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Annual Report DELTA N.V. 2014 The English translation of the annual report is for information purposes only The Annual Report 2014 comprises of the Dutch text including the independent auditor’s report in Dutch 1 Contents Annual Report 1 Management Board Report 2014 3 1.1 2014 – a dynamic year for DELTA 3 1.2 Profile and key figures 6 1.3 Notes to the results 10 1.4 Ambitions 13 1.5 Energy & Multimedia 15 1.6 Grids, mains and networks 22 1.7 Waste management 24 1.8 DELTA and corporate social responsibility 25 1.9 DELTA and its employees 28 1.10 DELTA and corporate governance 32 1.11 Opportunities and risks 42 1.12 Statement by the Executive Board 46 2 Financial statements for 2014 47 3 Other information 141 4 DELTA in financial figures 143 2 1 Management Board Report 2014 1.1 2014 – a dynamic year for DELTA DELTA formulated its strategy in 2014. At the start of the year, it set up a consultation body consisting of the Executive Board, Supervisory Board, and Shareholders’ Committee. After intensive exploration, the decision was made to continue as an independent company and to sell the company’s waste management business Indaver. DELTA also defined two focal points within our business strategy, more specifically to reduce our carbon footprint and integrate our energy and multimedia products so as to make life easier for the DELTAcustomers. Position To successfully operate as a business, it is important that DELTA has its financial house in order. In the past few years, we have laid a solid foundation to withstand the headwinds affecting the energy market. Energy prices are low because of overcapacity and the recession. This is unlikely to change over the next three years. DELTA has made the necessary preparations to deal with these market conditions and remain an independent company. In 2014, we used EUR 74 million from our cash flow to pay off part of our debts, reducing our debt position to EUR 559 million at year-end. After the strategic sale of the Kreekraksluis wind farm and Indaver (in which DELTA owns a 75% interest), our net debt will reduce to nil by mid-2015. The process of selling Indaver has been successful. Negotiations were held with several prospective buyers within a short space of time and, eventually, in March 2015, it became clear that Indaver would become a group company of the leading Belgian-based logistics provider Katoen Natie. Once approved by the shareholders, the sale will be completed by mid-2015. DELTA Group’s underlying operating profit is strong, especially when taking into consideration the poor market conditions for the production and sale of energy. Its cash flow was particularly strong, standing at EUR 94 million, EUR 20 million of which was used to pay a dividend and EUR 74 million to pay off debts. We ended 2014 with a net underlying profit of EUR 65 million. Due to the necessary impairment of Indaver’s environmental business and a change in tax position, net profit came to EUR 4 million. The write-down on the Indaver sale was necessary because we had bought the company for a higher price in 2007, when market conditions were different. DELTA’s different divisions all reported good results. CO2 reduction Regardless of DELTA’s future, we are convinced that the last days of coal as fuel to generate power are approaching. The coal-fired power plant operated by EPZ (in which DELTA owns a 70% stake) will be closed down by the end of 2015. This decision is also based on our conviction that burning coal harms the environment and there are other types of fuel, such as natural gas, nuclear, wind, solar, biomass and water, which make up a better mix for power generation. By 1 January 2016, DELTA will be the Netherlands’ cleanest energy producer. With the closure of the coal-fired power plant in Borssele, emissions will reduce to 130g/kWh, making DELTA the best performing major energy producer of the Netherlands. A year later, emissions will even reduce to 90g/kWh. By that time, the Gemini wind farm will have started delivering wind power, as shown in the chart on page 14. ‘By 1 January 2016, DELTA will be the Netherlands’ cleanest energy producer.’ 3 Integration of energy and multimedia products On the domestic market in Zeeland, we have begun integrating our retail products, building on the unique position of our energy and multimedia products. Our aim is to offer consumers a comfortable home, served by a single provider. An offering that is unique. What consumers want now more than ever is to get their energy bills down and, at the same time, contribute to a sustainable society. In 2014, we therefore focused on expanding DELTA's position as an intermediary and promoting value-adding services, such as the Comfort Indicator (ComfortWijzer) and our Guaranteed Solar (ZonGarant) programme. With our Scoring Together (Samen scoren) campaign, consumers in Zeeland can benefit from having an energy supplier and multimedia service provider being located under one roof. In 2014, we made preparations for the launch of our Home Advice (Woningadvies) online platform. Visitors can use the platform to access information about potential savings in and around their home. They can compare the investment required with the proceeds and ask directly for a quote. With DELTA Home Advice, we have taken a major step towards becoming an intermediary. We will continue integrating our energy and multimedia products and services in 2015. Ultimately, DELTA will occupy a special role in the lives of its customers, providing a range of useful services. Good energy production mix ensures flexibility DELTA’s energy production operations were severely affected by continued poor market conditions in 2014. The gas-fired power station SloeCentrale is one of the most efficient plants in the Netherlands, delivering a relatively high output, but margins were too low. The ELSTA gas-fired power station continually operated baseload to deliver steam and power to Dow in Terneuzen, but could not be deployed to generate extra power profitably due to market conditions. The biomass plant in Moerdijk, which converts poultry litter into energy, performed well despite a period of bird flu, when supply of poultry litter was limited. The diversity of our energy production mix allows us to respond flexibly to market developments. We will stop burning coal and close our coal-fired power plant by the end of 2015. EPZ’s nuclear power station made a substantial contribution to reducing carbon emissions. 