The Netherlands: Eneco’s Financial Results Up

Jeroen de Haas, chairman of the Board of Management: “We are proud of this result. It was achieved in a year in which great uncertainty affected economic activities and the confidence of businesses and consumers. In that context, it is satisfying to note that Eneco is able to realise further growth with its sustainability strategy. We have improved our safety performance by further reducing the number of accidents resulting in absence in our business operations.

 Results showed improvement across the board. The number of retail customers grew. Eneco has its cost under control, we do more with less and at a higher level of quality. During the coming years, Eneco will continue on its current course: investing in sustainable energy production, delivering sustainable energy to our customers, improving and renewing the distribution network and providing innovative solutions for the energy questions of our business and retail customers. Sustainable energy for everyone is the leading motto. A good financial result is crucial for investing in the sustainability strategy. Eneco is confident about the development of the company in 2012.”

Strong improvement in financial results in 2011

Eneco Holding N.V. achieved a net profit of € 204 million in 2011, an increase of € 63 million (45%) compared with 2010 (€ 141 million). All business units contributed to the improvement in the results. More wind energy was generated and the customer base was expanded, the investments in gas storage and Enecogen have produced financial contributions and costs have fallen. Joulz reduced its indirect expenses and revenues improved at Stedin. The average number of employees is lower than in the previous year, including the Oxxio employees. Eneco maintains a strict cost-control policy throughout the company.

Total revenues were € 5,007 million in 2011, € 85 million higher than in 2010 (€ 4,922 million). The improvement was mainly as a result of greater proceeds from energy transmission, profitable investments in wind energy and the acquisitions of Oxxio and the remaining 50% interest in the Prinses Amalia Wind Farm on 1 June and 6 October 2011 respectively. This made up for the decline in revenues due to the warmer weather in 2011.

Including the acquisitions, operating expenses were almost unchanged at € 1,222 million (2010: € 1,220 million), partly as a result of the reorganisations started in 2010, the lower average number of employees, more efficient operations and lower direct costs in the infrastructure company.

The consolidated operating profit was € 388 million, a rise of 42% compared with 2010 (€ 274 million). The improvement in operating profit was seen in all the company’s segments.

There was net financial expense in 2011 of € 81 million (€ 2010: € 93 million). The fall is explained by higher capitalisation of interest on capital expenditure projects and a more favourable working capital position during the year.

The improved results raised the tax charge to € 74 million (2010: € 36 million). It was decided in 2011 that certain activities were no longer core to Eneco and would be sold. This generated a loss on discontinued operations of € 32 million (2010: € 6 million).

Eneco Holding N.V.’s solvency at year end 2011 was 50.4% (year end 2010: 51.3%).

The operating profit of the energy company (supply, production and trading) rose € 15 million to € 135 million with much of the growth coming from the generation of wind energy. Wind conditions were better in 2011 than in 2010 and there was also the contribution from the new wind farms coming on stream and the acquisition of the second half of the Prinses Amalia Wind Farm. The trading department performed well compared with the previous year despite the extreme events affecting the global energy market, such as the earthquake in Japan, the sudden closure of nuclear power stations in Germany and unrest in oil producing countries. Further improvements were achieved in energy purchases and optimising the gas portfolio but margins on conventional (gas-generated) electricity production were under pressure. There were considerably (22%) fewer degree days in 2011 than in 2010, and this depressed sales volumes and the margin made on our supply activities. Cost savings have been and are still being achieved across the board.

The operating profit on gas and electricity distribution was € 290 million, an increase of € 90 million compared with 2010. Revenue was up € 67 million, mainly as a result of the higher transmission tariffs set by the Netherlands Competition Authority (NMa) in 2011, which were necessary in connection with the growing capital expenditure in the networks. In addition, purchase and transmission costs fell by € 23 million, mainly as a result of lower costs for technical and administrative network losses.

Infrastructure company Joulz improved its operating profit to € 17 million in 2011 (2010: € 3 million, excluding a restructuring provision of € 12 million) despite a slight fall in revenues. Good utilisation rates and lower indirect expenses in 2011 were the main reasons for the improvement. Joulz was successful in procuring commercial contracts in 2011; total order intake was € 578 million of which over € 240 million was for commercial orders. Order intake was, therefore, above target and in combination with the number of outstanding leads and opportunities gives great confidence for the future. Joulz’s commercial ambition to undertake contracts for other network managers as well as Stedin is gradually being achieved.

Investments

As well as the acquisition of Oxxio and the expansion of the holdings in the Prinses Amalia Wind Farm and Air Energy, Eneco invested € 737 million in 2011 (2010: € 734 million) in property, plant and equipment and intangible assets. Eneco invested € 388 million (2010: € 312 million) in replacing and expanding the gas and electricity networks. It also invested € 67 million in Enecogen, the efficient gas-fired power plant, and € 51 million in the gas storage installations in Epe in Germany, both of which came on stream at the end of 2011. € 94 million was invested in developing wind farms and € 46 million in replacing and expanding district heating networks. Construction of the ‘Golden Raand’ wood-fired biomass power plant in Delfzijl started in 2011 with an investment of € 37 million.

Sustainability report

As part of its social responsibility policy, Eneco has formulated strategic sustainability targets on safety, customer loyalty and satisfaction, continuity of supply, green energy generation, environmental footprint of its own operations, employee motivation and suchlike. Based on the external assurance assignment carried out by the accountant, it has been established that Eneco meets the requirements applicable to level GRI B+.

Outlook

In spite of our strong confidence in the development of the company, we refrain from making any statements with respect to expectations regarding the result over 2012 in view of the many external uncertainties.

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Offshore WIND staff, March 15, 2012