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Report of
the Supervisory Board
During 2013, the Supervisory Board (‘the Board’) carried out its tasks in accordance
with the provisions in the Dutch Civil Code (Book 2, articles 158 – 164) and
the articles of association of N.V. Nuon Energy and supervised and advised
the Management Board.
Composition of the Supervisory Board as at 31 December 2013
Composition
Director A or B Committees
First appointment
Reappointment
Current term until
Øystein Løseth, Chairman
B
Member of the Remuneration
and Audit Committee
2010
-
2014
Tuomo Hatakka
Anders Dahl
B
-
2009
13 May 2013
2017
B
-
2012
-
2016
Tom de Waard
B
Chairman of the
Remuneration Committee
2010
-
2014
Derk Haank
B
Member of the Audit Committee
2009
13 May 2013
2017
Pieter Bouw
A
Chairman of the Audit Committee
2009
13 May 2013
2017
Leni Boeren
A
Member of the
Remuneration Committee
2009
13 May 2013
2017
Laetitia Griffith
A
-
2013
-
2015
As at 13 May 2013, Tuomo Hatakka, Derk Haank, Pieter Bouw and
Leni Boeren were reappointed as members of the Supervisory Board.
As at 13 September 2013, Laetitia Griffith was appointed as a member
of the Supervisory Board succeeding Jacques Schraven, who resigned
with effect from 17 June 2013.
The Board has drawn up a profile indicating the desired criteria
and competences for the composition of the Board. This profile can
be found on our corporate website www.nuon.com. Appointments and
reappointments are assessed in the light of the profile. In the case of
reappointments, the performance of the person in question is also taken
into consideration.
In January 2013, the Act on Management and Supervision took effect.
This legislation introduced a limitation on the number of Supervisory
Board positions, as well as Management Board positions held by an
individual and target figures for a more even distribution of board seats
between men and women. These target figures have been one of the
factors taken into account on the consideration of the appointments
and reappointments during 2013.
In the opinion of the Board, all members of the Board can be considered
to be independent in the sense of best practice provision III.2.2 of the
Dutch Corporate Governance Code (‘the Code’) except for Mr A. Dahl,
who does not comply with the criteria of best practice provision III.2.2
due to his position as Managing Director of one of N.V. Nuon Energy’s
subsidiaries since 1 November 2012 (page 34) provides a more detailed
explanation on the position of Mr A. Dahl.
The current members of the Board comply with best practice provision
III.3.4 of the Code, which stipulates that the number of supervisory
directorships of Dutch listed companies may not exceed five (per person),
on the understanding that a Chairmanship is equivalent to
two memberships.
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Meetings and activities of the Supervisory Board
Contacts with the Central Works Council
Meetings of the Supervisory Board
In accordance with the covenant agreed with the Central Works Council,
consultations were held prior to meetings of the Board between the
members of the Board appointed following recommendation of the
Central Works Council, namely Pieter Bouw and Leni Boeren and the
Executive Committee of the Central Works Council.
The Board convened eight times in the reporting year. During its
meetings, the Board discussed a broad range of subjects, such as
strategic projects that require the approval of the Board, the business
plan and budget, investments, the quality of service and customer
satisfaction, the health and safety organisation, the strategic direction
of Vattenfall, the outcome of the employee survey, litigations and
divestments, cost control and cost-to-serve and other relevant matters
that were brought to its attention. During 2013, the Board specifically
focussed on the turbulent market conditions, closure of the Buggenum
plant, the company’s product portfolio, the churn rate of customers,
introduction of the supplier model, energy related services supplied
by the company’s subsidiary Feenstra, the SER agreement, the new
regionally-led organisational structure as applicable from 1 January 2014,
human resources including management development and items related to
the Dutch Collective Labour Agreement, the succession of Huib Morelisse.
In respect of the succession, the Board also discussed the amendment
related to the composition of the Management Board, which allows
for the possibility of combining the roles of CEO and CFO and creation
of an additional role for a COO. The financial results were discussed
extensively in the meetings of the Board before publication of this report.
Meetings of the Audit Committee
The Audit Committee consists of the following three members of the
Supervisory Board: Pieter Bouw (Chairman), Derk Haank and Øystein
Løseth. The composition of the Audit Committee meets the requirement
of best practice provision III.5.7 of the Code. The Audit Committee of
Nuon met five times in 2013.
The Audit Committee reviewed and discussed, in particular, all
financially relevant matters that were presented to the Supervisory
Board. The Audit Committee also monitored the internal risk framework
and risk management systems. Topics discussed included among other
things the quarterly results, the annual report, reports of the internal
and external auditor, budget and projections, risk reports and the
introduction of a mandatory supplier model in the Dutch Energy market.
Meetings of the Remuneration Committee
Furthermore, the Board evaluated its functioning, the functioning of its
committees and its individual members. The self-evaluation was based
on a questionnaire completed in advance of the evaluation. The results
of the questionnaire were discussed among the members of the
Supervisory Board.
Shareholder meetings
Five members of the Board attended the Annual General Shareholders
meeting on 13 May 2013. During this meeting, the annual accounts and
the dividend distribution for 2012 were approved. The members of the
Board and the Management Board were discharged for their supervisory
activities and their management activities, respectively, during the 2012
financial year. Furthermore, EY was appointed as the external auditor
for the financial year 2013.
On 13 September 2013 and 27 November 2013, several members of
the Board attended the Extraordinary General Meetings of Shareholders.
During the meeting on 13 September 2013, the proposal to appoint
Laetitia Griffith as a member of the Supervisory Board was approved.
During the meeting on 27 November 2013, the proposal to amend
the articles of association of Nuon Energy, in order to enable the
combination of the positions of CEO and CFO, was approved.
The Remuneration Committee consists of the following three members
of the Supervisory Board: Tom de Waard (Chairman), Øystein Løseth
and Leni Boeren.
The Remuneration Committee convened twice in 2013. The committee
reviewed and approved the target realisation for 2012. Furthermore,
the Remuneration Committee evaluated the performance of the
members of the Management Board and, in relating to the succession
of Huib Morelisse, who left the company on 1 August 2013, discussed
the composition of the Management Board, followed by the appointment
of Peter Smink as CEO/CFO and the appointment of Martijn Hagens
as COO and discussed an appropriate remuneration package for
Martijn Hagens. The Remuneration Committee also advised on the
succession of Supervisory Board member Jacques Schraven which
led to the appointment of Laetitia Griffith in September 2013.
Corporate governance
The Board endorses virtually all the principles and best practice
provisions of the Corporate Governance Code. Nuon departs from the
Code in a very limited number of cases. The manner in which Nuon
Energy applies the Code remained unchanged in the reporting year.
A separate chapter of this annual report describes the corporate
governance structure in general terms and indicates how Nuon Energy
has applied the principles and best practice provisions of the Code. This
chapter also explains the cases where Nuon Energy departs from the Code.
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General terms of the remuneration policy
The remuneration policy is designed to enable Nuon Energy to recruit,
motivate and retain qualified and expert directors in order to achieve its
strategic objectives. The total remuneration package of the members of
the Management Board consists of an annual gross base salary, pension
benefits and other emoluments.
The Remuneration Report in this annual report (page 36) provides a full
and detailed overview of the remuneration policy for the Management
Board, as well as a description of the execution of the remuneration
policy for the Management Board in 2013. An overview of the
remuneration of the Supervisory Board members is also provided.
Annual Report and Dividend Proposal
This annual report contains, among other things, the financial
statements for the 2013 financial year as signed by the Management
Board and the Supervisory Board. The financial statements for 2013,
as prepared by the Management Board, were audited by the external
auditor EY, which issued an unqualified audit opinion thereon.
The independent auditor’s report on the consolidated and company
financial statements is included in the section Other on page 94.
The 2013 financial statements were discussed by the Audit Committee
and the external auditor in the presence of the Chief Executive Officer/
Chief Financial Officer. In addition, the Supervisory Board also discussed
the 2013 financial statements with the Management Board in the
presence of the external auditor. On the basis of these discussions, the
Supervisory Board is of the opinion that the 2013 financial statements
meet the requirements and also provide a good basis of accountability
for the conducted supervision.
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It is recommended that the General Meeting of Shareholders:
■ Adopts the financial statements 2013;
■ Adopts the dividend proposal as included in the section Other in
this annual report for the financial year 2013;
■ Endorses the conduct of the company’s affairs by the members of the
Management Board during the financial year 2013 and the supervision
by the members of the Board during the 2013 financial year.
Developments in 2014
As of 1 January 2014, Vattenfall’s steering model has changed from
a business-led to a regionally led structure, comprising two regions:
Nordic and Continental/UK. Nuon’s activities have been allocated to
the Business Division Continental/UK, which includes the Dutch,
German and UK activities of Vattenfall AB. As a consequence, Nuon’s
legal and business governance structures are not fully aligned. To enable
the Management Board within the regionally led structure to perform
its obligations towards the Supervisory Board and its stakeholders,
the Vattenfall management will ensure that all necessary tools and
assistance are made available to the Management Board in order to
perform its fiduciary duties in this respect.
As at 3 April 2014, Anne Gynnerstedt was appointed as a member of the
Supervisory Board succeeding Anders Dahl, who resigned with effect
from that same date.
A word of thanks
The Board would like to take this opportunity to thank the members of the
Management Board and all Nuon employees for their contribution to the
results in 2013. Furthermore, the Board would like to thank Mr Morelisse
for his appreciated contribution as CEO of N.V. Nuon Energy.
Amsterdam, 11 April 2014
The Supervisory Board
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Repor t of the Super visor y Board
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Details of the Supervisory Board
(As at 31 December 2013)
Øystein Løseth
(1958)
Tuomo Hatakka
(1956)
Anders Dahl
(1957)
Tom de Waard
(1946)
Derk Haank
(1953)
Chairman of the Supervisory Board and member of the Remuneration Committee and the Audit Committee
Øystein Løseth (Norwegian nationality) was appointed as a member of the Supervisory Board on 8 April 2010. On 1 April 2010,
Løseth resigned as member and Chief Executive Officer of the Management Board of N.V. Nuon Energy and was appointed
President and CEO of Vattenfall AB as per 12 April 2010. Løseth graduated in 1983 with a Master’s in Engineering from
the Technical University of Trondheim and in 1986 earned a degree in Economics from Bedriftsøkonomisk Institutt, Bergen.
From 2003 to April 2010, Løseth fulfilled several management positions at n.v. Nuon, and after 1 July 2009, at
N.V. Nuon Energy. He was a member of the Management Board from January 2006 and was appointed as Chief Executive
Officer as per April 2008. Before joining Nuon in 2003, Løseth fulfilled several management positions at Statkraft in Norway.
Prior to his career at Statkraft, he worked at Naturkraft, Alliance Gas and Statoil.
Tuomo Hatakka (Finnish nationality) was appointed as a member of the Supervisory Board on 17 June 2009 and reappointed
on 13 May 2013. Hatakka has been serving as Senior Executive Vice President of Vattenfall AB since 2005 and as Head
of Business division Production since 1 January 2011. On 1 January 2014 Hatakka became Head of the Business Region
Continental/UK. He was Head of Business Group Central Europe from January 2008 to December 2010 and previously the
head of Vattenfall’s Polish activities. He studied Economics at the Helsinki School of Economics and Business Administration
and has a MBA from the Instituto de Estudios Superiores de la Empresa in Barcelona, Spain. His professional experience
includes work as a consultant at Bain & Company in London, Executive Vice President and partner at Enterprise Investors
in Warsaw, Poland, and President and CEO of Elektrim Kable SA, also in Warsaw.
Anders Dahl (Swedish nationality) was appointed as a member of the Supervisory Board on 6 December 2012.
Anders Dahl has been serving as Production Director CHP Vattenfall Poland since 2002 and as Head of Business Unit Wind
since 2005. He was acting Head of Business Group Pan Europe during 2010 and Head of Business Division Renewables
from January 2011 to November 2012. From November 2012 to January 2014, Anders Dahl was Head of Business Division
Distribution and Sales. From 1 January 2014, Dahl became Head of Business Support for the Nordic region of Vattenfall AB.
Anders Dahl graduated in 1981 with a Master’s in Science from Kungliga Tekniska Högskolan, Mechanical.
Chairman of the Remuneration Committee
Tom de Waard (Dutch nationality) was appointed as member of the Supervisory Board on 8 April 2010. De Waard
graduated from Leiden University in 1971 and joined Stibbe in Amsterdam as a lawyer in the same year, where he
became a partner in 1979. He was the resident partner of Stibbe in New York (1985-1990). In 2000, he joined Clifford
Chance, where he was Managing Partner of the Amsterdam office (2002-2005) and a Member of the Global Management
Committee representing Continental Europe (2005-2007). In 2012, he started his own law firm De Waard CS advocaten.
His expertise includes mediation, corporate litigation and privatisations, specialising in the energy and health sectors.
De Waard is a member of the Supervisory Board of STMicroelectronics N.V. (STM). In that capacity, he is Chairman of
the Nominating and Corporate Governance Committee, and a member of the Audit Committee and the Remuneration
Committee. De Waard is Chairman of the Supervisory Board of BE Semiconductor Industries N.V. (BESI) and a member
of the Audit Committee and the Remuneration Committee of BESI. He is also the Chairman of the Board of the Stichting
Administratiekantoor Telegraaf Media Groep.
Member of the Audit Committee
Derk Haank (Dutch nationality) was appointed as a member of the Supervisory Board on 17 June 2009 and reappointed
on 13 May 2013. Haank is Chairman of the Corporate Executive Board of Springer Science + Business Media. He is a former
member of the Reed Elsevier N.V. Management Board and the Supervisory Board of n.v. Nuon. Other supervisory and
advisory positions held by Haank include those of member of the Supervisory Board of MSD Nederland, KPN and member
of the Supervisory Council of the Dutch broadcasting association TROS.
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A bout Nuon
N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
Pieter Bouw
(1941)
Leni Boeren
(1963)
Laetitia Griffith
(1965)
A b o u t N u on
Repor t of the Super visor y Board
35
Chairman of the Audit Committee
Pieter Bouw (Dutch nationality) was appointed as a member of the Supervisory Board on 17 June 2009 and
reappointed on 13 May 2013. Bouw is a former CEO and President of KLM Royal Dutch Airlines N.V. and served
as a member of the Supervisory Board of n.v. Nuon. Currently, Bouw serves as a board member of the trust office
of a number of Dutch companies.
Member of the Remuneration Committee
Leni Boeren (Dutch nationality) was appointed as a member of the Supervisory Board on 17 June 2009 and reappointed
on 13 May 2013. Boeren has been a member of the Management Board of Robeco Groep N.V. since 2005. She is a former
member of the Executive Committee of Euronext N.V. (2000-2005) where one of the positions she held was that of
Managing Director of Information Services. She was a member of the board of Directors of Amsterdam Exchanges N.V.
(1997-2000) and previously worked for Robeco Groep, Rabobank and BNP Paribas. Other supervisory directorships and
advisory functions held by Boeren include those of Vice Chairman of the Supervisory Board and Chairman of the Audit
Committee of the Tergooiziekenhuizen (hospitals in Blaricum and Hilversum),chairman of the Dutch Fund and Asset
Management Association, and member of the board of Amsterdam Sinfonietta (String Orchestra).
Laetitia Griffith (Dutch nationality) was appointed as a member of the Supervisory Board on 13 September 2013.
Ms. Griffith is a member of the Council of State since 2012. She is a former member of the House of Representatives of
the Netherlands (2003-2005 and 2006-2010). Ms. Griffith was an Alderman of Finance, Economic Affairs, Airport and ICT
for the Municipality of Amsterdam (2005-2006). She also previously worked for the Ministry of Justice and the Public
Prosecution Service. Ms. Griffith holds a variety of supervisory directorships, management and advisory functions,
including that of Supervisory Board member at The Hague Strategic Studies (HCSS) and Chairman of the Dutch security
industry. She is also chairman of the Board of the Prinses Beatrix Spier Fonds.
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A b o u t N u on
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36 N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
Rem un era ti on re p o r t 2 0 13
36
Remuneration report 2013
This remuneration report has been drawn up on behalf of the Remuneration
Committee. The composition and activities of this committee in 2013 are
described in the Report of the Supervisory Board.
Introduction
Pursuant to the articles of association of Nuon, the Supervisory Board,
acting on the advice of the Remuneration Committee, formulates the
remuneration policy for the members of the Management Board of
Nuon. The General Meeting of Shareholders of Nuon adopts the
remuneration policy. Within that remuneration policy, the Supervisory
Board, again acting on the advice of the Remuneration Committee,
adopts the remuneration and other employment conditions of the
individual members of the Management Board.
The remuneration policy for N.V. Nuon Energy was adopted by the
General Meeting of Shareholders on 7 December 2011, with retrospective
effect from 1 January 2011. This policy was put to the General Meeting
of Shareholders by the Supervisory Board while being simultaneously
submitted for information purposes to the Central Works Council.
The remuneration policy does not include a long-term variable salary.
The policy facilitates compliance with the Dutch Corporate Governance
Code as well as with Vattenfall’s interpretation of the guidelines of the
Swedish State; ‘Terms of Employment for Senior Executives in Stateowned Companies’. These guidelines of the Swedish State stipulate
that the remuneration package for leading employees should follow
a specific design. Senior Executives of Vattenfall AB are considered to
be leading employees in the context of the Swedish State guidelines.
For detailed information, please see Vattenfall AB’s annual report
(www.vattenfall.com).
Nuon’s remuneration policy and remuneration report comply with
the Dutch Corporate Governance Code. Where this is not the case,
the departures are highlighted and explained.
Remuneration policy
The following will apply:
■
■
■
The full remuneration package shall be competitive but not marketleading in the relevant employment market;
Variable pay is not applicable to a member of the Management Board
who is simultaneously a Senior Executive of Vattenfall AB;
Pension is defined as a contribution capped at 30% or lower of fixed
salary, if a group pension scheme or equivalent exists.
The total remuneration package for the members of the Management
Board may consist of the following components:
a) Annual base salary;
b) Short-term variable salary;
c) Pension benefits;
d) Other emoluments.
(a) Annual base salary
The objective for the annual base salary is based on the median level
of the aforementioned reference group of comparable companies.
(b) Short-term variable salary
The short-term variable salary may be applicable to individual members
of the Management Board. The maximum of this variable salary is 50%
of the annual base salary.
The short-term variable part of the salary is aimed at achieving
challenging objectives which are set in advance by the Supervisory
Board for every accounting year.
The specific objectives are laid down annually in a scorecard. The
targets for short-term variable salary shall be objectively measurable,
i.e. verifiable by audit procedures as clearly defined and the objectives
shall be set at a level that is sufficiently ambitious and, at the same
time, sufficiently realistic.
Remuneration
Nuon’s specific remuneration policy is geared to the median of the
relevant remuneration market and includes the fixed and, to the extent
applicable, variable components associated with that market. The
relevant remuneration market is defined as the Dutch employment
market for the Management Boards of companies with comparable
turnover, staff levels and complexity.
The total remuneration shall be reasonable and well-considered. Overall,
the remuneration principles shall be characterised by moderation.
However, given the Swedish guidelines, the short-term variable salary
is not applicable to a board member who is simultaneously considered
a Senior Executive of Vattenfall AB.
(c) Pension benefits
Members of the Management Board participate in the pension scheme
that applies to Nuon’s staff. This mandatory scheme, which is arranged
through the ABP pension fund, consists entirely of an average pay scheme,
with an applicable legal retirement age. An early retirement option is
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A bout Nuon
A b o u t N u on
Rem un era ti on re p o r t 2 0 13
N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
37
included in the ABP pension fund. In accordance with current industry
practice, pension entitlement is built up on the basis of the annual base
salary, and the members of the Management Board pay an individual
contribution for membership in the pension scheme.
payment equal to his or her annual base salary in the case of
intermediate termination of the employment contract by the company.
Conditions for individual members of the Management Board may differ.
(d) Other emoluments
Besides the emoluments described above, members of the Management
Board are also entitled to an expense allowance as well as the use of
a company car.
Execution of the remuneration policy
This remuneration report has been drawn up on the basis of the IFRS
principles and Title 9, Book 2 of the Dutch Civil Code, which are also
used for the preparation of the financial statements. This means that the
report on the variable elements of the remuneration relates to the year
in which the elements were earned, regardless of the time of payment.
In cases where a Management Board member takes on temporary
additional responsibilities, the Supervisory Board will have the option to
amend or increase the total remuneration package temporarily to reflect
additional responsibilities and workload.
Employment
The following overview summarises the developments during the year
2013 and states the remuneration elements of the members of the
Management Board of Nuon based on their employment contract
with Nuon.
Every member of the Management Board has an employment contract
with Nuon. As a matter of company policy, employment contracts with
members of the Management Board are entered into for a fixed term
(generally four years), after which they can be renewed. It is company
policy that members of the Management Board receive a severance
As per 1 August 2013, Huib Morelisse stepped down from the position as
CEO of Nuon Energy, from the same date Peter Smink fulfilled the role of
acting CEO, in addition to his role as CFO of Nuon. On 27 November 2013,
Peter Smink was, in addition to his role as CFO, appointed as CEO of Nuon.
Overview of total remuneration of the Management Board from N.V. Nuon Energy
Amounts in EUR thousand
Huib Morelisse
Peter Smink
Total
1
2
Base salary
20122
20131
451
773
617
366
1,068
Short-term
variable salary
2013
2012
43
1,139
-
43
Accrued
long-term
incentive
2013
2012
33
-
Incidental
remuneration
2013
2012
775
27
-
33
775
27
Total
2013
2012
1,226
800
617
442
1,843
1,242
The base salary of Huib Morelisse covers the period 1 January 2013 until 1 August 2013.
During the period 28 October 2011 to 31 May 2012, Peter Smink fulfilled the role of acting CFO of Vattenfall. The activities and the duties associated with the role of acting CFO of Vattenfall
were governed by a separate labour contract between Peter Smink and Vattenfall AB. The remuneration in respect of this contract amounted to an amount of EUR 117,915 during 2012.
According to this employment contract Peter Smink was not entitled to any pension benefits.
Annual base salary
The employment contract with Huib Morelisse was entered into
on 1 July 2010 for a period of four years. His annual gross base salary
is EUR 773,000. As per 1 August 2013, Huib Morelisse stepped down
from the position as CEO of N.V. Nuon Energy.
The employment contract with Peter Smink was entered into from
1 November 2012 for a period of four years. His annual gross base salary
is EUR 617,000.
Short-term variable salary
Vattenfall is bound by the guidelines of the Swedish State; ‘Terms of
Employment for Senior Executives in State-owned Companies’. These
guidelines of the Swedish State stipulate that the remuneration package
for leading employees should follow a specific design. Members of the
Executive Group Management (EGM) of Vattenfall AB are considered
to be leading employees in the context of the Swedish State guidelines.
As per 1 July 2010, Huib Morelisse was appointed CEO of Nuon Energy
and became part of the EGM of Vattenfall AB. Consequently, his
remuneration package does not include a variable component.
Since 1 November 2012, Peter Smink became part of the EGM of
Vattenfall AB. As a result, his remuneration package does not include
a variable component.
Incidental remuneration
As per 1 August 2013, Huib Morelisse stepped down from the position as
CEO of Nuon Energy. The employment contract with Huib Morelisse was
entered into on 1 June 2010 for a period of four years and will terminate
at 1 June 2014. For the period from 1 August 2013 until 1 June 2014,
he was released from any work duties. The employment costs for this
period, including base salary, pension costs, social charges and other
remuneration, amounts to EUR 775,000 and has been booked as
incidental remuneration.
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38 N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
Pension benefits, social security contributions
and other emoluments
The members of the Management Board participate in the ABP pension
scheme that is applicable to the company. Nuon has not provided any loans,
Rem un era ti on re p o r t 2 0 13
38
advances or guarantees to members of the Management Board
or Supervisory Board. The impact of the crisis tax (‘crisisheffing’)
as imposed by the Dutch government in 2013 (EUR 162,000) is
not included in the table below.
Overview pensions, social charges and other
Amounts in EUR thousand
Huib Morelisse
Peter Smink
Total
1
Pensions
2012
20131
88
136
121
57
209
193
Social charges
and other
remuneration
2013
2012
4
14
18
9
22
23
Total
2013
2012
92
150
139
66
231
216
The pension costs for Huib Morelisse cover the period 1 January 2013 until 1 August 2013.
Remuneration of the Supervisory Board 2013
The remuneration of the Supervisory Board is determined by the
General Meeting of Shareholders. With effect from 1 July 2009,
the members of the Supervisory Board receive EUR 35,000 per annum.
The Chairman of the Supervisory Board receives a remuneration of
EUR 45,000 per annum. Members of the Supervisory Board, who are
also a member of the Audit Committee or Remuneration Committee,
receive an extra payment of EUR 10,000 based on full year membership.
Remuneration is only paid to those members of the Supervisory Board
who are not employed by Vattenfall AB or one of its subsidiaries.
The remuneration is in line with remuneration packages of companies
comparable to Nuon and Vattenfall.
Remuneration of the Supervisory Board
Amounts in EUR thousand
1 January 31 December 2013
Director A/B
Øystein Løseth, Chairman
Tuomo Hatakka
Anders Dahl
Tom de Waard
Derk Haank
Pieter Bouw
Leni Boeren
Laetitia Griffith1
Jacques Schraven2
Total
1
2
As per 13 September 2013.
Until 17 June 2013.
Amsterdam, 11 April 2014
The Remuneration Committee
B
B
B
B
B
A
A
A
A
45
45
45
45
10.50
17.50
208
1 January 31 December 2012
45
45
45
45
35
204
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Fina n c ia l s ta tem ent s
Financial statements 2013
Consolidated accounts
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated accounts
40
Company accounts
86
40
41
42
44
45
Company balance sheet
Company income statement
86
87
46
Notes to the company accounts
88
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40 N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
40
Consolidated accounts
Consolidated income statement
Amounts in EUR million, 1 January - 31 December
2013
Net sales
Other operating income
Cost of energy
Cost of goods and materials
Employee compensation and benefit expenses
Amortisation and impairments of intangible assets
Depreciation and impairments of property, plant and equipment
Other operating expenses
Note
2012
3,720
30
-2,506
-99
-388
-68
-833
-431
3,879
5
27
6
7
-2,606
-123
-456
8
-1
13
-1,258
14
9
-465
Gross operating expenses
-4,325
-4,909
Own work capitalised
33
-4,292
-4,862
6
18
-536
-938
4
-12
10
10
Financial expenses
-13
11
Result before tax
-544
-941
Income tax expense
125
225
Result for the year
-419
-716
-419
-
-716
Operating expenses
Participations in the results of associated companies and joint ventures
Operating result (EBIT)
Financial income
47
Attributable to:
- Nuon shareholders
- Non-controlling interests
-
15
12
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41
N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
Consolidated statement of comprehensive income
Amounts in EUR million, 1 January - 31 December
2013
Result for the year
Note
2012
-419
-716
Other comprehensive income:
Items that may be reclassified subsequently to profit and loss:
Changes in fair value of cash flow hedges
Cash flow hedges dissolved against the income statement
Transferred to cost of hedged item
Tax attributable to cash flow hedges
163
-146
-2
-4
Total cash flow hedges
14
17
-8
11
23
Items that may not be reclassified subsequently to profit and loss:
Actuarial gains and losses pension provision
Taxes attributable to actuarial gains and losses pension provision
Total pension
Total comprehensive income for the year
-4
1
-
-3
-
-411
-693
-411
-
-693
Attributable to:
- Nuon shareholders
- Non-controlling interests
-
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42 N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
42
Consolidated balance sheet
Amounts in EUR million, as at 31 December
Assets
2013
Note
2012
Non-current assets
Intangible assets
Property, plant and equipment
Participations in associated companies and joint ventures
Other shares and participations
Derivative assets
Deferred tax assets
Other non-current receivables
87
2,864
81
23
354
230
32
Total non-current assets
156
13
3,315
14
92
15
19
15
453
17
113
25
16
32
3,671
4,180
Current assets
Inventories
Trade receivables and other receivables
Derivative assets
Current tax assets
Short-term investments
Cash and cash equivalents
326
1,586
566
19
189
307
18
1,579
19
537
17
34
19
10
20
20
187
Total current assets
2,686
2,654
Total assets
6,357
6,834
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N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
Consolidated balance sheet
Amounts in EUR million, as at 31 December
Equity and liabilities
2013
Note
2012
Equity attributable to Nuon shareholders
Share capital
Share premium
Reserve for cash flow hedge
Currency translation reserve
Other reserves
Result for the year
684
2,797
-33
1
-110
-419
684
2,797
-44
1
609
-716
Total equity attributable to Nuon shareholders
2,920
3,331
Equity attributable to non-controlling interests
2
2,922
3,333
Total equity
2
21
Liabilities
Non-current liabilities
Interest-bearing liabilities
Provisions
Derivative liabilities
Deferred tax liabilities
Finance lease payable
Other non-interest-bearing liabilities
83
80
152
1
4
157
Total non-current liabilities
150
22
115
24
271
17
5
25
8
27
163
23
477
712
Current liabilities
Trade payables and other liabilities
Derivative liabilities
Current tax liability
Interest-bearing liabilities
Provisions
1,636
273
13
974
62
26
1,483
347
17
-
26
915
22
44
24
Total current liabilities
2,958
2,789
Total equity and liabilities
6,357
6,834
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44 N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
44
Consolidated statement of cash flows
Amounts in EUR million, 1 January - 31 December
2013
Operating activities
Result before tax
Note
2012
-544
-941
Adjustments for:
8
-6
901
-23
-108
Financial income and expenses
Participations in the results of associated companies and joint ventures
Depreciation, amortisation and impairments
Changes in provisions and other
Fair value movements derivatives
3
-18
1,259
10 11
15
13 14
97
-257
Changes in working capital
Inventories
Trade receivables and other receivables
Trade payables and other liabilities
-19
-5
149
18
-121
-229
19
212
26
Total changes in working capital
125
-138
Cash flow from operations
353
5
Financial expenses paid
Financial income received
Dividends received from associated companies and joint ventures
Income tax paid
-2
1
13
47
-13
3
15
19
18
Total
59
27
Cash flow from operating activities
412
32
Investing activities
Investments in property, plant and equipment
Investments in other shares and participations
Repayment of capital associated companies and joint ventures
Proceeds from sales of (assets of) subsidiaries
-384
-4
4
-
Cash flow from investing activities
-778
14
-6
15
4
15
5
-384
-775
Financing activities
Changes in short-term investments
New interest-bearing debt
Repaid interest-bearing debt
Payment dividend liability class A shares
Payment dividend to class B shares
Cash flow from financing activities
-9
74
-15
-76
-
834
-54
-74
-75
-26
631
2
-112
Cash flow for the year
187
2
-112
Cash and cash equivalents at end of year
189
187
Cash flow for the year
Cash and cash equivalents at start of year
299
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N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
Consolidated statement of changes in equity
Amounts in EUR million
Equity attributable to shareholders1
Reserve for Currency
Share
cash flow translation
premium
hedges²
reserve
Share
capital
As at 1 January 2012
1
246
438
4,099
2
4,101
Profit appropriation 2011:
dividend
-
-
-
-
-
-75
-75
-
-75
Profit appropriation 2011:
added to other reserves
-
-
-
-
363
-363
-
-
-
Result for the year
-
-
-
-
-
-716
-716
-
-716
Other comprehensive income
-
-
23
-
-
-
23
-
23
Comprehensive income 2012
-
-
23
-
-
-716
-693
-
-693
As at 31 December 2012
684
2,797
-44
1
609
-716
3,331
2
3,333
Profit appropriation 2012:
dividend
-
-
-
-
-
-
-
-
-
Profit appropriation 2012:
added to other reserves
-
-
-
-
-716
716
-
-
-
-
-
11
11
-
-3
-3
-419
-419
-419
8
-411
-
-419
8
-411
684
2,797
-33
1
-110
-419
2,920
2
2,922
As at 31 December 2013
4
Total
-67
Comprehensive income 2013
3
Subtotal
2,797
Other comprehensive income
2
Noncontrolling
interest
684
Result for the year
1
Other
reserves3
Unappropriated
profit for
the year4
For further information in regard to equity attributable to shareholders, please refer to note 21.
The negative reserve for cash flow hedges lowers the distributable reserves accordingly.
Other reserves include a reserve for actuarial gains and losses on pension provisions for an amount of EUR -3 million.
During the year 2013, no dividends were distributed to class B shareholders.
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46 N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
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Notes to the consolidated accounts
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Company information
Accounting policies
Important estimations and assessments
in the preparation of the consolidated accounts
Acquired and divested operations
Net sales
Other operating income
Cost of energy
Employee compensation and benefit expenses
Other operating expenses
Financial income
Financial expenses
Income tax expense
Intangible assets
Property, plant and equipment
Participations in associated companies and
joint ventures and other shares and participations
46
47
16
17
18
55
56
56
56
57
57
58
58
58
59
60
61
19
20
21
22
23
24
25
26
27
28
29
30
Other non-current receivables
Derivatives
Inventories
Trade receivables and other receivables
Cash and short-term investments
Equity
Interest-bearing liabilities
Other non-interest-bearing liabilities
Provisions
Deferred tax assets and liabilities
Trade payables and other liabilities
Leasing
Contingent assets and liabilities and licences
Related party disclosures
Information on risks and financial instruments
64
64
65
65
66
67
67
69
69
71
72
73
74
75
76
63
Note 1 Company information
N.V. Nuon Energy is a public limited liability company, registered in
Amsterdam, the Netherlands. The most significant activities of Nuon
and its subsidiaries comprise the production and supply of electricity,
gas, heat and cooling to customers in the Netherlands, as well as a broad
portfolio of energy-saving products and services.
‘We’, ‘Nuon’, ‘the company’, ‘Nuon Energy group’, ‘the group’ or similar
expressions are used in these consolidated accounts as a synonym for
N.V. Nuon Energy and its subsidiaries. N.V. Nuon Energy originated in
2009 from the unbundling of former parent company N.V. Nuon into a
production and supply company, N.V. Nuon Energy, and a grid company,
Alliander N.V.
On 1 July 2009 Vattenfall AB, owned by the Swedish government, acquired
49% of the shares of N.V. Nuon Energy. On 1 July 2011, 1 July 2012 and
1 July 2013, Vattenfall acquired respectively 15%, 3.04% and 11.96%
of the shares in accordance with the ‘shareholders agreement’. The
remaining 21% of the shares will be acquired by Vattenfall AB on or
around 1 July 2015. As Vattenfall effectively gained operational control
over Nuon on 1 July 2009, the financial data of Nuon have been included
in the consolidated accounts of Vattenfall since then.
These consolidated accounts for the financial year 2013 are authorised
for publication by the Management Board and Supervisory Board on
11 April 2014. Subsequently, these consolidated accounts are scheduled
to be adopted by the general meeting of shareholders on 23 May 2014.
Since the company income statement for 2013 of N.V. Nuon Energy is
included in the consolidated accounts, a condensed income statement
has been disclosed in the company accounts in accordance with
Section 402, Book 2, of the Dutch Civil Code.
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N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
Note 2 Accounting policies
■
Conformity with standards and regulations
The consolidated accounts of Nuon have been prepared in accordance
with the International Financial Reporting Standards (IFRS) issued
by the International Accounting Standards Board (IASB) as well as the
interpretations issued by the IFRS Interpretations Committee (IFRIC) as
endorsed by the European Commission for application within the EU.
Basis of measurement
■
Assets and liabilities are reported at cost or amortised cost, with the
exception of certain financial assets and liabilities and inventories held
for trading, which are measured at fair value. Financial assets and
liabilities measured at fair value consist of financial assets and liabilities
recognised at fair value through profit or loss, and all derivatives.
Functional and presentation currencies
The functional currency is the currency of the primary economic
environment in which each entity operates. Nuon’s functional and
presentation currency is the euro, which is also the presentation
currency of the consolidated and company accounts.
■
Unless stated otherwise, all amounts reported in these consolidated
accounts are in millions of euros.
Estimations and assessments
Preparation of the consolidated accounts in accordance with IFRS
requires the company’s Management Board to make estimations and
assessments as well as to make assumptions that affect the application
of the accounting policies and the reported amounts of assets, liabilities,
income and expenses. Assessments made by the company’s Management
Board, when applying IFRS, that have a material effect on the consolidated
accounts, and estimations that may result in substantial adjustments
to the following year’s consolidated accounts, are described in greater
detail in note [3] to the consolidated accounts.
■
IFRS 13 – Fair Value Measurement. The standard includes uniform
rules for measuring fair value where another IFRS requires fair value
measurements or disclosures about fair value measurements. New
types of disclosures are to be made in order to clarify which valuation
techniques are used and which inputs are used. The new standard
leads to consideration of credit risk in measurement of financial
instruments at fair value. The disclosures required by IFRS 13 are
provided in note [30];
Amendments to IAS 1 – Presentation of Financial Statements.
The amendment entails a change in the categories of transactions
that are reported in other comprehensive income. Items that are to
be reclassified (or ‘recycled’) to profit or loss are to be reported
separately. As shown in the consolidated statement of comprehensive
income, sub-headings have been added: Items that will be reclassified
to profit or loss when specific conditions are met, and Items that will
not be reclassified to profit or loss, respectively;
Amendments to IAS 19 – The IASB has issued numerous amendments
to IAS 19. These range from fundamental changes such as removing
the corridor mechanism and the concept of expected returns on plan
assets to simple clarifications and re-wording. In addition the IASB
has amended the classification requirements for pension plans, which
resulted in a change in classification of the ABP and ‘Metaal en
Techniek’ multi-employer plans from defined benefit to defined
contribution. The change in classification, and the other changes
mentioned above, do not impact the financial performance and
operations of Nuon as these plans were already accounted for as
defined contribution plans in earlier years under the multi-employer
scheme exemption;
‘Improvements to IFRSs’ (issued in May 2012) aim to streamline and
clarify the accounting standards concerning presentation, recognition
and measurement including changes in terminology or amendments
of an editorial nature. The changes are to be applied for the 2013
financial year, but have not had any significant impact on Nuon’s
financial statements.
Accounting policies
New IFRSs and interpretations not yet adopted
The accounting policies of Nuon have been applied consistently for all
periods presented in the consolidated accounts. For comparative purposes,
minor adjustments have been made to the presentation of the 2012 figures.
New standards, amendments to standards and interpretations endorsed
by the EU at 31 December 2013, which are effective as of the 2014
financial year and which have not been early adopted:
■ IFRS 10 – Consolidated Financial Statements. The standard contains
uniform rules for determining which units are to be consolidated and
will supersede major parts of IAS 27 – Consolidated and Separate
Financial Statements and SIC 12, which addresses Special Purpose
Entities. The rules in IAS 27 on consolidation have been transferred
unchanged from IAS 27. The new standard is not expected to have
any significant effect on Nuon’s consolidated accounts;
■ IFRS 11 – Joint Arrangements. The standard addresses the reporting
of joint arrangements, i.e., arrangements in which two or more
parties have joint control, and will supersede IAS 31 – Interests
in Joint Ventures. The new standard is not expected to have any
significant effect on Nuon’s consolidated accounts;
New IFRSs and interpretations effective as of 2013
The new standards and amendments to standards and interpretations
described below, and endorsed by the EU, are effective as of the 2013
financial year:
■ Amendments to IFRS 7 – Financial Instruments: Disclosures. The
amendment entails that further disclosures are to be provided about
financial instruments that are recognised net in accordance with the
rules of IAS 32 as well as about financial assets and liabilities covered
by master netting agreements and similar, regardless of whether these
have been offset or not. The new disclosure requirements are reported
in note [17];
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IFRS 12 – Disclosures of Interests in Other Entities. Expanded
disclosure requirements regarding subsidiaries, joint arrangements and
associates have been gathered in a single standard. The disclosures
address the effects of holdings on the financial statements and risks
associated with the current holdings;
Amendment and change of name for IAS 27– Separate Financial
Statements where the requirements concerning separate financial
statements are unchanged, while other parts of IAS 27 are superseded
by IFRS 10;
Amendment of IAS 28 – Investments in Associates and Joint Ventures,
which has been adapted to IFRS 10, IFRS 11 and IFRS 12;
Amendments to IAS 32 – Financial Instruments: Presentation and
amendments in IFRS 7 – Financial Instruments: Disclosures clarifying
some of the requirements for offsetting financial assets and financial
liabilities on the balance sheet. The amendments are not expected
to have any significant effect on Nuon’s financial statements.
New standards, amendments of standards and interpretations issued
by IASB/IFRIC which at 31 December 2013 had not yet been endorsed
by the EU:
■ IFRS 9 – Financial Instruments is a new standard that is currently
being developed to supersede IAS 39 Financial Instruments:
Recognition and Measurement. The first part of the revision of
the standard has been published and pertains to recognition and
measurement of financial assets and liabilities. IFRS 9 prescribes
that financial assets are to be divided into two classifications –
those measured at fair value and those measured at amortised cost.
Classification is made at the time the financial asset is initially
recognised based on the characteristics of the asset and the company’s
business model. For financial liabilities, no major changes have been
made compared with IAS 39. The biggest change pertains to liabilities
identified at fair value. For these, the portion of the change in fair
value that is attributable to own credit risk is to be reported in other
comprehensive income instead of through profit or loss, insofar as
this does not cause an inconsistency in the reporting.
The standard is or will be complemented with rules on impairment and
hedge accounting in 2013 and 2014. At present, the IASB has not set
a mandatory effective date. The standard is not expected to take effect
before 1 January 2016. Pending the completion of all parts of the
standard, Nuon has not yet evaluated the effects of the new standard;
■ IFRIC 21–Levies: The interpretation clarifies when a liability for levies
shall be recognised. Levies are fees and taxes charged to companies
by governmental authorities in accordance with laws and regulations,
except income taxes, penalties and fines. The interpretation clarifies
that a liability shall be recognised when a company has an obligation
to pay due to a past event. A liability is recognised progressively if
the obligating event occurs over a period of time. If an obligation to
pay a levy is triggered when a minimum threshold is reached, the
liability is not recognised until the minimum threshold is reached.
The interpretation is not expected to have any significant effect on
Nuon’s financial statements. The standard is expected to be effective
on 1 January 2014.
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Principles for consolidation
Subsidiaries
The consolidated accounts comprise the financial data of Nuon and
its subsidiaries. Subsidiaries are companies over which Nuon, either
directly or indirectly, has the power to control both operational and
financial policies in order to benefit from them. In order to ascertain
whether or not Nuon has control, actual and potential voting rights that
are currently exercisable or convertible are taken into account, as well as
the existence of other agreements enabling Nuon to control the
operations and financial policies.
The assets, liabilities and results of subsidiaries are fully consolidated.
The results of consolidated subsidiaries that have been acquired during
the year are consolidated as of the date Nuon effectively acquired
control over these subsidiaries. Consolidation of these subsidiaries
ceases as of the moment Nuon no longer controls the subsidiary.
The interests of third parties in Equity and the Total comprehensive
income are presented separately under the items Equity attributable
to non-controlling interests and Total comprehensive income for the year
attributable to non-controlling interests. The item Equity attributable to
non-controlling interests on the balance sheet consists of the share of
non-controlling interests in the fair value of the identified assets and
liabilities of subsidiaries on the date of acquisition and the share of
non-controlling interests in the movements in Equity as of that date.
The acquisition method is applied in the case of an acquisition of a
subsidiary by the group. The purchase price of an acquisition consists of
the fair value of the assets transferred, the equity instruments that were
issued and the assumed or acquired liabilities. The identifiable assets
and liabilities and contingent liabilities that are acquired are initially
recognised at fair value at the date of acquisition, irrespective of the
amount that is attributable to non-controlling interests (see also the
accounting policies for goodwill).
Intercompany transactions, balance sheet items and unrealised gains on
transactions with and between subsidiaries are eliminated. Unrealised
losses are also eliminated, unless the transaction gives rise to the
recognition of impairment charges.
Where applicable, the accounting policies of subsidiaries have been
adjusted in order to ensure the consistent application of accounting
policies across the group.
Associated companies and joint ventures
Associated companies are entities over which Nuon, directly or indirectly,
exercises significant influence on the financial and operational policies,
but over which Nuon has no control. Significant influence is assumed
when Nuon can exercise between 20% and 50% of the voting rights.
Joint ventures are agreements by which Nuon, together with one or more
parties, conducts activities that are controlled jointly by all parties involved.
Investments in associated companies and interests in joint ventures are
measured in accordance with the equity method. Initial measurement is
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at cost. The carrying amount of the associated company or the joint
venture includes the goodwill (adjusted for the accumulated impairments
that may have been recognised) paid at the date of acquisition of the
associated company or conclusion of the joint venture and Nuon’s share
in the movements in the equity of the associated company or joint venture
after the date of the transaction. In the case that the (accumulated) losses
exceed the carrying amount, these losses are no longer recognised unless
Nuon has the obligation or has made payments to make up these losses.
In this case, a provision is recognised.
Unrealised gains on transactions between the group and its associated
companies or joint ventures are eliminated on a pro rata share of the
interest of the group in the associated company or joint venture.
Unrealised losses are also eliminated, unless the transaction gives rise
to the recognition of impairment charges. If appropriate, the accounting
policies of associated companies and joint ventures are adjusted in order
to assure a consistent application of accounting policies.
Scope of consolidation
The significant subsidiaries, associated companies and joint ventures are
listed in note [29]. The information on the equity interests as referred to
in sections 379 and 414, Book 2, Part 9 of the Dutch Civil Code has been
filed separately with the Amsterdam Trade Register.
Foreign currency translation
Translation of transactions and balance sheet items
denominated in foreign currency
Transactions denominated in foreign currency are translated into
the functional currency at the exchange rates prevailing at that time.
Monetary assets and liabilities in foreign currency are translated at the
exchange rates as at the reporting date. Foreign currency exchange
differences resulting from the settlement of transactions denominated in
foreign currency or the translation at the reporting date are recognised
in the income statement unless these exchange gains or losses are
accounted for as cash flow hedges or net investment hedges in a foreign
entity. Foreign currency exchange differences on non-monetary items,
such as investments that are valued at fair value through the profit or
loss, are accounted for as part of the movement in the fair value of the
item involved.
Translation differences regarding the balance sheet positions
and results of foreign subsidiaries
The assets and liabilities of subsidiaries of which the functional currency
differs from the euro are translated at the exchange rate at the reporting
date, whereas the results are translated at the average exchange rate for
the period. The resulting exchange rate differences are recognised in
Other comprehensive income and included in the Currency translation
reserve within Equity.
Foreign currency exchange differences resulting from the translation of
net investments in foreign entities, loans and other currency instruments
that are used as hedges of net investments are recognised in Other
comprehensive income and included in Equity. If a foreign entity is sold,
the corresponding exchange rate differences are recognised in the
income statement as part of the result on the sale.
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Assets held for sale
Non-current assets (or disposal groups) are classified as held for sale
if their carrying amount will be recovered principally through a sale
transaction rather than through continuing use. The assets are valued
at the lower of their carrying amount and fair value less costs to sell and
are not subject to amortisation or depreciation.
Assets (and liabilities) held for sale are classified as current assets
(current liabilities) since the sale transaction is expected to be settled
within twelve months after the reporting date.
Net sales
Net sales comprises the following components:
■ Supply of goods – electricity, gas, heating and cooling: net sales from
electricity, gas, heating, cooling and other energy-related products are
recognised at the moment of supply to the customer, when the sales
price has been agreed and the receipt of the sales proceeds can be
reasonably assumed. Value-added taxes (VAT) and regulating energy
taxes (RET) are not included in net sales;
■ Supply of goods – heating equipment and other equipment: net sales
from the supply of heating and other equipment are recognised at the
moment of supply or installation, when practically all risks and
rewards with regard to the ownership have been transferred, the sales
price has been agreed and the receipt of the sales proceeds can be
reasonably assumed;
■ Work in progress: this encompasses the proceeds from construction
activities on behalf of third parties. Sales are determined based
on the percentage of completion method;
■ Income from operating leases: these proceeds are recognised on
a straight-line basis over the term of the lease;
■ Delivery of service/maintenance contracts: the amounts received for
maintenance contracts are allocated to the periods to which they relate;
■ Amortisation of construction contributions: please refer to the specific
accounting policies for this item;
■ Services to external parties such as activities of the Customer
Service Center.
Cost of energy
Cost of energy represents the direct and indirect expenses attributable
to the supply of power to Nuon’s customers, including the cost of
electricity purchased from third parties and the raw materials used
for the generation of power and heat.
Commodity contracts
Fair value movements of energy commodity contracts and net results of
hedging instruments are included both in net sales and cost of energy.
This item consists of the following categories:
■ Nuon actively trades in oil, gas, coal and energy commodity contracts
and in options and swaps within set boundaries and risk limits.
The trading portfolio is valued at fair value and fair value movements
on the open energy commodity positions are recognised in the income
statement;
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Nuon uses energy commodity contracts for the physical sale and
purchase of raw materials and energy. Optimisation takes place due
to uncertainties with regard to future production and consequently
the expected and contracted purchases, sales and production deviate
from the actual purchases, sales and production. These contracts
are recognised at fair value and hedge accounting is applied where
this is possible;
Nuon uses derivatives, such as energy commodity contracts, swaps
and options, in order to hedge financial risks (mainly price risks)
of sales contracts. The net results of these hedging instruments are
also reported in net sales or cost of energy;
The non-effective part of hedges: Nuon uses commodity contracts
in order to hedge price and other risks that arise from the future
expected sales of electricity and gas and from the purchases necessary
for covering the generation of power or the sourcing of sales. These
contracts are designated as cash flow hedges. The effectiveness tests
may demonstrate that the hedges, or part of the hedges, are not
effective. The non-effective part of the fair value movements of
the hedges is recognised in net sales or cost of energy.
Other operating income
Other operating income includes the result from the disposal of assets
(including subsidiaries, associated companies and joint ventures) and
dunning fees. The result from disposal of assets relates to the net proceeds
from the disposal and the carrying amount of the disposed asset. Gains
and losses from the disposal of assets are presented as a net amount.
Government grants, investment premiums
and operating subsidies
Government grants, investment premiums and operating subsidies are
recognised at fair value if there is reasonable certainty that the criteria
for receiving the grant or premium are or will be met, and that the grant
or premium will be received. Grants and premiums received relating
to a non-current asset are recorded as a reduction of the asset.
Government grants and operating subsidies that do not relate to
non-current assets are taken to income at the moment the associated
costs are incurred.
Financial income and expenses
These items consist of the following:
■ Interest income: this includes the interest income on financial
interest-bearing assets being loans, receivables and cash and cash
equivalents, determined using the effective interest method;
■ Interest expense: this includes the interest expense on interestbearing liabilities, determined using the effective interest method.
In addition, expenses related to the time value of provisions are
included. The costs of financing, such as costs of letters of credit,
commitment fees, etc., are also reported under this item;
■ Foreign exchange results: foreign exchange results arising from
the translation of transactions denominated in foreign currencies
and the translation of financial assets and liabilities and derivatives
in foreign currencies are reported under this item. The exchange
rate differences arising on cash flow hedges are initially recognised
in Equity;
■ Fair value movements of interest derivatives.
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Intangible assets
Goodwill
Goodwill is the amount by which the purchase price exceeds the fair value
of the identifiable assets and liabilities and contingent liabilities of the
subsidiaries, associated companies or joint ventures acquired. Goodwill
paid on the acquisition of subsidiaries is classified under intangible
assets. Goodwill paid on the acquisition of associated companies and
joint ventures is part of the value of the associated company or joint
venture involved. If the purchase price is lower than the fair value of
the identifiable assets and liabilities and contingent liabilities (negative
goodwill), this difference is recognised in the income statement.
The carrying amount of goodwill consists of historical cost less
accumulated impairments. Impairment tests are performed annually
in order to determine whether the value of the goodwill has to be
impaired. The goodwill is taken into account in the determination
of the results on the disposal of entities or cash-generating units.
Concessions, permits and licences
Concessions, permits and licences are valued at historical cost less
accumulated amortisation and accumulated impairments. These assets
are amortised over their estimated useful life, using the straight-line
method. The term of the concessions, permits and licences is used as
the useful life.
Research and development
Investments in research activities, undertaken with the prospect of
gaining new scientific or technical knowledge and understanding, are
recognised in the income statement as incurred. Development activities
involve a plan or design for the production of new or substantially
improved products and processes. Development investments are
capitalised only if these costs can be measured reliably, the product
or process is technically and economically feasible, future economic
benefits are probable and Nuon intends to, and has sufficient resources
to, complete development and to use or sell the asset. Capitalised
investments are measured at cost less accumulated amortisation and
accumulated impairment losses. Cost includes the cost of materials,
direct labour, overhead costs that are directly attributable to the
preparation of the asset for its intended use and, if applicable,
borrowing costs. Other development investments are recognised
in the income statement as incurred.
Property, plant and equipment
The item Property, plant and equipment is subdivided into
the following categories:
■ Land and buildings;
■ Plants and other technical installations;
■ Equipment, tools and fixtures and fittings;
■ Construction in progress.
Property, plant and equipment are measured at historical cost less
accumulated depreciation and impairments. Historical cost includes all
expenditure directly attributable to the purchase of property, plant and
equipment or the production of property, plant and equipment for own
use. The cost of assets produced for the company’s own use includes the
direct costs of materials used, labour and other direct production costs
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attributable to the production of the item of property, plant and
equipment and the costs required to bring the assets into their current
operational condition. The costs of loans associated with the purchase
and/or construction of property, plant and equipment are capitalised if
the asset is identified as a qualifying asset in accordance with IAS 23.
Costs incurred after the date on which the asset has been taken into use
are only capitalised as property, plant and equipment if it can be assumed
that these costs will generate future economic benefits and when these
costs can be measured reliably. Depending on the circumstances, these
costs form part of the carrying amount of the asset involved or are
capitalised separately. Maintenance expenditure is charged directly
to the income statement in the year these costs are incurred.
Historical cost also includes the net present value of the estimated costs
of dismantling, site restoration and returning land to its original condition
as far as there is a legal or constructive obligation to do so. These costs
are capitalised at the moment of acquisition or at a later date when the
obligation arises. In both cases, the capitalised costs are depreciated
over the expected remaining useful life of the asset involved.
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Impairment of assets attributable to a cash-generating unit is allocated
primarily to goodwill. Thereafter, a proportional impairment loss is
conducted of other assets that are part of the unit. The structure of the cashgenerating units is largely unchanged compared with the preceding year.
The recoverable amount is the higher of fair value less costs to sell
and value in use. When calculating value in use, the future cash flow is
discounted by a discounting factor that takes into consideration risk-free
interest and the risk associated with the specific asset. For an asset
that does not generate cash flow independently of other assets, the
recoverable amount is calculated for the cash-generating unit to which
the asset belongs.
Impairment losses on goodwill are never reversed. Impairment losses
on other assets are reversed if a change has occurred in the assumptions
that formed the basis for the calculation of the recoverable amount.
An impairment loss is reversed only if the asset’s carrying amount after
reversal does not exceed the carrying amount that the asset would have
had if the impairment loss had not been recognised.
Financial instruments
Property, plant and equipment are depreciated over the expected useful
lives of the various components of the asset involved, taking account of
the expected residual value, using the straight-line method.
The useful lives of the asset categories are as follows:
■ Land is not depreciated;
■ Buildings: 25-50 years;
■ Plants and other technical installations: 5-40 years for combined
heat and power (CHP) installations, 5-40 years for hydro power
installations, 10-20 years for wind power installations;
■ Equipment, tools and fixtures and fittings: 5-10 years;
■ Construction in progress is not depreciated.
The expected useful lives, residual values and depreciation methods are
reviewed annually and adjusted when deemed necessary. Gains or losses
on disposals are determined based on the sales proceeds and the
carrying amount on the date of the disposal.
Impairments
Assessments are made throughout the year for any indication that an
asset may have decreased in value. If there is an indication of this kind,
the asset’s recoverable amount is estimated. For goodwill and other
intangible assets with an indefinite useful life and for intangible assets
that are still not ready for use, the recoverable amount is calculated
at least annually or as soon as there is an indication that an asset has
decreased in value. If the essentially independent cash flow for an
individual asset cannot be established for the assessment of any need for
impairment, the assets must be grouped at the lowest level where it is
possible to identify the essentially independent cash flow (a so-called
cash-generating unit). An impairment loss is reported when an asset or
cash-generating unit’s reported value exceeds the recoverable amount.
Any impairment loss is recognised in the income statement.
General
IFRS requires that financial assets, which include derivative commodity
contracts for trading purposes, are classified in one of the following
categories: at fair value through profit or loss, held-to-maturity, loans
and receivables and available-for-sale. Financial liabilities, which
include derivative commodity contracts for trading purposes, have to be
classified in one of the following categories: at fair value through profit
or loss, or other financial liabilities. The classification depends on the
purpose for which the financial assets and liabilities were acquired.
Management determines the classification of financial assets and
liabilities at initial recognition.
Financial assets are derecognised when the rights to receive cash flows
from the asset have expired or have been transferred and Nuon has
transferred substantially all risks and rewards of ownership. Financial
assets and liabilities are offset and the net amount is reported in the
balance sheet when there is a current legally enforceable right to offset
the recognised amounts and there is an intention to settle on a net basis
or realise the asset and settle the liability simultaneously.
Financial assets
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets
held for trading and are recognised on the trade date. A financial asset
is classified in this category if acquired principally for the purpose of
selling in the short term. Derivatives are categorised as held for trading
unless they are designated as effective hedging instruments as defined
by IAS 39. Financial assets carried at fair value through profit or loss are
initially recognised at fair value and are subsequently carried at fair
value. Transaction costs are expensed in the income statement.
Gains or losses arising from changes in the fair value of the financial
assets at fair value through profit or loss category are presented in the
income statement within Net sales, Cost of Energy or Financial income or
expenses in the period in which they arise. Classification depends on the
nature of the derivative contract (e.g. commodity contract or interest
swap contract or foreign exchange contract).
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Loans and receivables
Loans and receivables are non-derivative financial assets with fixed
or floating receipts that are not quoted in an active market. They are
included in current assets, except for instruments with maturities of
more than 12 months after the end of the reporting period, which are
classified as non-current assets. Nuon’s loans and receivables comprise
Other non-current receivables, Trade receivables and other receivables,
Cash and cash equivalents and Short-term investments in the balance
sheet (notes [16], [19] and [20]). Loans and receivables are initially
recognised at fair value adjusted for transaction costs. Loans and
receivables are subsequently carried at amortised cost using the
effective interest method. If the fair value of these financial assets
has been hedged, the amortised cost is adjusted for the profit or loss
attributable to the hedged risk. These adjustments are recognised in
the income statement.
Available-for-sale financial assets
Financial assets that are available for sale are carried at fair value on the
balance sheet, with changes in value recognised in Other comprehensive
income. On the date that the assets are derecognised from the balance
sheet, any previously recognised accumulated gain or loss in Other
comprehensive income is transferred to the income statement. Holdings
in listed companies are measured based on the share price on the
balance sheet date. Other shares and participations (note [15]) for which
there are no balance sheet date quotations and for which a fair value
cannot be established are valued at cost, after taking accumulated
impairment losses into account.
Impairment of financial assets carried at amortised cost
Nuon assesses at the end of each reporting period whether there is
objective evidence that a financial asset or group of financial assets
requires impairment. A financial asset is impaired if there is objective
evidence of impairment as a result of one or more events impacting
the estimated future cash flows of the financial asset that can be reliably
estimated. Nuon uses criteria indicating the creditworthiness of the
borrower to determine whether there is objective evidence of an
impairment loss. The amount of the loss is measured as the difference
between the asset’s carrying amount and the present value of estimated
future cash flows (excluding future credit losses that have not been
incurred) discounted at the financial asset’s original effective interest
rate. The loss is recognised in the income statement. Previously
recognised impairments may be reversed following changed conditions
and/or changed estimates.
Financial liabilities
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss are financial
liabilities held for trading and are recognised on the trade date.
A financial liability is classified in this category if acquired principally
for the purpose of selling in the short term. Derivatives are categorised
as held for trading unless they are designated as effective hedging
instruments in accordance with IAS 39. Financial liabilities carried
at fair value through profit or loss are initially recognised at fair value
and are subsequently carried at fair value. Transaction costs are
expensed in the income statement.
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Gains or losses arising from changes in the fair value of the financial
liabilities at fair value through profit or loss category are presented in
the income statement within Net sales, Cost of Energy or Financial income
or expenses in the period in which they arise. Classification depends on
the nature of the derivative contract (e.g. commodity contract or
interest swap contract or foreign exchange contract).
Other financial liabilities
This category includes interest-bearing and non-interest-bearing financial
liabilities that are not held for trading. They are included in current
liabilities, except for liabilities with maturities greater than 12 months
after the end of the reporting period, which are classified as non-current
liabilities. Nuon’s other financial liabilities comprise Interest-bearing
liabilities and Trade payables and other liabilities in the balance sheet
(notes [22] and [26]). Other financial liabilities are initially recognised
at fair value adjusted for transaction costs and are subsequently carried
at amortised cost using the effective interest method.
Derivatives and hedge accounting
General
Nuon uses different types of derivative instruments (forwards, futures
and swaps) to hedge various financial risks, currency risks, electricity
and fuel price risks and interest rate risks.
Derivatives are initially recognised at fair value on the date a derivative
contract is entered into and are subsequently remeasured at their fair
value. The fair values are derived from market prices that are listed in
active markets or by using comparable recent market transactions or
valuation methods, e.g. discounted cash flow models and option pricing
models in the case that there is no active market. The fair value also
includes counterparty credit risk and/or own non-performance risk.
A derivative contract is classified as either current or non-current in the
balance sheet based on the last delivery month of the derivative contract.
Accounting for the movements in fair value of derivatives
The accounting treatment for the movements in fair value of derivatives
depends on whether the derivative is designated as held for trading
purposes or as a hedging instrument. In principle, all fair value
movements of derivatives are recognised in the income statement,
except when cash flow hedge accounting is applied.
Commodity contracts
Nuon uses energy commodity contracts for oil, gas, coal and electricity
for the purpose of the production, sale and purchase of energy. The
majority of these contracts, which can be settled as derivatives, are
valued at fair value through profit or loss. Hedge accounting is applied
for these contracts if possible.
Derivatives used for hedging
Nuon uses derivatives to hedge foreign exchange risks on assets and
liabilities, and fair value and cash flow risks arising from energy
commodity contracts. Nuon only applies cash flow hedge accounting.
These hedge transactions hedge the risk of movements in (future)
cash flows that may affect profit or loss. The hedges are attributable to
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a specific risk that is related to a balance sheet item or a future transaction
that is highly probable. The effective part of the changes in the fair value
of the hedge is recognised in other comprehensive income (‘OCI’) in the
hedge reserve. The non-effective part is taken to the income statement.
The accumulated amounts that are taken to OCI are recycled to the
income statement in the same period in which the hedged transaction
is recognised in the income statement. However, if an anticipated future
transaction that is hedged leads to the recognition of a non-financial
asset or liability, the accumulated value movements of the hedges are
included in the initial measurement of the asset or liability involved.
If a hedge ceases to exist, or is sold, or if the criteria for hedge accounting
are no longer being met, the accumulated fair value movements are
held in equity until the anticipated future transaction is recognised
in the income statement. If an anticipated future transaction is no longer
expected to take place, the accumulated fair value movements that
were recognised in OCI are recycled to the income statement.
Fair value measurement
Fair value is defined as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value of an asset or
a liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market
participants act in their economic best interest.
All assets and liabilities for which fair value is measured or disclosed in
the financial statements are categorised within the fair value hierarchy,
described as follows, based on the lowest level input that is significant
to the fair value measurement as a whole:
■ Level 1: Quoted prices (unadjusted) in active markets for identical
assets or liabilities;
■ Level 2: Inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly (that is, as prices)
or indirectly (that is, derived from prices). Nuon reports mainly
commodity derivatives and interest rate swaps in Level 2;
■ Level 3: Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs).
Leasing
Leases where Nuon acts as lessor
Finance leases
Nuon has concluded a number of leases for energy-related installations.
Where all risks and rewards with regard to the ownership of the assets
have effectively been transferred to the lessee, the lease is accounted for
as a finance lease. The net present value of the lease payments, together
with the residual value if appropriate, is recognised as the carrying
amount on the balance sheet. The estimated residual values used in
the determination of Nuon’s gross investment that are not guaranteed
by parties other than the lessee are reviewed periodically. If the residual
value is expected to be lower, the decrease of the finance lease
receivables is charged directly to the income statement. The lease
payments received are treated as repayments of, and interest payments
on, the investment of Nuon in the lease. The interest income reflects
the effective interest on Nuon’s net investment.
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Operating leases
In addition to finance leases, Nuon has concluded a number of operating
leases for energy-related installations. Operating leases are leases that
are not designated as finance leases and where the risks and rewards
with regard to the ownership of the assets have not been effectively
transferred, or not completely transferred, to the lessee.
The assets that are leased to third parties under operating leases are
classified under the item Property, plant and equipment. The proceeds
from operating leases are recognised in the income statement on
a straight-line basis over the lease term.
Leases where Nuon acts as lessee
Finance leases
If all risks and rewards with regard to the ownership have effectively
been transferred to Nuon, the contract is accounted for as a finance
lease. In this case, an asset and a liability are recognised on the balance
sheet at the lower of the fair value and the net present value of the
future lease payments. The asset is depreciated over the shorter of the
useful life of the asset and the term of the lease contract. Consequently,
the lease payments are regarded as repayment of principal amounts and
interest expenses for the counterparty (lessor). The interest expenses
reflect the effective interest on the investment made by the lessor.
The assets that Nuon holds under finance leases are recognised as
Property, plant and equipment. The corresponding lease obligations are
recognised as non-current liabilities.
Operating leases
Operating leases are leases that are not classified as finance leases and
where the risks and rewards with regard to the ownership of these assets
have effectively not been transferred, or not completely transferred, to the
lessee. The cost of operating leases is charged to the income statement.
Inventories
General
Inventories, except for coal, oil, gas and emission allowances
inventories, are valued at the lower of cost and net realisable value.
These inventories consist of raw materials and consumables, inventories
in process of production, finished goods and spare parts. The cost of
inventories is determined by using the weighted average cost method.
Net realisable value is determined using the estimated sales price under
normal operating circumstances, less the estimated selling costs. In
contrast to the above, coal, oil and gas inventories are valued at fair
value less costs-to-sell, as these inventories form part of the trade
position in this type of commodity. Movements in the fair value of coal,
oil and gas inventories are recognised in the income statement in the
period in which the movement takes place.
Emission allowances
With regard to the accounting for emission allowances, a distinction is
made between emission allowances designated for own use, necessary
to cover the number of rights required for the actual emissions, and
emission allowances that are held for trading purposes.
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54 N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
Emission allowances designated for own use are recognised at cost.
When actual emissions exceed the volume of emission allowances
available, a liability is recognised for the deficit and charged to the
income statement, measured at market prices. These liabilities are
subsequently carried at fair value (market price) until additional
emission allowances are purchased to offset the deficit. Gains or losses
arising from changes in the fair value of these deficits are presented in
the income statement within Operating expenses in the period in which
they arise.
The trading position in emission allowances is accounted for at market
prices at the reporting date and changes are recognised directly in the
income statement. The possibility of converting Certified Emissions
Reductions (CERs) or Emissions Reduction Units (ERUs), into
(European) emission allowances is taken into account for the trading
positions in CERs and ERUs.
Cash and short-term investments
The item Cash and short-term investments comprises all liquid financial
instruments with a maturity date at inception of less than three months.
Cash and cash equivalents include cash at hand, cash held on bank
accounts, cash held at banks through the cash pool of Vattenfall, shortterm deposits held at Vattenfall, call money and other short-term
deposits. Amounts owed to banks are only classified as cash and cash
equivalents when Nuon has the right to offset amounts owed and due
held on bank accounts with the same banks and Nuon has the intention
to use this right.
Amounts owed to credit institutions are reported under the item
Interest-bearing liabilities.
Other non-interest-bearing liabilities
Contributions to construction and payments received from customers,
property developers and local and regional governmental bodies for the
costs incurred for heating infrastructure of new housing projects and
industrial estates are measured at their fair value and subsequently
recognised as Other non-interest-bearing liabilities on the balance sheet.
Other non-interest-bearing liabilities are amortised over the expected
useful lives of the assets involved.
Income taxes and deferred taxes
Deferred tax assets and liabilities that arise from temporary differences
between the carrying amount in the consolidated accounts and the
carrying amount for tax purposes are determined based on the corporate
income tax rates that are currently applicable or will be applicable,
based on current legislation, at the time of settlement of the deferred
tax asset or liability. Deferred tax assets are only recognised if it can be
reasonably assumed that sufficient future taxable income will be available.
Deferred tax assets and liabilities are only offset if Nuon has a legal right
to offset current tax assets and liabilities and the assets and liabilities
relate to taxes that are levied by the same tax authority or governmental
body. Deferred tax assets and liabilities are measured at nominal value.
54
The corporate income tax charge is determined based on the applicable
rates for corporate income taxes and is measured at nominal (i.e.
undiscounted) value. The effective tax rate is affected by permanent
differences between the results for tax purposes and financial reporting
purposes as well as the possibilities of the utilisation of tax losses carried
forward, to the extent that no deferred tax assets can be recognised for
these tax losses.
Provisions
Defined contribution pension plans
Defined contribution pension plans are post-employment benefit plans
under which fixed fees are paid to a separate legal entity. There is no
legal or constructive obligation to pay additional fees if the legal entity
does not have sufficient assets to pay all benefits to the employees.
Fees for defined contribution pension plans are reported as an expense
in the income statement in the period they apply to.
Other long-term employee benefits
Other long-term employee benefits include plans, other than pension
plans, that are not expected to be settled in full within 12 months after
the end of the annual reporting period in which the employees render
the related service. These plans consist of long-term sickness benefits,
jubilee benefits, disability benefits for former employees, conditional
bonuses and additional annual leave for older employees. These
obligations have not been transferred to pension funds or insurance
companies.
The obligation for other long-term employee benefits recognised in
the balance sheet consists of the net present value of the vested benefits.
If appropriate, estimates are used for example for future salary raises,
employee turnover and similar factors. These factors are incorporated
in the calculation of the provision. Changes in the provision resulting
from changes in actuarial assumptions used and changes in the benefits
are taken directly to the income statement.
The service costs attributable to the year of service and the accretion
of interest to the provision are reported under the item Employee
compensation and benefit expenses in the income statement.
Termination benefits
Termination benefits are benefits resulting from the decision of Nuon
to terminate the employment contract before the retirement date,
or resulting from the voluntary decision of an employee to accept an
entity’s offer of benefits in exchange for termination of employment.
The nature and amount of the termination benefits are laid down in
the Social Plan. The Social Plan is renegotiated periodically.
A provision is only recognised when Nuon can no longer withdraw
the offer of these benefits and has drawn up a detailed plan for the
restructuring and has raised a valid expectation in those affected by
starting the implementation of the plan or announcing the main features.
The provision is measured at the present value of the expenditures
expected to be required to settle the termination benefit obligation.
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Other provisions
Provisions are recognised when:
■ There is a legal or constructive obligation as at the reporting date,
arising from events that occurred before the reporting date;
■ It can be reasonably assumed that there will be an outflow of
economic resources in order to settle the obligation;
■ The obligation can be reliably estimated.
Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation using a pre-tax rate that
reflects current market assessments of the time value of money and the
risks specific to the obligation. The increase in the provision due to
passage of time is recognised as interest expense.
Policies for the consolidated statement of cash flows
The consolidated statement of cash flows is prepared in accordance with
the indirect method. The movement in Cash and cash equivalents is
derived from Result before tax according to the income statement.
Exchange rate differences are eliminated as far as they did not lead to
cash flows. In addition, non-cash transactions (such as finance leases)
are excluded from the Cash flows used in investing and/or financing
activities. The financial consequences of the acquisition or sale of
subsidiaries, associated companies and joint ventures are shown
separately in the Cash flow from investing activities. As a result, the cash
flows presented do not necessarily reconcile with the movements in the
items in the consolidated balance sheet.
The definition of cash and cash equivalents used in the consolidated
statement of cash flows and balance sheet includes bank overdrafts,
if applicable, which are recognised under interest-bearing liabilities.
Note 3 Important estimations and assessments
in the preparation of the consolidated accounts
Preparation of the consolidated accounts in accordance with IFRS
requires the company’s Management Board to make estimations and
assessments as well as to make assumptions that affect application of
the accounting policies and the reported amounts of assets, liabilities,
income and expenses. The estimations and assessments are based on
historic experience and other factors that seem reasonable under
current conditions. The results of these estimations and assessments are
then used to establish the reported values of assets and liabilities that
are not otherwise clearly documented from other sources. The final
outcome may deviate from the results of these estimations and
assessments. The estimations and assessments are revised on a regular
basis. The effects of changes in estimations are reported in the period
in which the changes were made if the changes affected this period only,
or in the period the changes were made and future periods if the
changes affect both the current period and future periods.
Important estimations and assessments are described below.
Impairment testing for intangible assets
and property, plant and equipment
Nuon has reported substantial values in the balance sheet regarding
intangible assets and property, plant and equipment. These are tested
for impairment in accordance with the accounting policies described
in note [2] to the consolidated accounts, Accounting policies.
The recoverable amount for cash-generating units is determined
by calculating the value in use or fair value less costs to sell. These
calculations require certain estimates to be made regarding future cash
flows and other assumptions for example, on the required rate of return.
For 2013, Nuon has reported impairment losses including reversed
impairment losses to the amount of EUR 687 million (2012: EUR 1,076
million). These impairment losses are further described in notes [13]
and [14] to the consolidated accounts.
Employee benefits and other provisions
For provisions, such as environmental restoration provisions, provisions
for onerous contracts, personnel-related provisions for non-pension
purposes, provisions for tax and legal disputes or other provisions,
a discount rate of 4.0% (2012: 2.0%) was used for long-term provisions
and 0.8% (2012: 2.0%) for short-term provisions. For further information
on these provisions, see notes [24] to the consolidated accounts.
Income taxes and deferred taxes
Nuon reports deferred tax assets and liabilities that are expected to be
realised in future periods. In calculating these deferred taxes, certain
assumptions and estimates must be made regarding future tax
consequences pertaining to the difference between assets and liabilities
reported on the balance sheet and their corresponding tax values.
The deferred tax assets and liabilities are measured based on the
assumptions that future earnings for Nuon’s units will correspond to
previously reported earnings, that applicable tax laws and tax rates
will be unchanged in the countries in which Nuon is active, and that
applicable rules for exercising tax loss carryforwards will not be
changed. Nuon also reports future expenses arising from ongoing
tax audits or tax disputes under Provisions. The outcome of these may
deviate from the estimates made by Nuon.
For further information on taxes, see note [25] to the consolidated
accounts.
Held for sale
According to IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations, an entity shall classify a non-current asset (or disposal
group) as held for sale if its carrying amount will be recovered
principally through a sale transaction rather than through continuing
use. For that to be the case, certain criteria need to be fulfilled. The
assets need to be available for immediate sale in its present condition
subject only to usual and customary terms. Further, the sale must be
highly probable, meaning that a plan for the disposal must have been
prepared and approved at the appropriate level of management, an
active program for the disposal must have been initiated and the asset
must be marketed for sale at a price that is reasonable in relation to
its current fair value. In addition, the sale should be expected to be
completed within one year from the date of classification.
At 31 December 2013, management was of the opinion that there are
no non-current assets that comply with the requirements in IFRS 5 to
be recognised as Assets held for sale.
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Note 4 Acquired and divested operations
The following changes in consolidation are applicable for these
consolidated accounts:
■ In February 2013, Nuon sold all shares of Gelre Flevo
Warmtekracht II B.V.;
■ In May 2012, Nuon sold all the assets of Helianthos.
Note 5 Net sales
Net sales
2013
2012
1,853
Heating and other products
1,252
1,811
657
Total
3,720
3,879
Electricity
Gas
Net sales and cost of energy include the fair value movements of
commodity derivatives. The total impact of these fair value movements
was EUR 168 million positive in 2013 (2012: EUR 25 million negative).
1,375
651
This EUR 168 million represents the net effect of accounting for
derivatives at fair value through profit or loss. It consists of the combined
effects of settled derivatives and fair value changes during the year.
Note 6 Other operating income
Other operating income
2013
2012
Other operating income
30
27
Total
30
27
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Note 7 Cost of energy
Cost of energy
2013
2012
-1,852
Heating and other products
-190
-2,028
-288
Total
-2,506
-2,606
Electricity
Gas
-458
-296
Note 8 Employee compensation and benefit expenses
Employee compensation and benefit expenses
2013
2012
-314
Other personnel expenses
-297
-30
-39
-6
-7
-9
Total
-388
-456
Wages and salaries
Social security contributions
Pension expenses
Termination benefit expenses
Other long-term employee benefit expenses
-32
-38
-39
-18
-15
The number of employees (FTE based on a 38-hour working week)
is shown in the following table.
Number of employees (FTEs)
2013
2012
Average
Employed FTEs
4,984
5,325
4,833
5,200
85
76
As at 31 December
Employed FTEs
of which working in foreign countries
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Note 9 Other operating expenses
Other operating expenses
2013
2012
-105
Other expenses
-97
-83
-70
-142
-26
-13
Total
-431
-465
External hires and consultants
Marketing and sales expenses
Operating and maintenance expenses
Office and ICT expenses
Costs charged by Vattenfall and its subsidiaries
-73
-117
-142
-24
-4
Note 10 Financial income
Financial income
2013
2012
Other financial income
1
3
10
Total
4
10
Interest income from related parties
–
Note 11 Financial expenses
Financial expenses
2013
2012
-10
Interest added to provisions
-9
-2
-1
Total
-12
-13
Interest on loans and liabilities
Interest on loan and current account Vattenfall
-1
-2
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Note 12 Income tax expense
Income tax expense
2013
2012
Current tax
Deferred tax
-4
6
123
195
Total
125
225
Current taxes related to the period
Adjustment of current tax for prior periods
-3
33
The following table provides a reconciliation between the corporate
income tax rate in the Netherlands and the effective tax rate.
Reconciliation of effective corporate income tax rate
%
2013
Netherlands income tax rate at 31 December
2012
25.0
Other
25.0
0.6
0.6
-0.1
0.1
-3.3
0.1
Effective tax rate
23.0
23.9
Differences in tax rate in foreign operations
Tax adjustments for previous periods
Unrecognised tax loss carry forward from current year
Tax-exempt income
Non-deductible cost
The statutory tax rate is 25.0% (2012: 25.0%). The effect of the
difference between the statutory tax rate and other (foreign) tax rates
is disclosed in the corresponding line.
-1.2
-0.1
-0.1
0.4
-0.1
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Note 13 Intangible assets
Intangible assets
Other
intangible assets
Goodwill
Total
As at 1 January 2012
Historical cost
93
102
195
Accumulated amortisation and impairments
-27
-10
-37
Carrying amount as at 1 January 2012
66
92
158
Amortisation
-
-1
-1
Impairment
-
-
-
Transfers and other movements
-
-1
-1
Total
-
-2
-2
Historical cost
89
96
185
Accumulated amortisation and impairments
-23
-6
-29
Carrying amount as at 31 December 2012
66
90
156
-66
-66
-2
-1
-3
-2
-66
-1
-69
Accumulated amortisation and impairments
89
-89
94
-7
183
-96
Carrying amount as at 31 December 2013
-
87
87
Movements 2012
As at 31 December 2012
Movements 2013
Amortisation
Impairment
Transfers and other movements
Total
As at 31 December 2013
Historical cost
The Other intangible assets item mainly comprises concessions, permits
and licences. Concessions, permits and licences are amortised over their
term. Transfers and other movements mainly relates to reclassifications
from or to Property, plant and equipment.
Impairment
Goodwill is not subject to amortisation, but is tested annually for
impairment. Impairment testing has been conducted through
calculation of the value in use of the assets to which the goodwill is
allocated. Impairment testing on goodwill has been conducted in the
second quarter of 2013. Based on this impairment test, the goodwill
related to subsidiaries acquired in former years (mainly in the Energy
Related Services business) is fully impaired, resulting in an impairment
loss of EUR 66 million in 2013.
This impairment was caused by further deterioration of market
conditions.
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The main assumptions management used in calculating the projected
future cash flows, were based on the business plan for the coming five
years and the residual values. The projected future cash flows for the
residual value were based on a growth factor of 0.0% (2012: 1.0%).
A decrease in the annual growth factor of 0.5% would decrease the
estimated value in use of the Energy Related Services business and
would result in a need to recognise an additional EUR 10 million
impairment on Property, plant and equipment. An increase in the
annual growth factor of 0.5% would have resulted in a EUR 10 million
lower impairment of goodwill.
Future cash flows have been discounted to value in use using a discount
rate of 6.8% (2012: 5.1%) after tax, which is derived from the average
discount rate used by peer groups. An increase in the discount rate of
+/- 0.5% would affect the estimated value in use of the Energy Related
Services business by approximately -/+ EUR 13 million. An increase
of the discount rate of 0.5% would decrease the estimated value in use
for the Energy Related Services business and would result in a need to
recognise an additional EUR 13 million impairment on Property, plant
and equipment. A decrease in the discount rate of 0.5% would have
resulted in EUR 13 million lower impairment of goodwill.
Note 14 Property, plant and equipment
Property, plant and equipment
Equipment,
Plants and
tools
other technical and fixtures
installations
and fittings
Land and
buildings
Construction
in progress
Total
As at 1 January 2012
Historical cost
Accumulated amortisation and impairments
Carrying amount as at 1 January 2012
125
2,233
839
2,228
5,425
-69
-1,005
-481
-30
-1,585
56
1,228
358
2,198
3,840
Movements 2012
Investments and new consolidations
2
3
42
731
778
Disposals
-3
-5
-4
-32
-44
Depreciation
-2
-123
-57
-
-182
Impairment
-1
-362
-
-713
-1,076
Transfers and other movements
-1
497
33
-530
-1
Total
-5
10
14
-544
-525
As at 31 December 2012
Historical cost
109
2,893
789
2,302
6,093
Accumulated amortisation and impairments
-58
-1,655
-417
-648
-2,778
Carrying amount as at 31 December 2012
51
1,238
372
1,654
3,315
-3
-12
-15
3
-126
-525
1,775
1,127
88
-2
-83
-78
16
-59
293
-6
-1,791
-1,504
384
-2
-212
-621
-451
Movements 2013
Investments and new consolidations
Disposals
Depreciation
Impairment
Transfers and other movements
Total
As at 31 December 2013
Historical cost
109
5,271
883
197
6,460
Accumulated amortisation and impairments
-73
-2,906
-570
-47
-3,596
Carrying amount as at 31 December 2013
36
2,365
313
150
2,864
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Borrowing costs
The borrowing costs of Nuon that can be attributed to the acquisition,
production or construction of qualifying assets amounted to EUR 7 million
for the year 2013 (2012: EUR 8 million) and are included in the
investment. The average interest rate for borrowing amounted to
0.8% (2012: 1.5%).
Operating leases
Property, plant and equipment includes EUR 100 million
(2012: EUR 94 million) relating to assets for which operating lease
contracts have been agreed upon with third parties and for which
Nuon is the lessor.
Investments
Investments in 2013 and 2012 mainly related to the construction of
the Nuon Magnum power plant in Eemshaven, two gas-fired power
plants in Amsterdam and Diemen and the Princess Alexia Wind Farm.
Government grants
Property, plant and equipment included government grants for an
amount of EUR 24 million (2012: EUR 17 million). There are no
unfulfilled conditions or contingencies attached to these grants.
Impairments and reversal of impairments
As part of the Vattenfall group, impairment testing has been conducted
through calculation of the value in use for the Business Units, which is
the basis for the cash-generating units.
During the year, an impairment loss of EUR 621 million was recognised,
of which EUR 570 million related to CGU Thermal Power and
EUR 51 million to CGU Industry Parks. The impairment of CGU
Thermal Power was caused by increased business risk and by further
deterioration of market conditions compared to 2012. Margins are
under pressure by, on the one hand falling demand and on the other
hand increased production capacity and more imports. By focusing more
on reducing costs and improving the commercial deployment of power
plants, we have managed to compensate the negative effect in part.
On the basis of the forecast Nuon concluded that the book value of
the Thermal assets exceeded the estimated value in use, specifically
for the gas-fired power plants, resulting in this impairment.
In 2012, an impairment loss of EUR 1,076 million was recognised,
of which EUR 1,059 million related to CGU Thermal Power in the
Generation segment. This impairment was caused by sharply lower
margins and higher cost associated with additional taxes on coal-based
power generation.
CGU Thermal Power
The main assumptions used in calculating projections of future cash
flows for CGU Thermal Power within the Generation segment are – for
the power generating assets – based on forecasts of the useful life of the
respective assets. In other respects, they are based on the business plan
for the coming five years, after which their residual value is taken into
62
account, based on a long-term market outlook. The calculated revenues
in these forecasts are based on Vattenfall’s long-term pricing projections,
which are the result of a large number of simulations of the prices of oil,
gas, electricity and CO2 emission allowances in the relevant commodity
markets. In general it can be stated that a further decrease of projected
dark and spark spreads in the future is likely to result in additional
impairments for the Thermal asset portfolio. In calculations of the value
of power-generating assets in the Generation segment, a so-called
flexibility value is taken into account. Most of the power-generating
assets have a technical degree of flexibility that gives the owner the
opportunity to adapt generation to current prices in the market. If spot
prices are low, a production plant can reduce its generation or even go
off line during the time in which generation would be unprofitable.
On the other hand, a production plant can be brought back on line or
be ramped up when spot prices allow for positive production margins.
In option valuation theory, this asymmetry in potentially earned
margins results is an additional value component. This flexibility value
is mainly dependent on two key elements: the volatility of energy prices,
and the technical flexibility of the power plants, which affects decisions
in the daily production optimisation.
The main driving force behind the estimated flexibility value for the
power generating assets in the Generation segment is the effects of
production optimisation; however, calculation of the flexibility value is
also affected by a multitude of simulation scenarios for future prices of
electricity, fuel and CO2 emission allowances. The calculation of these
scenarios takes into account fundamental market dynamics, including
the historical as well as the anticipated future level of volatility. Future
cash flows have been discounted to value in use using a discount rate of
6.8% (2012: 5.1%) after tax, which is derived from the average discount
rate used by peers. An increase of the discount rate of 0.5% would
decrease the estimated value in use for cash-generating unit Thermal
Power in the Generation segment and would result in a need to recognise
an additional EUR 136 million impairment. A decrease in the discount
rate of 0.5% would result in a EUR 136 million lower impairment.
CGU Industry Parks
The main assumptions management used in calculating the projected
future cash flows, were based on the business plan for the coming five
years and the residual values. The projected future cash flows for the
residual value are based on a growth factor of 1.0% (2012: 1.0%).
A decrease in the annual growth factor of 0.5% would decrease the
estimated value in use for the Industry Parks business and would result in
a need to recognise an additional EUR 1.2 million impairment. An increase
in the annual growth factor of 0.5% would result in a EUR 1.2 million
lower impairment. Future cash flows have been discounted to value in use
using a discount rate of 6.8% (2012: 5.1%) after tax, which is derived
from the average discount rate used by peer groups. An increase of the
discount rate of 0.5% would decrease the estimated value in use for
the Industry Parks business and would result in a need to recognise
an additional EUR 1.6 million impairment. A decrease in the discount
rate of 0.5% would result in a EUR 1.6 million lower impairment.
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Value of assets held under finance leases
The value of assets held under finance leases totalled EUR 4 million
as at year-end 2013 (2012: EUR 8 million) and are classified under
Equipment, tools and fixtures and fittings. These finance leases relate
to property, plant and equipment for the production of renewable
energy, such as wind farms, solar and biomass generation assets.
The heating networks belonging to Alliander N.V. which had been placed
within a cross-border lease, were subleased to N.V. Nuon Warmte, now
part of Nuon, as of mid 2008 until 2020. This was done in connection
with the implementation of the Independent Network Operation Act
(WON) and preparations for the unbundling of our former shareholder
N.V. Nuon. The strip risk (the part of the termination value – i.e. the
possible compensation payable by Nuon to N.V. Alliander in the event of
premature termination of the transaction – that cannot be settled from
the deposits and investments held for this purpose) related to these
subleased assets is borne by Nuon and amounted to USD 41 million as
at year-end 2013 (2012: USD 35 million). As these subleases are still
operational, no liability for this strip risk is included in the balance sheet.
Note 15 Participations in associated companies and joint ventures and other shares
and participations
Participations in associated companies and joint ventures and other shares and participations
Carrying amount as at 1 January
Associated companies
and Joint ventures
2012
2013
92
97
Other shares
and Participations
2013
2012
19
14
Movements
Investments
Capital repayment
Disposals
Share in results
Dividends received
Currency translation adjustments and other movements
Total
Carrying amount as at 31 December
-
-
4
-4
-4
-
-
6
-
-
-2
-
19
18
-13
-11
-19
-5
4
81
92
23
-
6
-
1
5
Other shares and participations mainly include development-stage clean
energy investments.
Financial information of investments in associated companies
Nuon share as per 31 December 2013
Nuon share as per 31 December 2012
Assets Liabilities Revenue
30
16
14
-
-
Profit/
(Loss)
-
Carrying
amount
14
-
14
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Financial information of participations in joint ventures
Nuon share as per 31 December 2013
Noncurrent
assets
123
Nuon share as per 31 December 2012
130
NonCurrent
current
Current
assets
liabilities liabilities
25
62
19
23
71
4
Revenue Expenses
38
32
39
19
Profit/
(Loss)
6
Carrying
amount
67
20
78
Note 16 Other non-current receivables
Other non-current receivables consist mainly of loans and receivables
(including incremental costs) with related parties.
Note 17 Derivatives
Derivatives
Commodity contracts
Assets
2012
2013
6,516
2,802
Liabilities
2013
2012
5,997
2,402
56
6,572
2,859
80
6,077
2,487
-5,652
-1,869
-5,652
-1,869
920
566
354
990
425
273
152
618
-52
-10
-44
Collateral
-34
-52
-150
-221
Net position
858
912
223
353
Treasury contracts
Gross amount recognised derivatives
Effects from netting agreements
Net amount presented on the balance sheet
Current portion
Non-current portion
57
537
453
85
347
271
Amounts not set off on the balance sheet
Effects from unrecognised netting agreements
The commodity contracts mainly relate to forwards contracts for oil, gas,
coal, power and emission allowances. The majority of the derivatives are
held for trading purposes. The gross asset and liability derivatives
-44
balances increased compared to 2012, as a result of the fact that the
gross amount is determined in 2012 based on total contract value and
in 2013 based on value per delivery period.
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Note 18 Inventories
Inventories
2013
2012
Inventories at fair value
87
1
238
273
Total
326
307
Raw materials and consumables
Finished goods
Inventories at fair value include coal, gas, emission allowances and
oil inventories.
33
1
Inventories recognised as an expense in 2013 amount to
EUR 2,004 million (2012: EUR 1,509 million).
Inventories measured at the lower of cost and net realisable value were
written down in 2013 by EUR 5 million (2012: EUR 1 million).
Note 19 Trade receivables and other receivables
Trade receivables and other receivables
Trade receivables - regular sales
Trade receivables - trade activities
Provisions for impairments on trade receivables
2013
612
261
-58
2012
414
398
-43
Trade receivables (net)
815
Taxes and social security premiums
13
433
241
84
Receivables from related parties
Other receivables
Accrued income and prepayments
Total
The net balance of trade receivables from regular sales relate mainly to
energy receivables in the business and consumer markets. As of August
2013 this item also includes receivables related to Nuon’s customers’
use of the electricity network. Receivables from trading activities have
a maximum credit term of one month as they are normally settled in
the month after invoicing.
1,586
769
13
421
233
143
1,579
At the end of 2013, the impairments on trade receivables totalled
EUR 58 million (2012: EUR 43 million). An impairment charge on
trade receivables of EUR 40 million (2012: EUR 28 million) was
recorded in other operating expenses in the income statement in 2013.
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Current tax assets
2013
2012
Corporate income tax
-
34
Total
-
34
Note 20 Cash and short-term investments
Cash and cash equivalents
2013
2012
184
Cash equivalents
186
3
-
Total
189
187
Cash and bank balances
Vattenfall group cash pool
The effective interest rate on credit balances available on demand
and short-term deposits was 0.14% (2012: 0.37%). Cash and cash
equivalents are denominated almost entirely in euros. Cash and cash
equivalents included cash and deposits of EUR 162 million
2
1
(2012: EUR 147 million) to which Nuon does not have free access.
This amount relates to cash held at banks which is provided as
collateral and for margin call payments to cover exchange-based
commodity trades.
Short-term investments
2013
2012
10
Interest-bearing investments
18
1
Total
19
10
Margin calls, financing activities
-
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Note 21 Equity
Authorised, issued and paid-up share capital
The authorised share capital of Nuon amounts to EUR 1,500,000,000
consisting of 150,000,000 class A shares and 150,000,000 class B shares,
each with a nominal value of EUR 5 per share. The total number of
issued and paid-up shares amounts to 28,726,937 class A shares and
108,068,027 class B shares totalling a paid-up capital of EUR 683,974,820.
The class B shares, equal to 79% of the total number of outstanding
shares, are held by Vattenfall.
The class A shareholders sold 11.96% of the shares to Vattenfall AB on
1 July 2013 at EUR 72.10 per share. These shares have subsequently
been converted into class B shares. The remaining class A shares,
representing a 21% stake in Nuon, will be sold to Vattenfall AB at
EUR 72.10 per share on or around 1 July 2015 and subsequently be
converted into class B shares.
Rights and obligations related to class A and B shares
The ‘one share, one vote’ principle applies to the issued shares. Further
information is provided in the Corporate Governance section of the
annual report on page 22.
The class A shareholders are entitled to an annual fixed preferred
dividend on the remaining class A shares, amounting to 2% of the
outstanding predetermined purchase price for the outstanding class A
shares. As these payments qualify as a liability rather than equity in
accordance with IAS 32, a liability of EUR 430 million was recognised
as at 1 July 2009 as a charge to Other reserves. This represented the net
present value of the fixed preferred dividend payable until 1 July 2015.
As at 31 December 2013 this liability was EUR 100 million
(2012: EUR 171 million). Interest is accreted to the dividend liability.
Share premium
Share premium consists of the additional paid-up or contributed value
to Nuon.
Reserve for cash flow hedges and
currency translation reserve
The changes in the fair value of derivatives, net of taxes, which effectively
hedge the risk of changes in future cash flows, are included in the Reserve
for cash flow hedges.
The exchange rate differences resulting from the assets and liabilities
of subsidiaries with a different functional currency being translated at
closing rate while their results are translated at an average rate are
recognised in Other comprehensive income and included in the Currency
translation reserve within Equity. Neither the Reserve for cash flow hedges
nor the Currency translation reserve is freely distributable.
Other reserves
Other reserves consist mainly of retained earnings. Results which are
not distributed as dividend to class B shareholders are in principle added
to the Other reserves. The Other reserves are not freely distributable until
all class A shares have been sold to Vattenfall AB.
Note 22 Interest-bearing liabilities
Interest-bearing liabilities
2013
Carrying amount as at 1 January
2012
1,065
355
Movements
Additions and loans received
Loans repaid
Payment dividend liability class A shares
Other movements
Total
Carrying amount as at 31 December
74
-11
-76
5
-8
1,057
834
-54
-74
4
710
1,065
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In 2012, EUR 26 million of the green loans repaid related to the transfer
of external green loans to Vattenfall AB. This transfer was settled in cash.
The carrying amount of the non-current interest-bearing liabilities,
including the current part, was as follows.
Maturities of interest-bearing liabilities
Effective
interest rate
Variable/
Fixed
Carrying amounts
Less than
1 year
Between
1 and 5 years
Over
5 years
Total
2012
Interest-bearing liabilities
Green loans
3.0%
Green loans
Fixed
3
29
-
Variable
6
-
-
32
6
Variable
825
-
-
825
Current account Vattenfall
0.2%
Dividend liability class A shares
3.6%
Fixed
77
94
-
171
Other
7.7%
Fixed
-
2
24
26
Variable
4
1
-
5
915
126
24
1,065
29
500
400
41
4
59
2
-
22
-
29
500
400
100
24
4
974
61
22
1,057
Other
Total interest-bearing liabilities
2013
Interest-bearing liabilities
Green loans
Current account Vattenfall
Loan Vattenfall
Dividend liability class A shares
Other
3.1%
0.6%
0.2%
3.6%
8.0%
Other
Total interest-bearing liabilities
The green loans outstanding at year-end 2013 are not subject to
covenant clauses.
At year-end 2013 and 2012, the carrying amount of the interest-bearing
liabilities was denominated in euros.
Fixed
Variable
Fixed
Fixed
Fixed
Variable
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Note 23 Other non-interest-bearing liabilities
Other non-interest-bearing liabilities
2013
2012
Carrying amounts as at 1 January
163
170
Repayments
-7
Transfers and other
10
-16
-
Carrying amount as at 31 December
157
Contributions received
Amortisation recognised as income
Other non-interest-bearing liabilities relates to construction
contributions received. These amounts were mainly attributable to
district heating grids. The amortisation periods of these amounts
11
-8
-3
163
are equal to the depreciation periods of the underlying assets with
a maximum of 30 years.
Note 24 Provisions
Provisions
Employee
benefits
Carrying amount as at 1 January 2012
Environment and
dismantling
Onerous
contracts
Other
15
Total
44
20
25
104
57
23
3
2
85
-19
-1
-5
-8
-33
Movements 2012
Additions
Withdrawals
Interest accretion
1
1
-
1
3
Other movements
-
-
-
-
-
Total
39
23
-2
-5
55
Carrying amount as at 31 December 2012
83
43
13
20
159
Current portion
33
50
43
13
11
9
44
115
39
-43
-21
1
-24
2
-4
-2
-2
-2
6
2
3
11
47
-47
-21
1
3
-17
Carrying amount as at 31 December 2013
59
41
11
31
142
Current portion
23
36
21
20
4
7
14
17
62
80
Non-current portion
Movements 2013
Additions
Withdrawals
Release to other expenses
Interest accretion
Other movements
Total
Non-current portion
An amount of EUR 43 million is expected to lead to a cash outflow
after 2018.
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Provisions for employee benefits
Nuon has various pension and similar plans for its current and former
employees. The majority of the pension obligations has been transferred
to the ABP pension fund and the ‘Metaal en Techniek’ pension fund.
In addition to these two main pension plans, Nuon has a small number
of defined benefit plans that are in aggregate not material. The ABP and
‘Metaal en Techniek’ plans have been classified as defined contribution
plans and are reported as such. The coverage ratio of the ABP pension
fund amounts to 106.4% (2012: 96.6%) and the pension premium
for 2014 amounts to 21.6% (2013: 25.4%). The coverage ratio of the
‘Metaal en Techniek’ pension fund amounts to 103.8% (2012: 92.4%)
and the pension premium for 2014 amounts to 31.2% (2013: 32.3%).
In addition Nuon operates a number of other employee benefit schemes,
including the following:
■ Jubilee benefits: this benefit covers the jubilee benefits paid to
employees after 10, 20, 30 and 40 years of service and after retiring
upon reaching the retirement age;
■ Long-term sickness benefits: this benefit covers the obligation to
continue paying all or part of an employee’s salary during the first
two years of sick leave;
■ Disability benefits: Nuon is the risk-bearer within the meaning of the
Income and Employment Act (WIA); this benefit covers the obligation
■
■
■
in respect of Nuon employees who have become partly or fully
incapacitated for work;
Unemployment benefits: Nuon is the risk-bearer within the meaning
of the Unemployment Act (WW); if a Nuon employee becomes
unemployed, the unemployment benefit they receive is borne
by Nuon for a period of between three and thirty-eight months,
depending on the employment history of the employee concerned;
Reduction of working hours of older employees: in the light of the
legal measures in relation to early retirement, it was agreed in the
2005 Collective Labour Agreement to create a transitional scheme
in which older employees would work less in the future;
Termination benefits: The provision covers payments and/or
supplements to benefits granted to employees whose employment
contract has been terminated. These benefits and supplements are
based on the Social Plan operated by Nuon and individual
arrangements. The Social Plan is periodically renegotiated and
established during the Collective Labour Agreement negotiations.
In 2013, a net amount of EUR 6 million (2012: EUR 39 million)
was added to the provision for new restructuring programmes.
The provision for termination benefits totalled EUR 16 million
at the end of 2013 (2012: EUR 41 million).
The main assumptions used in determining the provisions for employee
benefits are given below.
Assumptions
As at 31 December
2013
Generation table
2010-2060/2013
4.0%
0.8%
2.5%
2.0%
Mortality table
Discount rate long-term provisions
Discount rate short-term provisions
Expected future salary increases
Expected increase in disability benefits
2012
Generation table
2010-2060
2.0%
2.0%
2.5%
2.5%
Environment and dismantling provisions
Onerous contracts
The environmental restoration provision, as included in Environment
and dismantling, covers legal and constructive obligations related to
soil pollution.
The provision for onerous contracts relates mainly to obligations in
relation to the purchase of green certificates from a Norwegian wind
farm and heat contracts.
The provision for dismantling costs, as included in Environment and
dismantling, is formed for legal and constructive obligations related
to dismantling and removal of assets, including expenses to be incurred
to restore certain sites to their original condition.
Other provisions
The item Other includes provisions for various claims and litigation.
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Note 25 Deferred tax assets and liabilities
The balances and gross movements of the deferred tax assets and
deferred tax liabilities were as follows:
Gross movement in deferred tax assets/(liabilities)
Property,
plant and
equipment
Carrying amount as at
1 January 2012
Intangible
assets
Non-settled
Settled
derivatives derivatives
Tax
losses
Provisions
Other
Total
-68
-9
-11
-2
-
9
2
-79
179
2
12
-
7
1
-6
195
Movements 2012
Charged to income
Charged to other comprehensive
income
-
-
-12
4
-
-
-
-8
179
2
-
4
7
1
-6
187
111
-7
-11
2
7
10
-4
108
116
-7
-11
2
7
10
-4
113
5
-
-
-
-
-
-
5
142
-
-9
-
-4
-3
-3
123
Total
142
-
-39
-48
36
36
-4
1
-2
-3
-2
121
Carrying amount as at
31 December 2013
253
-7
-59
38
3
8
-7
229
254
-7
-59
38
3
8
-7
230
1
-
-
-
-
-
-
1
Total
Carrying amount as at
31 December 2012
Of which:
- Deferred tax asset
- Deferred tax liability
Movements 2013
Charged to income
Charged to other comprehensive
income
Of which:
- Deferred tax asset
- Deferred tax liability
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The deferred tax positions for property, plant and equipment and
intangible assets mainly represent the difference between the carrying
value and the value for tax purposes of the assets of the powergenerating facilities and are recorded at 25.0% (2012: 25.0%).
A deferred tax asset is recognised for the difference to the extent that
the realisation of the related tax benefit through future taxable profits
is probable.
The deferred tax positions in respect of derivatives reflect the temporary
differences – measured at the prevailing tax rate – between the
valuation of derivatives for tax purposes and the valuation in the
consolidated accounts. The settled derivatives refer to cash-settled
72
derivatives of which the fair value movements are not yet recognised
in the income statement as cash flow hedge accounting is applied.
Unrecognised deferred tax assets
Unrecognised deferred tax assets relate to the temporary differences in
the valuation of tax losses carried forward and amounted to EUR 8 million
(2012: EUR 10 million). These tax losses carried forward relate mainly
to losses in foreign operations where insufficient taxable profit is
considered to be available in the foreseeable future to recognise the
losses carried forward. These tax losses on the foreign operations do
not have an expiration date.
Note 26 Trade payables and other liabilities
Trade payables and other liabilities
2013
Trade payables
Invoices to be received from energy supplies and trading activities
Deposits received
Payables to related parties
Other payables
Other taxes and social securities
Total
2012
158
637
30
113
263
435
305
1,636
1,483
172
637
34
173
162
Other payables included short-term employee benefit accruals of
EUR 63 million at the end of 2013 (2012: EUR 66 million) relating
to salaries to be paid, holiday allowances, bonuses payable and other
personnel expenses to be paid.
Current tax liability
2013
2012
Corporate income tax
13
–
Total
13
–
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Note 27 Leasing
Leasing receivables
The total future minimum lease receipts from non-cancellable operating
leases on property, plant and equipment were as follows:
Operating lease receivables
2013
2012
Over 5 years
30
108
157
156
Total
295
284
Less than 1 year
Between 1 and 5 years
27
101
These operating lease receivables relate mainly to leases of heating
equipment to consumers.
Leasing payables
Finance lease payables
Less than 1 year
Between 1 to 5 years
Over 5 years
Total
2012
Future minimum lease obligations
4
4
-
8
Future finance charges on finance leases
-
-
-
-
Present value of finance lease obligations
4
4
-
8
Future finance charges on finance leases
4
-
-
-
4
-
Present value of finance lease obligations
4
-
-
4
2013
Future minimum lease obligations
Finance lease payables relate to property, plant and equipment mainly
for the generation of renewable energy, such as wind farms and solar
and biomass generation assets.
The total future minimum lease payments in respect of non-cancellable
operating leases were as follows.
Operating lease payables
2013
Less than 1 year
Between 1 and 5 years
Over 5 years
Total
2012
74
147
47
151
268
266
86
29
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Nuon has off-balance operating lease payables in respect of district
heating networks, buildings, company cars, IT assets and gas
storage assets.
The current year’s leasing expenses amount to EUR 78 million
(2012: EUR 63 million).
74
Note 28 Contingent assets and liabilities
and licences
Rights and obligations arising from operating leases
Please refer to note [27] Leasing for a breakdown of the rights and
obligations with regard to operating leases.
Capital expenditure and purchasing commitments
The outstanding capital expenditure commitments, which relate mainly
to construction in progress, and other purchasing commitments at the
end of the year are listed below:
Capital expenditure and purchasing commitments
2013
2012
Capital expenditure commitments regarding property, plant and equipment and intangible assets
353
204
Total
353
204
Sales and purchase commitments
Nuon has concluded a number of long-term purchase contracts with
terms varying from 2014 to 2020. In addition, Nuon has concluded
long-term sales contracts on varying terms and conditions. Nuon enters
into energy commodity contracts for the sale and purchase of electricity,
oil, gas, coal and emission allowances. The energy commodity contracts
that are held for trading purposes and the energy commodity contracts
that are designated as hedging instruments are recognised on the
balance sheet at fair value. These contracts are not generally settled
by means of physical delivery but by concluding opposite transactions
in which only the net cash flows are settled. The energy commodity
contracts that are designated for own use are generally settled by
physical delivery. The majority of these contracts are also valued at
fair value. Hedge accounting is applied where possible. Please refer
to note [30] for the liquidity overview, which shows the contractual
terms of all financial obligations recognised.
Contingent liabilities
At the reporting date, Nuon (including its subsidiaries, associated
companies and joint ventures) was involved in a number of legal
proceedings and investigations by tax and other authorities. Provisions
have been made as far as deemed required in accordance with the
accounting principles.
At 31 December 2013, Nuon had issued bank guarantees and letters of
credits amounting to EUR 4 million (2012: EUR 47 million). In addition
Nuon has provided several parent guarantees for its subsidiaries, part of
which are uncapped.
N.V. Nuon Energy has issued declarations of joint and several liability
pursuant to article 403, Part 9, Book 2 of the Dutch Civil code for
a number of its subsidiaries. The significant group companies for
which such a declaration has been issued are included in the list of
subsidiaries, associated companies and joint ventures included in note
[29] Related party disclosures of the consolidated accounts. As partners
in a number of general partnerships, subsidiaries of Nuon are liable
for the obligations of these partnerships. The exposure under these
obligations is not considered to be significant.
N.V. Nuon Energy and the majority of its subsidiaries form a fiscal unity
for both corporate income tax and VAT purposes. Consequently, every
legal entity forming part of the fiscal unity is jointly and severally liable
for the tax liabilities of the legal entities forming part of the fiscal unity.
Contingent assets
At the end of 2005, Nuon and Statkraft reached agreement on the
settlement of the obligation to purchase green energy certificates from
the Norwegian Smøla 1 and 2 and Hitra wind farms. Nuon retains the
right to 50% of the gain on any future sale of green certificates from
these wind farms until 2016.
Licences
Nuon has a licence for the supply of electricity and gas and holds
licences for constructing certain power and heat facilities.
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Note 29 Related party disclosures
As of 1 July 2013, 79% of Nuon’s shares are owned by Vattenfall AB
(class B shares). Vattenfall AB has a casting vote in the Supervisory
Board and qualifies as a related party. The remaining 21% (class A shares)
are held by various municipalities and provinces in the Netherlands
(a total of 58 shareholders), none of which has significant influence
(>20%) and they therefore do not qualify as related parties. Nuon also
conducts transactions with subsidiaries within the Nuon group and with
other entities in the Vattenfall group. Furthermore, the Nuon group has
interests in various associated companies and joint ventures over which
it exercises significant influence, but no control or only joint control
of the operations and financial policy. Transactions with the parties
classified as related parties are conducted at market conditions and
prices that are not more favourable than the conditions and prices
offered to independent third parties. The following list includes the
significant subsidiaries, associated companies and joint ventures and
the share that Nuon holds in these entities.
Shares and participations
Registered office
Participations in % 2013
Subsidiaries
N.V. Nuon Energy Sourcing1
Amsterdam
Nuon Power Generation B.V.1
Utrecht
Nuon Power Buggenum B.V.1
Amsterdam
Nuon Epe Gasspeicher GmbH
Heinsberg (Germany)
Nuon Epe Gas Service B.V.1
Amsterdam
Feenstra N.V.1
Amsterdam
Feenstra Beveiliging B.V.1
Amsterdam
Feenstra Verwarming B.V.1
Lelystad
Feenstra Isolatie B.V.1
Veendam
Zuidlob Wind B.V.
Amsterdam
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
82.2
100
100
100
100
100
100
100
100
100
Amsterdam
22.5
Nuon Storage B.V.
Amsterdam
N.V. Nuon Duurzame Energie1
Arnhem
Nuon Wind Development B.V.1
Rhenen
Nuon UK Ltd.
Long Rock, Penzance (United Kingdom)
Pen Y Cymoedd Wind Farm Ltd.
Long Rock, Penzance (United Kingdom)
Swinford Wind Farm Ltd.
Long Rock, Penzance (United Kingdom)
ENW Duurzame Energie B.V.1
Amsterdam
Nuon Power Projects I B.V.1
Amsterdam
Vattenfall Energy Trading Netherlands N.V.1
Amsterdam
N.V. Nuon Warmte1
Amsterdam
De Kleef B.V.
Arnhem
Emmtec Services B.V.1
Emmen
N.V. Nuon Sales Nederland1
Amsterdam
Ingenieursbureau Ebatech B.V.1
Amsterdam
Yellow & Blue Clean Energy Investments B.V.
Amsterdam
N.V. Nuon Customer Care Center1
Arnhem
Nuon Energie und Service GmbH
Heinsberg (Germany)
Associated companies
B.V. Nederlands Elektriciteit Administratiekantoor
Joint Ventures
1
NoordzeeWind C.V.
IJmuiden
Westpoort Warmte B.V.
Amsterdam
N.V. Nuon Energy has issued a declaration of liability for these subsidiaries.
A complete list of subsidiaries, associated companies and joint ventures, as required by sections 379 and 414 of Book 2 Title 9 of the Dutch Civil Code, is filed with the Chamber
of Commerce in Amsterdam.
50
50
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The following transactions have taken place with related parties with
regard to sales and purchases of goods and services, including leases.
Related parties transactions
2013
2012
43
10
Sales of goods and services to Vattenfall and its subsidiaries
Sales of goods and services to associated companies and joint ventures
-26
-28
Costs charged by Vattenfall and its subsidiaries
Costs charged by associated companies and joint ventures
26
14
-24
-26
Various goods and services are bought or provided on normal
commercial terms and conditions within Vattenfall. A cost-sharing
programme is in place, which entails that certain costs within the group
are recharged to the users within the Vattenfall group based on actual
usage. Nuon, in the ordinary course of business, trades commodities
with and via VET Germany. The results of these trading activities with
VET Germany are reported net in net sales or cost of energy. In addition
to the trading activities, Nuon purchased a CO2 portfolio at market value
from VET Germany in mid-2012.
Note 30 Information on risks
and financial instruments
In the ordinary course of business, Nuon has outstanding payables
and receivables with Vattenfall companies (note [19], note [22] and
note [26]) as well as with its associated companies and joint ventures
(note [15]). Nuon has also granted a limited number of loans to
related parties. Where relevant, this has been disclosed in these
consolidated accounts.
This note provides information on the above-mentioned financial risks
to which Nuon is exposed, the objectives and the policy for the
management of risks arising from financial instruments as well as
the management of capital.
The members of the board of Nuon have been identified as individuals
who qualify as related parties. The employee benefits related to these
individuals have been disclosed in the Remuneration Report set out on
page 36 of the Annual Report.
General
The following risks can be identified with respect to financial instruments:
market risk, credit risk and liquidity risk. Market risk is defined as the
risk of loss due to an adverse change in market prices. Credit risk is the
risk resulting from counterparty default, including suppliers, investments
and trading counterparties. Liquidity risk is the risk that the company
will not be able to meet its obligations associated with financial liabilities.
Market risk
Nuon is exposed to the following market risks:
■ Electricity and fuel price risk: the risk that the value of a financial
instrument will fluctuate due to changes in commodity prices;
■ Currency risk: the risk that the value of a financial instrument will
fluctuate due to changes in exchange rates;
■ Interest rate risk: the risk that the value of a financial instrument
will fluctuate due to changes in interest rates.
Nuon hedges market risks through the purchase and sale of derivatives.
Nuon applies hedge accounting as far as possible in its consolidated
accounts. All transactions are carried out within set boundaries and
risk limits set.
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Electricity and fuel price risk
Nuon is exposed to the impact of market fluctuations in the prices of
a range of energy commodities including, but not limited to, electricity,
coal, natural gas, oil and emission allowances. These risks are a result
of ownership of physical assets (primarily gas- and coal-fired power
plants in the Netherlands), sales positions in electricity and gas to
both households and business customers in the Netherlands and
the proprietary positions taken in the energy commodity markets.
It is Vattenfall’s policy to centralise its exposures on group level and
to hedge via different Market Access Points. Vattenfall Energy Trading
Netherlands (‘VET NL’), which is legally part of Nuon, is designated
as Market Access Point for a number of commodities for Vattenfall
and is also active in proprietary trading. Hedge contracts between
VET Germany and VET NL as well as hedge contracts between VET NL
and the market are treated as derivatives and recognised at fair value
in the balance sheet.
All market risks associated with electricity and fuel price risk are
measured using a Value at Risk (VaR) method on a total Vattenfall level.
VaR calculation quantifies potential changes in the value of commodity
positions as a result of market price movements. The inputs to the VaR
calculation are positions (open volumes), current market prices and the
variability of prices (volatilities and correlations), all of which are
updated daily. The risk limits are designed to prevent maximum loss to
exceed SEK 4 billion (approximately EUR 445 million), which can be
compared to a VaR of EUR 48 million, with a 99% confidence level and
a 1-day holding period. Thus, the VaR measures the marked-to-market
movement arising from a 1-day change in market prices, under normal
market conditions, which should only be exceeded 1% of the time.
The VaR level for trading is:
Trading VaR levels
2013
As at 31 December
Average for the year
Vattenfall’s risk management strategy is managed based on the actual
operational structure instead of the legal structure. Part of the
commodity exposures arising from assets and the customer book are
hedged via VET Germany and as such do not result in direct positions
for Nuon. Nuon treats the aforementioned contracts with VET Germany
as derivatives which are valued at fair value on the balance sheet.
If possible, hedge accounting is applied.
Currency risk
General
Nuon is exposed to currency risks on purchases, trading activities, cash
and cash equivalents and other positions denominated in a currency
other than the euro. Currency risks mainly arise in respect of positions
in US dollars and, to a more limited extent, in respect of positions in
Japanese yen, Swiss francs and British pounds.
2012
4.6
6.1
9.3
9.4
Nuon has an exposure-based currency policy. Nuon recognises
three types of risk in relation to foreign currency:
■ Transaction risk concerns the risk in respect of future cash flows
in foreign currency and in relation to positions in foreign currency
in the balance sheet. This risk is hedged. Subsidiaries report current
positions and risks to the Treasury Department within Nuon. These
positions and risks are principally hedged with counterparties through
average rate options and spot and forward exchange contracts;
■ Translation risk concerns the risk in respect of the translation of
foreign subsidiaries with a functional currency other than the euro.
The risk arising from this is only hedged if Nuon expects to terminate
the business activities in question in due course. The net asset value
of the subsidiary can be hedged in this case. If no decision has been
taken to sell or close the subsidiary, the translation differences are
accounted for via Other comprehensive income and included in the
currency translation reserve in Equity;
■ Economic risk is related to a possible deterioration of the competitive
position as a result of a change in the value of foreign currencies. This
risk is generally not hedged but is considered on a case-by-case basis.
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unchanged, on Nuon’s financial income and expenses and equity.
In relation to this, derivatives concluded to hedge the currency risk
are taken into account. The effects on equity and income are calculated
using the closing rate at the reporting date.
Exposure to currency risks and sensitivity analysis
Nuon’s exposure to significant currency risks based on nominal values
is included in the table below. This table indicates the pre-tax effect that
a possible increase or decrease in the value of foreign currencies relative
to the euro would have, assuming all other circumstances remain
Sensitivity analysis currency risk
Position
Profit or loss
Decrease by
10% relative
to the euro
Equity
Increase by
10% relative
to the euro
Decrease by
10% relative
to the euro
Increase by
10% relative
to the euro
2013
Total exposure in foreign currencies
Total hedged position in foreign currencies
Sensitivity cash flow in foreign currencies (net)
-497
495
-2
41
-40
1
-50
49
-1
2
-5
-3
-3
6
3
-1,097
90
1,097
-88
-110
4
-4
109
-10
-
2
10
-1
-6
6
2012
Total exposure in foreign currencies
Total hedged position in foreign currencies
Sensitivity cash flow in foreign currencies (net)
The table includes risk positions from any exposure in foreign currencies,
whether arising from financial instruments or not, while the effects on
income and equity have been presented taking into account financial
instruments only.
The most important effects in the table in respect of the income
statement exposure to currency risks are related to the Average Rate
Options (AROs) concluded to hedge the currency risk on purchased
commodities in US dollars.
The most important effects in the table in respect of the equity exposure
in 2013 to currency risk are related to foreign currency forwards concluded
to hedge the currency risk on the purchase of parts and spare parts in
Japanese yen for the maintenance of the Nuon Magnum power station.
Interest rate risk
General
Nuon is exposed to interest rate risk on its interest-bearing liabilities
(note [22]). Nuon makes limited use of derivatives such as interest rate
swaps to mitigate the interest rate risk. Nuon had no interest rate
derivatives outstanding at 31 December 2013 and 2012.
Sensitivity analysis in relation to cash flows for variable interest
assets and liabilities
A change of 100 basis points in the interest rates as at 31 December
2013 would, assuming all other circumstances remain unchanged,
have a pre-tax effect on Nuon’s equity and financial income and
expenses of EUR 5 million (2012: EUR 6 million) on an annual basis.
Hedging transactions
Cash flow hedging
Nuon hedges the price risks relating to the purchase of commodities
for the company’s production as well as the purchase of electricity and
gas for direct supply to our customers. The prices for these commodities
contracts are variable as they are indexed to the average price of the
commodities over a preceding period.
The price risks arising from these purchases of commodities for the
company are hedged by means of futures, forwards and swaps. The fair
value movements of these derivatives recognised in the reserve for cash
flow hedges in equity will be released from the reserve for cash flow
hedges when the cash flows of the underlying item take place. For the
contracts that were hedged as at 31 December 2013, all cash flows will
take place and will have an effect on income within the subsequent
seven years.
Nuon has used currency forward contracts to hedge the maintenance
of Nuon power stations. For maintenance contracts which are cancelled,
the related hedge reserve is released to the income statement.
As at 31 December 2013, the hedge reserve amounted to EUR 45 million
negative (after tax: EUR 33 million negative) (2012: EUR 60 million
negative (after tax: EUR 44 million negative)).
The hedge ineffectiveness recognised in the income statement in 2013
amounts to EUR 4 million negative (2012: EUR 0 million).
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Credit risk
Credit risk can arise if a counterparty or contractor cannot or is not
willing to fulfil its obligations and exists in Nuon’s commodity trading,
sales activities, treasury activities and investments. A consistent
approach to credit analysis and management is applied throughout the
organisation, with the degree of review undertaken varying depending
on the magnitude of credit risk in a transaction.
In the trading segment, credit risk is calculated as a settlement plus
replacement cost. The credit risk calculations are based on the markedto-market value calculated by the Risk Analysis & Reporting Group
within Risk Management and aggregated on a counterparty level.
In cases where legally enforceable netting agreements have been
reached, the exposure is monitored on a net basis. In some cases,
credit protection has been purchased in the credit default swap
market, but credit default swaps are not actively traded.
Credit risk is managed through established credit policies, regular
monitoring of credit exposures and application of appropriate mitigation
tools. While credit exposure is also managed at portfolio level, there are
limitations to the extent to which diversification is possible as Nuon is
exposed to concentration risk in the energy markets as well as to energyintensive industries.
Credit quality
Treasury
Cash and cash equivalents surpluses are to a large extent held within
Vattenfall, by using both a cash pool and deposits.
Trading
As a result of the application of high credit risk standards, the trading
portfolio has remained at an acceptable credit quality throughout the
last years. No write-offs linked to credit risk were made for the trading
portfolio in 2013 or 2012.
Sales
The sales segment is exposed to credit risk in the case of non-payment
by customers for energy delivered as well as the loss from the resale of
energy previously committed to a customer at a fixed price. In the business
segment, most of the small and medium-sized trade debtors are rated
by Dun & Bradstreet and Moody’s KMV Riskcalc®. Nuon considers the
credit quality of this portfolio as satisfactory. Credit risk mitigation tools
in this segment include parent company guarantees, bank guarantees,
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letters of credit and prepayments. Our debtors in the retail market are
not rated. Nuon considers this portfolio to be comparable to the average
credit quality of this segment for the Netherlands as a whole.
Maximum credit risk
The maximum credit risk is the value in the balance sheet of each
financial asset, with the exception of the following instruments:
trade receivables – trade activities, commodity derivatives, interest rate
derivatives and currency derivatives. The credit risk for these trade
debtors and derivatives is lower than their carrying amounts for several
reasons. Firstly, there is a difference between the use of netting
agreements by Nuon and the netting rules in accordance with IFRS.
For example, Nuon uses Master Netting Agreements (MNAs) where
legally enforceable. These MNAs allow netting over multiple classes
and categories of financial assets and liabilities as well as non-financial
assets and liabilities that are excluded under IFRS. Also, Nuon nets
positions when calculating credit risk (close-out netting) even though
in its daily operations Nuon does not intend to settle on a net basis or
if it is practically not possible to settle on a net basis, for example due
to timing differences. Secondly, there is a difference between the way
Nuon calculates credit risk (the net settlement per counterpart plus
replacement value) and the carrying amount of the derivatives in
the balance sheet (fair value (note [17])). Furthermore the credit risk
is mitigated through the use of collateral such as bank guarantees,
letters of credit and cash. Nuon also uses bilateral margining
agreements with many of the major trading counterparties. As a result
of these agreements, but also due to other credit support received,
as at 31 December 2013 Nuon held EUR 30 million in cash and
EUR 715 million as collateral (including parent company guarantees)
(2012: EUR 30 million and EUR 1,360 million respectively).
Overall the group evaluates the concentration of credit risk, with respect
to trade receivables, as low due to the use of bank guarantees and letters
of credit and also as its customers are located in several industries and
operate in largely independent markets.
Past due instalments
The provision for bad debts and uncollectible receivables exclusively
concerns trade receivables from regular sales. The ageing of trade
receivables, concerning trade receivables from regular sales and trade
receivables from trade activities, was as follows on the reporting date
(gross amounts).
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Age analysis trade debtors
As at 31 December
2013
gross
2012
impaired
net
gross
impaired
net
-3
-4
-4
-47
634
69
36
76
647
-3
644
58
-3
55
24
-2
22
>90 days
637
73
40
123
83
-35
48
Total
873
-58
815
812
-43
769
Not past due
0 to 30 days
30 to 90 days
The movement of the provision for bad debt in relation to the trade
debtors can be presented as follows.
Movement schedule provision for bad debt
2013
Balance as per 1 January
Use of allowance account (impairment trade receivables)
Addition to allowance account charged to income
Reversed impairment losses
Disposals
Balance as per 31 December
No collateral is held relating to past due and impaired debtors.
Liquidity risk
Liquidity risk comprises the risk that Nuon is not able to obtain the
required financial resources for the timely fulfilment of its financial
commitments. Nuon regularly assesses the expected cash flows over
a period of one year. These cash flows include operational cash flows,
dividends, payments of interest and repayments of debts, (replacement)
investments, the consequences of changes in the creditworthiness of
Nuon and ‘margin calls’ for trading activities. For the latter, Nuon makes
use of a Margin-VaR as well as a Margin Stress Test tool. These tools
allow Nuon to assess potential future margin calls under various
scenarios based upon historic market price developments, stress tests
and contractual agreements including rating thresholds on Nuon and
2012
43
51
-24
40
-1
-33
58
43
28
-4
1
its counterparties. The overall aim is to have sufficient funding at
all times in order to secure the required liquidity in the coming year.
Capital requirement planning is performed by Vattenfall for the
Vattenfall group over a horizon of five years.
To provide insight into the liquidity risk, the following table shows the
contractual terms of the financial obligations (translated at the reporting
date rate), including interest payments. The contractual cash flows of
non-current assets as well as current assets combined with the credit
facilities available at Vattenfall cover the current need for liquidity as
included in the table. The current amounts drawn on these Vattenfall
facilities amount to EUR 900 million, of which EUR 500 million is in
current account and EUR 400 million is a loan.
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Liquidity risk
Carrying amount
Contractual cash flows
Less than
1 year
Between
1 and 5 years
Over
5 years
Total
2013
Interest-bearing liabilities
-29
-128
-29
-47
-72
-34
-29
-153
-4
-4
-
-
-4
Trade payables
-158
-158
-
-
-158
Other liabilities
-1,478
-1,478
-
-
-1,478
-74
-147
-47
-268
-15,091
14,820
-4,772
5,437
-19
37
-19,883
20,294
-2,061
445
-63
-1,679
Green loans - notional amounts
Other interest-bearing debt - notional amounts
Finance lease payables
Off-balance sheet commitments
Operating lease payables
Derivatives1
495
Buy
Sell
Total
-1,302
2012
Interest-bearing liabilities
Green loans - notional amounts
-38
-10
-31
-
-41
-202
-83
-113
-37
-233
-8
-4
-4
-
-8
Trade payables
-172
-172
-
-
-172
Other liabilities
-1,311
-1,311
-
-
-1,311
-86
-151
-29
-266
Buy
-16,155
-7,150
-39
-23,344
Sell
15,428
7,813
76
23,317
-2,393
364
-29
-2,058
Other interest-bearing debt - notional amounts
Finance lease payables
Off-balance sheet commitments
Operating lease payables
Derivatives1
Total
1
372
-1,359
Derivatives are settled on a gross basis with our counterparties. Payments and receipts coincide. To provide insight to the the actual liquidity risk, both outgoing and incoming cash flows
are presented for each contract.
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Fair values
General
Nuon’s financial assets and liabilities are valued at either amortised cost
or fair value. The following table provides insight into the different IAS
39 categories, that Nuon presents its financial assets and liabilities in,
the measurement principle used and the fair value of the financial assets
and liabilities.
Fair value of financial assets and liabilities
As at 31 December
Carrying amount IAS 39 categories
Other
Fair value
Loans and
financial
through profit receivables liabilities at
or loss/hedge at amortised amortised
accounting
cost
cost
Level
Total
Fair value
1
2
Note
3
2013
32
Other non-current receivables
Derivative assets
33
33
920
920
780
1,586
1,586
1,586
1,586
19
19
19
19
19
20
189
189
189
189
20
920
Trade and other receivables
Short-term investments
Cash and cash equivalents
16
32
140
17
Current account Vattenfall
-500
-500
-500
-500
22
Interest-bearing debt
-557
-557
-562
-562
22
-4
-1,636
-425
-4
-1,636
-425
-4
-1,636
-382
-4
-1,636
32
35
35
990
990
795
1,579
1,579
1,579
1,579
19
10
10
10
10
20
187
187
187
187
20
Derivative liabilities
-425
Finance lease payables
Trade and other payables
-43
17
27
26
2012
Other non-current receivables
Derivative assets
32
990
Trade and other receivables
Short-term investments
Cash and cash equivalents
16
195
17
Current account Vattenfall
-825
-825
-825
-825
22
Interest-bearing debt
-240
-240
-254
-254
22
Derivative liabilities
Finance lease payables
Trade and other payables
-618
-262
17
-618
-618
-356
-8
-8
-8
-8
27
-1,483
-1,483
-1,483
-1,483
26
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Financial instruments valued at fair value through
profit or loss/hedge accounting
The fair value of financial instruments traded in active markets is based
on quoted market prices at the reporting date. A market is regarded
as active if quoted prices are readily and regularly available from an
exchange, dealer, broker, industry group, pricing service or regulatory
agency, and those prices represent actual and regularly occurring
market transactions on an arm’s length basis. The quoted market price
used for financial assets held by the group is the current bid price.
These instruments are included in level 1.
The fair value of financial instruments that are not traded in an active
market (for example, over-the-counter derivatives) is determined by
using valuation techniques. These valuation techniques maximise the
use of observable market data where it is available and rely as little as
possible on entity-specific estimates. If all significant inputs required
for the valuation of an instrument are observable, the instrument
is included in level 2. If one or more of the significant inputs is not
based on observable market data, the instrument is included in level 3.
The fair value of financial instruments includes counterparty credit risk
and/or own non-performance risks and is further determined as follows:
■ Currency and interest rate derivatives are recognised on the basis
of the present value of the future cash flows, making use of the
interbank rate (such as Euribor, or Euroswap for cash flows longer
than one year) applicable on the reporting date for the remaining
term of the contracts. The present value in foreign currency is
translated at the spot rate applicable on the reporting date.
These financial instruments are included in level 2;
■ Commodity derivatives, for which quoted prices can be obtained
(e.g. futures), are measured based on their marked-to-market
valuation. Commodities, which are not listed in active markets,
are valued using comparable recent market transactions or
valuation methods;
■ For certain commodities, delivery tenors and market instruments no
reliable market quotes are available for fair value calculation. In these
cases, positions are marked-to-model. For some positions (e.g. illiquid
commodities, long-dated tenors) the price of the commodity is
modelled and positions are marked against this price (level 3):
■ Certified Emission Reductions (CERs) from Clean Development
Mechanism (CDM) projects. CDM is a flexible mechanism under
the Kyoto Protocol, overseen by United Nations Framework
Convention on Climate Change (UNFCCC), under which projects
Fina n c ia l s ta tem ent s
■
set up in developing countries to reduce CO2 emissions can
generate tradable carbon credits called CERs (Certified Emission
Reductions). Once CERs are issued by the UNFCCC they can be
used by companies and governments in industrialised nations to
meet their reduction targets, either under the EU ETS in the case
of a company or under the Kyoto Protocol in case of countries.
In terms of valuation of the CDM Projects in Nuon CDM portfolio
the non-observable input factor is an estimate of the volume of
CERs that is expected to be delivered from each project annually.
This estimate is derived from six defined Risk Adjustment Factors
(RAFs) that have the same weighting. These project specific factors
are calculated using the Carbon Valuation Tool developed by Point
Carbon to quantify the risk by adjusting the volume based on these
six risks and calculating the fair value based on these six risk
adjusted volumes against the CER forward curve on the exchange
(Inter Continental Exchange - ICE). The tool is based on Point
Carbon’s valuation methodology, which was developed in
cooperation with several experienced market players. The
valuation methodology is strictly empirical, and all risk parameters
are extracted from Point Carbon’s proprietary databases of CDM
project data, which entails a correct valuation of the contracts.
The results are validated based on monitoring reports for the
respective CDM projects, which are publicly available on the
website of the UNFCCC.
The net value as at 31 December 2013 has been calculated at
EUR 0.2 million negative (2012: EUR 48 million negative).
The fair value is mainly determined and correlated with the
observable price for CER, meaning a higher price for CER leads
to a higher value of the CDM contract and vice versa. A change in
the modelled price of CERs of +/- 5% would affect the total value
by approximately EUR -/+ 0.4 million;
Large gas supply contract. This agreement is valued at market
price, as long as market prices are available. Modelled prices are
used for commodity deliveries beyond the market horizon or
deliveries with uncommon terms and options. The modelled prices
are benchmarked against reliable financial information obtained
from the company Markit; this information is well-known and used
by many energy companies, offering a fair valuation of the portion
of the large gas supply contract that cannot be valued against
market prices (Level 3).
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84 N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
The large gas supply contract is hedged by OTC forward trades
of underlying products, which were also marked against modelled
prices until 2012. At the beginning of 2013, these forward contracts
have been transferred from level 3 to level 2, since from 2013,
the market price input can be observed and derived from
the market.
The net value as at 31 December 2013 has been calculated at
EUR 72 million (2012: EUR 19 million negative). The price of the
coal price index used in the model (API#2) has the most significant
impact on the modelled price. A change in this index of +/- 5%
would affect the total value by approximately EUR -/+ 2.8 million.
The fair value movements of the large gas contact and the hedged
position together are limited with respect to market price movements;
■
Virtual Gas Storage contracts. A virtual gas storage contract
is a contract, which allows Nuon to store gas without owning the
physical gas storage facility. The virtual gas storage contracts
include constraints on the maximum storage capacity and the
maximum injection and withdrawal per day. The valuation of
the contract is based on the storage, injection and withdrawal fees
included in the contract, the observable expected spread between
84
■
gas prices in the summer and winter and the optionality value,
which is marked to model (level 3).
The net value as at 31 December 2013 has been calculated at
EUR 7 million and is most sensitive to the optionality value.
A change in the optionality value of +/- 5% would affect the total
value by approximately +/- EUR 3.5 million;
Gas Swing contract. A gas swing contract is a contract which
provides flexibility on the timing and amount of gas purchases.
The contract is based on a price formula with maximum and
minimum annual and daily gas quantities. The valuation of the
contract is based on observable price differences between the
contract prices and indexes and the optional value, which is
marked to model (level 3).
The net value as at 31 December 2013 has been calculated at
EUR 18 million and is most sensitive to the optionality value.
A change in the optionality value of +/- 5% would affect the
total value by approximately +/- EUR 0.7 million.
The movement of the financial instruments categorised in Level 3
is as follows:
Level 3 Fair value of financial assets and liabilities
2013
2012
Balance as at 1 January
-67
-98
Included in income statement
58
-23
104
25
-18
97
-67
Settlements
Transfer to level 2
Transfer from level 2
Balance as at 31 December
The gains and losses of EUR 58 million (2012: EUR 18 million negative),
relating to level 3 fair value measurements are recognised in the net
sales or cost of energy line items of the consolidated income statement.
49
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Fair value of other financial instruments valued at amortised cost
The fair value of all short-term financial instruments equals the
carrying amount.
The fair value of financial instruments valued at amortised cost
is determined as follows:
■ Other non-current receivables are discounted at the appropriate
market rate (Level 2);
■ The fair value of financial liabilities is determined by making use
of market quotes. As no market quotes are available for the majority
of the loans, the fair value of current and non-current loans is
determined by calculating their present value at the yield curve
applicable to Nuon as at 31 December. This yield curve is derived
from the zero coupon rate plus the credit spread applicable to Nuon
(Level 2);
■ At year-end 2013 the following yield curve was applied:
■ 1-year
0.47% (2012: 0.43%)
■ 5-year
1.26% (2012: 1.30%)
■ 10-year
2.98% (2012: 2.64%)
■ 20-year
4.15% (2012: 3.71%);
■ Finance lease payables: the fair value is estimated at the present value
of the future cash flows, discounted at the interest rate applicable to
comparable contracts on reporting date (Level 2);
■ The fair value of the Cash and cash equivalents, trade receivables and
other receivables and current payable liabilities is, in view of their
short-term nature, identical to the carrying amount (Level 2).
Capital management
The group’s objectives when managing capital are to safeguard its ability
to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital. In order to
maintain or adjust the capital structure, which is based on Vattenfall
group policies, the group may adjust the amount of dividends paid to
shareholders, return capital to shareholders or sell assets to reduce debt.
Nuon’s financial policy, which is part of its general policy and strategy,
is to obtain an adequate return for shareholders and lenders, while
maintaining the flexibility to grow and invest in the business.
For information on the dividend policy, see page 98.
Nuon’s major shareholder is Vattenfall AB, holding the B shares
representing 79% of the paid-up share capital of Nuon as at
31 December 2013. The largest other shareholders in Nuon at year-end
are the provinces of Gelderland, Noord-Holland and Friesland and the
Municipality of Amsterdam. These parties jointly hold approximately
76% of Nuon’s class A shares. The remainder is in the hands of 54
other shareholders.
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Company accounts
Company balance sheet
Amounts in EUR million, as at 31 December, before appropriation of result
Assets
2013
Note
2012
Non-current assets
Property, plant and equipment
Investments in subsidiaries
Derivative assets
Deferred tax assets
Receivables from group companies
Other non-current receivables
60
1,553
4
9
2,020
25
Total non-current assets
47
32
2,086
33
5
35
69
34
2,032
34
26
3,671
4,265
Current assets
Trade receivables and other receivables
Derivative assets
Receivables from group companies
Cash and cash equivalents
Total current assets
Total assets
29
132
2,642
9
65
35
131
1,574
36
10
2,812
1,780
6,483
6,045
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Company balance sheet
Amounts in EUR million, as at 31 December, before appropriation of result
Equity and liabilities
2013
Note
2012
Equity
Share capital
Share premium
Reserve for cash flow hedges
Currency translation reserve
Legal reserves
Other reserves
Unappropriated result for the year
684
2,797
-33
1
528
-638
-419
Total equity attributable to Nuon shareholders
Provisions
684
2,797
-44
1
450
159
-716
2,920
3,331
37
52
81
38
Non-current liabilities
Interest-bearing liabilities
Derivative liabilities
59
-
Total non-current liabilities
39
124
35
1
59
125
Current liabilities
Trade payables and other liabilities
Interest-bearing liabilities
Payables to group companies
Derivative liabilities
189
70
3,057
136
176
39
86
2,109
35
137
Total current liabilities
3,452
2,508
Total equity and liabilities
6,483
6,045
Company income statement
Amounts in EUR million, 1 January - 31 December
2013
Note
2012
-744
Other income less expenses after taxation
-465
46
Result after taxation
-419
-716
Result after taxation from subsidiaries
28
41
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Notes to the company accounts
31
32
33
34
35
36
Accounting policies
Property, plant and equipment
Investments in subsidiaries
Deferred tax assets and other non-current receivables
Derivatives
Cash and cash equivalents
88
89
90
91
91
91
Note 31 Accounting policies
The company accounts have been prepared in accordance with the
provisions of Part 9, Book 2 of the Dutch Civil Code. In the company
accounts, Nuon uses the option provided for in Part 9, Book 2 of the
Dutch Civil Code to prepare the company accounts in accordance with
the IFRS accounting policies that are used in the preparation of the
consolidated accounts. The company income statement is presented in
abridged form, as allowed by section 402, Part 9, Book 2 of the Dutch
Civil Code. In addition to the accounting policies for the consolidated
accounts, specific accounting policies for the company accounts are
presented below.
Investments in subsidiaries
Investments in subsidiaries are valued at net asset value, which is
determined on the basis of IFRS accounting policies as used in the
consolidated accounts.
37
38
39
40
41
42
Equity
Provisions
Interest-bearing liabilities
Contingent assets and liabilities
Other income less expenses after taxation
Average number of employees
91
92
92
93
93
93
Legal reserve for unrealised fair value gains
of financial instruments
A legal reserve, in the form of a revaluation reserve, is recognised for
unrealised fair value gains on financial instruments that are recognised
in income, and for which no frequent market quotations are available
(Level 2 and Level 3 financial instruments). With regard to Nuon, this
relates to energy commodity contracts for oil, gas, coal, electricity and
emission allowance, that are not traded through recognised exchanges
(e.g. Amsterdam Power Exchange, Endex), known as over-the-counter
or OTC contracts. A legal reserve of EUR 462 million in total is held
for the unrealised fair value movements of these contracts
(2012: EUR 450 million), which is calculated on a collective basis.
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Note 32 Property, plant and equipment
Property, plant and equipment
Equipment,
tools and
fixtures and
fittings
Land and
buildings
Construction
in progress
Total
As at 1 January 2012
Historical cost
1
160
11
172
Accumulated depreciation and impairments
-
-124
-
-124
Carrying amount as at 1 January 2012
1
36
11
48
Movements 2012
Investments
1
9
9
19
Depreciation
-1
-19
-
-20
Transfers and other movements
-
8
-8
-
Total
-
-2
1
-1
As at 31 December 2012
Historical cost
2
172
12
186
Accumulated depreciation and impairments
-1
-138
-
-139
Carrying amount as at 31 December 2012
1
34
12
47
-
1
-18
8
-9
30
-8
22
31
-18
13
Movements 2013
Investments
Depreciation
Transfers and other movements
Total
As at 31 December 2013
2
174
34
210
Accumulated depreciation and impairments
-1
-149
-
-150
Carrying amount as at 31 December 2013
1
25
34
60
Historical cost
For further disclosure, reference is made to note [14]
Property, plant and equipment in the consolidated accounts.
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Note 33 Investments in subsidiaries
Investments in subsidiaries
Carrying amount as at 1 January 2012
2,994
Movements 2012
Capital contributions
Disposals
9
304
Share premium repaid
-500
Result of the year
-744
Movement reserve for cash flow hedges
23
Total
-908
Carrying amount as at 31 December 2012
2,086
Movements 2013
Capital contributions
Share premium repaid
Dividends received
Result of the year
7
-33
-50
-465
Total
8
-533
Carrying amount as at 31 December 2013
1,553
Other comprehensive income
A list of directly and indirectly held participations in subsidiaries is
included in note [29] Related party disclosures in the consolidated
accounts. The disposal in 2012 related to liquidation of Nuon Energy
& Water Investments.
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Note 34 Deferred tax assets and other non-current receivables
Deferred tax assets and other non-current receivables
Deferred tax assets
Carrying amount as at 1 January 2012
Other non-current
receivables
7
27
Total
34
Movements 2012
Loans and interest repaid
-
-1
-1
Temporary differences charged to profit and loss
62
-
62
Total
62
-1
61
Carrying amount as at 31 December 2012
69
26
95
-60
-60
-1
-1
-1
-60
-61
9
25
34
Non-current
assets
2013
2012
4
5
Current
liabilities
2013
2012
136
137
Movements 2013
Loans and interest repaid
Temporary differences charged to profit and loss
Total
Carrying amount as at 31 December 2013
Other non-current receivables consist of loans and receivables
(including incremental costs) with related parties.
Note 35 Derivatives
Derivatives
Current
assets
2013
2012
Treasury contracts
132
131
Totaal
132
131
4
5
136
137
Non-current
liabilities
2013
2012
-
1
1
Note 36 Cash and cash equivalents
Note 37 Equity
The cash and cash equivalents at the end of 2013 included EUR 5 million
restricted cash (2012: EUR 5 million). This amount relates to cash held
at banks which is provided as collateral.
The Consolidated statement of changes in equity and disclosure to that
statement are included in the Consolidated accounts. In addition to the
Consolidated statement of changes in equity, a legal reserve was formed
within equity for the unrealised gains on OTC contracts for an amount
of EUR 462 million (2012: EUR 450 million). This reserve was charged
against the Other reserves. The reserve for cash flow hedges, legal
reserve and the currency translation reserve are not freely distributable.
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Note 38 Provisions
Movements in provisions
Total
As at 1 January 2012
40
Movements 2012
Releases to income
-
Additions
57
Interest accretion
1
Withdrawals
-17
Total
41
As at 31 December 2012
81
33
48
Current portion
Non-current portion
Movements 2013
-21
33
1
-42
-29
Releases to income
Additions
Interest accretion
Withdrawals
Total
As at 31 December 2013
52
Current portion
22
30
Non-current portion
Note 39 Interest-bearing liabilities
Interest-bearing liabilities
2013
Carrying amount as at 1 January
2012
210
328
Movements
Total
-77
-10
5
-82
-118
Carrying amount as at 31 December
128
210
Payment dividend liability class A shares
Loans repaid
Other movements
-74
-46
2
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In the interest rates and carrying amounts of interest-bearing liabilities
can be analysed as follows:
Short- and long-term interest-bearing liabilities
Green loans
Dividend liability class A shares
Effective interest rate
2012
2013
3.1%
3.0%
3.6%
3.6%
Short-term part
2013
2012
29
9
41
77
Total
Note 40 Contingent assets and liabilities
Reference is made to note [28] Contingent assets and liabilities
and licences.
70
86
Long-term part
2013
2012
29
59
95
59
The employee benefits related to the members of the Management
Board have been disclosed in the Remuneration Report as included
on page 36 of the Annual Report.
Amsterdam, 11 April 2014
Note 41 Other income less expenses
after taxation
Other income less expenses after taxation was EUR 46 million positive
(2012: EUR 28 million positive) and consists mainly of income and
expenses of company-wide activities at holding company level.
Note 42 Average number of employees
The average number of employees in 2013 was 675 FTE based on
a 38-hour working week (2012: 706 FTE).
Supervisory Board
Øystein Løseth, Chairman
Anne Gynnerstedt
Tuomo Hatakka
Tom de Waard
Leni Boeren
Pieter Bouw
Derk Haank
Laetitia Griffith
Management Board
Peter Smink
Martijn Hagens
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Other
Independent auditor’s report
To: The General Meeting of Shareholders of N.V. Nuon Energy
Report on the financial statements
We have audited the accompanying financial statements 2013 of
N.V. Nuon Energy, Amsterdam. The financial statements include the
consolidated financial statements and the company financial statements.
The consolidated financial statements comprise the consolidated
statement of financial position as at 31 December 2013, the consolidated
statement of comprehensive income, changes in equity and cash flows
for the year then ended, and notes, comprising a summary of the
significant accounting policies and other explanatory information.
The company financial statements comprise the company balance sheet
as at 31 December 2013, the company income statement for the year
then ended and the notes, comprising a summary of the accounting
policies and other explanatory information.
Management’s responsibility
Management is responsible for the preparation and fair presentation
of these financial statements in accordance with International Financial
Reporting Standards as adopted by the European Union and with Part 9
of Book 2 of the Dutch Civil Code, and for the preparation of the
Management Board report in accordance with Part 9 of Book 2 of the
Dutch Civil Code. Furthermore, management is responsible for such
internal control as it determines is necessary to enable the preparation
of the financial statements that are free from material misstatement,
whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with Dutch
law, including the Dutch Standards on Auditing. This requires that we
comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor’s judgment, including the assessment of
the risks of material misstatement of the financial statements, whether
due to fraud or error.
In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the financial
statements 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 the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion with respect to the consolidated financial statements
In our opinion, the consolidated financial statements give a true
and fair view of the financial position of N.V. Nuon Energy as at
31 December 2013 and of its result and its cash flows for the year then
ended in accordance with International Financial Reporting Standards
as adopted by the European Union and with Part 9 of Book 2 of the
Dutch Civil Code.
Opinion with respect to the company financial statements
In our opinion, the company financial statements give a true and fair
view of the financial position of N.V. Nuon Energy as at 31 December
2013 and of its result for the year then ended in accordance with Part 9
of Book 2 of the Dutch Civil Code.
Report on other legal and regulatory requirements
Pursuant to the legal requirement under Section 2:393 sub 5 at e and f
of the Dutch Civil Code, we have no deficiencies to report as a result of
our examination whether the Management Board report, to the extent
we can assess, has been prepared in accordance with Part 9 of Book 2 of
this Code, and whether the information as required under Section 2:392
sub 1 at b-h has been annexed. Further, we report that the Management
Board report, to the extent we can assess, is consistent with the financial
statements as required by Section 2:391 sub 4 of the Dutch Civil Code.
Rotterdam, 11 April 2014
Ernst & Young Accountants LLP
Signed by
G.A.M. Aarnink
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Independent assurance report
Auditor’s responsibility
To: The General Meeting of Shareholders of N.V. Nuon Energy
It is our responsibility to express an opinion on the Fuel Mix and
Renewable Investments based on the procedures we have performed
and the evidence we have obtained. We conducted our assurance
engagement in accordance with Dutch law including the Dutch
Standards on Auditing and the Dutch Standard 3000 ‘Assurance
Engagements Other than Audits or Reviews of Historical Financial
Information’. This requires that we comply with ethical requirements
and plan and perform procedures to obtain sufficient and appropriate
evidence to substantiate our opinion.
Engagement
We have performed an assurance engagement on the information
relating to the Fuel Mix of electricity supplied and/or produced
(hereinafter Fuel Mix) and Investments in renewable energy capacity
(hereinafter Renewable Investments) in the accompanying Annual
Report 2013 of N.V. Nuon Energy (hereinafter Nuon). The Fuel Mix
and Renewable Investments are presented in the chapter ‘Operational
Performance’ in the Annual Report 2013.
Procedures
Our assurance engagement is aimed to provide reasonable assurance
that the Fuel mix and Renewable Investments are correctly presented in
accordance with the criteria applied. The data relating to the Fuel Mix
and Renewable Investments on which we provide assurance are labelled
as ‘RA-verified’ in the Annual Report 2013 of Nuon.
Limitations in our assurance engagement
The quantification of CO2 emission factors related to the Fuel Mix
is subject to inherent uncertainty due to the designed capability
of measurement instrumentation and testing methodologies and
incomplete scientific knowledge used in the determination of emissions
factors and global warming potentials.
Criteria applied
Nuon applies the guidelines of EnergieNed as established in 2004
regarding the calculation method of the Fuel Mix. It is important to
view the Fuel Mix in the context of these guidelines. We believe that
these guidelines are suitable in the view of the purpose of our
assurance engagement.
Nuon reports on Renewable Investments based on investments in
renewable energy capacity for which the building activities were
performed in the reporting year 2013 and invoices have been received
(hereinafter source data).
Management’s responsibility
The Managing Board of Nuon is responsible for the preparation of the
Fuel Mix and Renewable Investments in accordance with the criteria.
This responsibility includes designing, implementing and maintaining
internal control relevant to the preparation of a Fuel Mix and Renewable
Investments that are free of material misstatements, selecting and
applying appropriate reporting policies and using measurement
methods and estimates that are reasonable in the circumstances.
We have performed the procedures deemed necessary to provide a basis
for our opinion.
Our main procedures with regard to the Fuel Mix, were:
■ Assessing the suitability of the reporting policies used and their
consistent application, as well as reviewing significant estimates
and calculations made in preparing the Fuel Mix;
■ Reviewing based on a risk analysis the plausibility of the information
contained in the Fuel Mix by performing analytical procedures,
conducting interviews with responsible company officers, and
checking the substantiations of this information on a test basis,
as well as retrieving the relevant corporate documents and
consulting external sources;
■ Evaluating the sufficiency of the Fuel Mix and its overall presentation
against the criteria mentioned above;
■ Identifying inherent risks relating to the reliability of the information
and investigating the extent to which these risks are covered by
internal controls;
■ Performing tests of controls to review the existence and effectiveness
of internal controls aimed at reviewing the adequacy and reliability
of the information;
■ Following the audit trail on a test basis, from the source data to
the information contained in the Fuel Mix;
■ Agreeing the overall mix of conventional electricity for import and
trade in the Netherlands as published by the ‘Autoriteit Consument
en Markt’ with the Fuel Mix;
■ Agreeing the emission factors of conventional electricity for import
and trade in the Netherlands as published by the ‘Autoriteit
Consument en Markt’ with the Fuel Mix;
■ Performing tests of detail aimed at reviewing the reliability of the
primary information of:
■ the production of conventional and renewable electricity;
■ conventional and green electricity (the latter based on GoO’s from
CertiQ) supplied to end customers;
■ purchased conventional electricity;
■ imported conventional electricity;
■ centralized sourced conventional electricity on the APX
(aggregation of purchases, sales and production).
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Our main procedures with regard to the Renewable Investments, were:
■ Assessing the suitability of the reporting policies used and there
consistent application, as well as reviewing significant estimates
and calculations made in preparing the Renewable Investments;
■ Reviewing based on a risk analysis the plausibility of the information
contained in the Renewable Investments by performing analytical
procedures, conducting interviews with responsible company officers,
and checking the substantiations of this information on a test basis,
as well as retrieving the relevant corporate documents and consulting
external sources;
■ Identifying inherent risks relating to the reliability of the information
and investigating the extent to which these risks are covered by
internal controls;
■ Following the audit trail on a test basis, from the source data to
the information contained in the Renewable Investments.
We believe that the assurance evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
96
Opinion
In our opinion:
■ the Fuel Mix of electricity supplied and/or produced is in all material
respects correctly presented in accordance with the guidelines of
EnergieNed as established in 2004 regarding the calculation method
of the Fuel Mix;
■ the Investments in renewable energy capacity are in in all material
respects correctly presented in accordance with the source data.
Rotterdam, 11 April 2014
Ernst & Young Accountants LLP
Signed by
H. Hollander
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N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
Declaration of Compliance with the Code of
Conduct for Suppliers and Metering companies
under their responsibility operating
(hereafter: Code of Conduct for energy suppliers and metering companies)
Regarding data available through metering devices to be read remotely
(smart meters) from consumers and small and medium enterprises
(‘kleinverbruikers’).
Name legal entity: N.V. Nuon Sales Nederland
Statutory place of business: Amsterdam
Period: 1 January 2013 - 31 December 2013
N.V. Nuon Sales Nederland in Amsterdam uses data obtained from
small-scale consumption metering which devices are read remotely with
the purpose to provide a good performance of its services.
In addition to the Dutch Privacy Act (‘Wet bescherming persoonsgegevens’), suppliers and under their responsibility acting and metering
companies operating under their responsibility in the Dutch energy
sector set up a Code of Conduct on the use, the capturing, the sharing
and the storing of data obtained from small scale consumption
measuring devices which are read remotely.
To secure the continuity of the bimonthly overviews of energy
consumption (‘het verbruikskostenoverzicht’) in 2013, Nuon Sales
Nederland temporarily requested data once a month; this deviates from
the agreed Code of Conduct for energy suppliers and metering companies,
in which it is stated that such data will be requested bimonthly.
Except for this deviation, we hereby confirm that N.V. Nuon Sales
Nederland has complied with the rules and obligations as set out in
the Code of Conduct for energy suppliers and metering companies
during 2013.
Amsterdam, 11 April 2014
Signed by
Martijn Hagens
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98
Profit appropriation
Dividend policy
Profit appropriation is governed by Article 34 of the Articles of
Association of N.V. Nuon Energy, which reads as follows.
Nuon’s dividend policy stipulates the following:
■ The basis for dividend distribution is the net profit, adjusted for
significant non-cash fair value movements on financial instruments
other than fair value movements on trade positions;
■ In accordance with the Shareholders’ Agreement, class A shareholders
– the provinces and municipalities that will sell their respective final
interest to Vattenfall on or around 1 July 2015 – will receive a predetermined annual dividend yield, irrespective of the net profit achieved in
a financial year. A separate liability for the dividend payments on class
A shares had been recognised in Nuon’s balance sheet on 30th June
2009, which is reduced every year by the dividend payments;
■ The remaining profit after taking into account the adjustments/
payout in points 1 and 2 above is available for distribution to class B
shareholder (Vattenfall AB), subject to:
■ A gearing ratio (Interest-bearing liabilities/(Interest-bearing
liabilities + Total equity) of no more than 50%. This ratio is based
on the guidance of S&P and Moody’s as the maximum for
investment grade companies;
■ Fulfilment of financial restrictions in Nuon’s financial
documentation (i.e. covenants);
■ Sufficient sustainable cash position over the next 12 months
as proven by the long-term cash forecast of Nuon;
■ Adequate liquidity lines available to Nuon.
Article 34: Profits and distributions
■
■
■
■
■
Subject to the approval of the Supervisory Board, the Management
Board shall decide annually what portion of the distributable profit –
the positive balance of the profit and loss account – shall be retained
with due observation of a dividend policy, to be discussed with the
General Meeting;
Any unretained profit shall be available to the General Meeting. In
the case that the General Meeting decides for a distribution of profits,
a dividend shall be distributed as far as possible on the class A shares,
the percentage of which, to be computed on the computation basis set
out below, shall be two percent (2%). The basis for the computation
of the dividend on the class A shares amounts to EUR 72.1042626
per class A share;
If, for any financial year, the distribution on the class A shares cannot
be effected or cannot be fully effected because the profit after
reservation does not suffice, the deficit shall be distributed to the
debit of the following financial years, without prejudice to the
provisions of Article 34.6. In that case, each time as much as possible,
the overdue dividend, augmented by the dividend for the last expired
financial year, shall be distributed on the class A shares according to
Article 34.2;
The remaining profit shall be at the disposal of the General
Meeting provided that no further dividend shall be distributed
on the class A shares;
Distributions of profit shall be made after the adoption of the annual
accounts if permissible under the law, given the contents of the
annual accounts.
Proposed result appropriation
In accordance with the Articles of Association and the shareholders
agreement, the Management Board, after consulting the Supervisory
Board, proposes to distribute the preferred dividend payable amounting
to EUR 41.4 million to class A shareholders (EUR 1.44 per class A-share)
as per 1 July 2014. As this amount is already included as a liability
in the balance sheet, this part of the result for the year will not affect
the appropriation of the net result to the other reserves. Furthermore,
the Management Board proposes to deduct the loss of EUR 419 million
from other reserves.
Dividend proposal
Amounts in EUR million
2013
Dividend
Dividend class B shareholders
41.4
0.0
Total dividend to be distributed
41.4
Preferred dividend shareholders
Loss after taxation
Dividend proposal: Dividend to be distributed
Dividend paid from dividend liability
Loss to be deducted from the other reserves
-419.2
-41.4
41.4
-419.2
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N .V. N u on Energ y A n n u a l Re p o r t 2 0 1 3
Ratios and definitions
Ratios
Credit spread
Return on Invested Capital (ROCE)
Credit spread reflects the additional interest on a bond compensating for the
Operating profit (EBIT) as a percentage of capital employed. Calculation of capital
difference in risk between the bond and a credit risk-free government bond.
employed is: total assets – financial assets – non-interest bearing debt.
CSS
Solvency
Clean spark spread (see Spark spread).
Equity as a percentage of balance sheet total.
Dark spread
The difference between the market price of raw materials for the production of
Definitions
energy in a coal-fired power plant and the market price of electricity. The clean dark
ARO
spread includes in addition to the price of raw materials the cost for the required
Average Rate Option is an option contract used to hedge against fluctuations in
number of emission allowances.
exchange rates by averaging the spot rates over the life of the option and comparing
that to the strike price of the option.
District heating
District heating is a system for distributing heat generated in a centralised location
BREEAM
for residential and commercial use. The heating is generated during the production
BREEAM is the sustainable building certification scheme that is the most widely
of energy in a CHP plant or by burning of waste or biomass. The central generation
used throughout the world, providing a benchmark for performance used by clients,
of heat results in a significant reduction of usage of fossil resources and CO2 emissions.
investors, developers and design teams.
Emission allowances
CCS
A right to emit a predetermined quantity of carbon dioxide (CO2) during a certain
Carbon Capture and Storage; capture, transport and storage of CO2 released during,
period. Any organisation operating one or more installations that emit CO2 is
for example, industrial activities or the production of electricity.
required to apply for an emission permit. This permit is granted by the Dutch
Emission Authority (Nederlandse Emissieautoriteit or NEa).
CDM
Clean Development Mechanism refers to projects aimed at reducing greenhouse
ERUs
gases registered by the CDM Executive Board in countries that are not signatories
Emissions reduction units, certificates for Greenhouse Gas reduction originating
of the Kyoto Protocol.
from Joint Implementation projects in terms of the Kyoto Protocol.
CDS
Fair value
Clean dark spread (see Dark spread).
Fair value is the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the
CERs
measurement date.
Certified Emissions Reductions, certificates originated from CDM projects.
Fossil-based power
CO2
Fossil-based power is understood as energy generated from coal, natural gas and
Carbon dioxide mainly released during the burning of fossil fuels such as natural gas
other non-renewable resources.
and coal.
FTE (Full Time Equivalent)
Coal gasification
Equivalent of the number of employees working a full week. In Nuon a full working
A process for converting coal into synthesis gas (a mixture of mainly carbon
week consist of 38 hours.
monoxide and hydrogen).
GJ
Combined Heat and Power (CHP)
Gigajoule, 1,000,000,000 joules, is a unit of energy. One GJ is equal to 278 kWh.
Combined Heat and Power is the simultaneous production of electricity and heating
1 terajoule (TJ) = 1,000 GJ
from a single fuel. The combined production has a higher energy efficiency than the
1 petajoule (PJ) = 1,000,000 GJ
separate production of electricity and heating and therefore leads to less usage of
fossil resources and lower CO2 emissions.
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100
Guarantees of Origin (GoO)
Near-incident
Guarantees of origin are certificates that give the customer guarantees on the way
An unplanned event that did not result in an incident without lost-time or
in which the power was generated. Guarantees of origin are tradable.
a lost-time incident, but which could have led to an incident without lost-time
or a lost-time incident.
IFRS
International Financial Reporting Standards.
Office of Energy Regulation
The Office of Energy Regulation is a department within the Dutch Competition
Incident without lost-time
Authority (NMa) charged with the implementation and supervision of compliance
An unintended and sudden event affecting an employee in connection with
with the Electricity Act 1998 and the Gas Act.
the performance of work and causing an interruption of activities.
OHSAS
kW
Operational Health and Safety Standard, international accreditation for safe
Kilowatt, 1,000 watts, is a unit of power (kWe is a unit of electric power, kWth
working practices.
is a unit of thermal power).
1 megawatt (MW) = 1,000 kW
RA-verified
1 gigawatt (GW) = 1,000,000 kW
Items included in the Report of the Management Board on which reasonable
1 terawatt (TW) = 1,000,000,000 kW
assurance is provided by EY as explained in the Assurance report of EY.
kWh
Spark spread
Kilowatt hour is a unit of energy.
The difference between the purchase price of raw materials (gas) for the production
1 megawatt hour (MWh) = 1,000 kWh
of energy in gas-fired power plants and the market price of electricity. The clean
1 gigawatt hour (GWh) = 1,000,000 kWh
spark spread includes in addition to the price of raw materials the cost for the
1 terawatt hour (TWh) = 1,000,000,000 kWh
required number of emission allowances.
Lost Time Injury (LTI)
Whistle-blower facility
Any occupational incident involving injury, which temporarily prevents the person
The procedure for dealing with suspected abuses, including those relating,
from carrying out his or her work.
for instance, to a serious offence, defeating the ends of justice or endangering public
health. Employees who report an instance of abuse are not subject to any kind of
LTIF
Lost Time Injury Frequency (number of accidents leading to sick leave divided by
the total number of hours worked, in millions).
retaliatory action.
Colophon
Disclaimer
N.V. Nuon Energy
Hoekenrode 8
1102 BR Amsterdam
‘We’, ‘Nuon’, ‘Nuon Energy’, ‘the company’, ‘Nuon Energy group’,
‘the Nuon group’, ‘the group’ or similar expressions are used in
this report as a synonym for N.V. Nuon Energy and its subsidiaries.
N.V. Nuon Energy originated from the unbundling of former parent
company n.v. Nuon, currently Alliander N.V. In order to avoid
misunderstanding, the names ‘our former shareholder n.v. Nuon’,
‘Alliander’ or ‘the Alliander group’ are used in this annual report
to refer to n.v. Nuon, Alliander N.V. and/or Liander N.V. with their
respective subsidiaries, which jointly form the network company.
Where the name Nuon is used in terms, project names or other
titles, such as Nuon Magnum, this relates to activities that fall under
the Nuon group. The name ‘Vattenfall’ or similar expressions refer to
Vattenfall AB and its subsidiaries. Vattenfall acquired 49% of the
shares of N.V. Nuon Energy on 1 July 2009, an additional 15% on
1 July 2011, 3.04% on 1 July 2012 and 11.96% on 1 July 2013, and
consequently holds 79% of the shares in Nuon. The financial data
of Nuon are consolidated in the financial statements of Vattenfall.
P.O. Box 41920
1009 DC Amsterdam
The Netherlands
Email: financejaarverslag@nuon.com
The annual report is available in PDF on our website www.nuon.com
Contact information
Media relations
Hoekenrode 8, P.O. Box 41920, 1009 DC Amsterdam, the Netherlands
Email: mediarelaties@nuon.com
Publication
© N.V. Nuon Energy, 2014
Concept and realisation
DartGroup, Amsterdam, the Netherlands
Photography
Jorrit Lousberg Light@work
Hans-Peter van Velthoven
Editing
Bosch & Bosch Translations and Copy, Amsterdam, the Netherlands
Scripta Media, Amsterdam, the Netherlands
Printing
Zwaan Printmedia BV, Wormerveer, the Netherlands
Paper
Cover: Fastprint Gold 250 gm
Inside pages: Fastprint Gold 120 gm
Parts of this report contain forward-looking statements that are
based on Nuon’s current expectations. Even if Nuon’s management
believes that these expectations are reasonable, no guarantee can be
made that these expectations will prove to be correct. The forwardlooking statements herein pertain to risks and uncertainties that
could have a material impact on future earnings. The statements
are based on certain assumptions, including such that pertain to
financial conditions in general in the company’s markets and the
level of demand for the company’s products. The outcome may
vary significantly compared with what is presented in the forwardlooking statements, depending on, among other things, changed
conditions regarding the economy, markets and competition, legal
requirements, and other political actions and variations in exchange
rates, as well as other factors referred to in the report.
AR2013/N.V. Nuon Energy
www.nuon.com