2014 was a good year for EPZ. Availability was high, with the units achieving a historically high aggregate monthly output. EPZ also for the first time used MOX fuel, closing the fuel cycle. MOX is a fuel composed of residual products. It reduces the use of finite natural resources, as well as providing more fuel load alternatives. Synergy and efficiency 1 January 2014 saw the merger of DELTA Infra and DELTA Netwerkbedrijf. The two companies are now trading as DELTA Netwerkgroep (DNWG). The new set-up has provided greater synergy and improved operational efficiency. Not surprisingly, DNWG performed well in 2014. The merger of the two divisions allows us to work even more efficiently and respond proactively to market developments. Water company Evides (in which DELTA owns a 50% interest) also reported good results for 2014. Evides supplies drinking and industrial water in Zeeland and other areas. Its performance again showed that Evides operates a solid and efficient organisation. ’The diversity of our energy production mix allows us to respond flexibly to market developments.’ 4 DELTA’s future DELTA saw many changes in 2014. This will not be different in 2015. Thanks in part to the dedication of our employees, we ended the year with a profit and have every confidence for 2015. Reducing our carbon footprint is an important focal point for DELTA. This is why we are uncomfortable with the coal section in the National Energy Agreement. We cannot endorse the substantial amount in compensation paid to coal companies for phasing out their old power plants. The compensation involves abolishing the coal tax and making extra grants available to co-fire biomass. This comes down to extra support being provided for coal power generation. And that was not the intention of the National Energy Agreement. It certainly runs counter to our ambition to provide low carbon energy. Many of the possibilities for DELTA to shape its future depend on the Dutch Supreme Court’s decision on the mandatory separation of its grid operation business and the response of politicians if the decision were to go against DELTA. In the past few years, we have made no bones about the fact that such a split would mean the end of DELTA in its current form and would be bad news for jobs in Zeeland. Separating the grid business is a poor solution to a non-existent problem. The Independent Grid Operation Act (WON) is already doing its job. Moreover, there is not a single power company outside the Netherlands that is being required to hive off its grid operations. In fact, most European providers are full-service companies at holding company level, including those with subsidiaries in the Netherlands. We trust that the Dutch government will ultimately take the sensible decision. Executive Board of DELTA N.V. Arnoud Kamerbeek, CEO Frank Verhagen, CFO 5 1.2 Profile and key figures DELTA is an independent supplier of energy and waste management services. The company provides energy, waste processing, infrastructure, and digital services. We want to make life for our customers as easy as possible and are constantly looking for ways to add value. The company’s shares are held by municipal and provincial authorities in the provinces of Zeeland, Noord-Brabant, and Zuid-Holland. DELTA’s head office is located in Middelburg, The Netherlands. The company and its subsidiaries employ a total of 3,349 FTEs. 1.2.1 What we do Group companies DELTA N.V. DELTA Netwerkgroep Energy & Multimedia DELTA Netwerkgroep DELTA Comfort DELTA Netwerkgroep DELTA Energy DELTA Netwerkgroep Waste Management Indaver N.V. EPZ (70%) SloeCentrale (50%) For a list of consolidated and non-consolidated subsidiaries, please refer to page 123 of the Annual Report. Products and services DELTA generates electricity, trades in energy, and supplies gas, power and digital services to retail and corporate customers in Zeeland and other areas. The company also supplies drinking water and industrial water services through its subsidiary Evides. ZRD (Zeeland Sanitation Department), a subsidiary of Indaver, operates household waste processing facilities across Zeeland, collecting household refuse in nearly all towns and cities in Zeeland. Grid operator On 1 January 2014, DELTA Netwerkbedrijf B.V. (DNWB) and DELTA Infra B.V. were combined to form DELTA Netwerkgroep. DNWB is the regional power and gas grid operator. It is responsible for managing the gas and electricity distribution grids in Zeeland. DNWB has entrusted the construction and maintenance of these grids to DELTA Infra B.V., which is also responsible for constructing and servicing the water mains networks operated by water company Evides and DELTA’s cable network (Zeelandnet). DELTA Infra’s other areas of expertise include high-voltage applications and metering technology, with services being delivered in Zeeland and other areas. 6 Waste management DELTA’s waste management operations have been brought together in Indaver N.V., a subsidiary company in which DELTA owns a 75% share interest. Indaver offers high-quality, sustainable waste management solutions to industry and local authorities. focusing on environmentally safe ways of processing all sorts of waste materials and maximising the reuse of energy and materials. Part of the waste is processed at its own facilities, but some is treated at other plants. The company selects the best processing method for each type of waste: recycling, processing into biomass, or waste-to-energy (incineration). In recent years, Indaver has grown into a leading European provider, with operations and facilities in Belgium, Germany, Ireland, and the Netherlands. The company processes 5 million tonnes of waste a year and employs around 1,700 employees. In 2014, DELTA took the decision to sell its interest in Indaver. 1.2.2 What we stand for DELTA offers its customers the convenience of sustainable and innovative multi-utility solutions. The company seeks to ensure continuity of supply and is committed to long-term customer relationships. We are the partner of choice for buyers of utility products and services, such as power, water, digital services, and waste collection and processing, on both a small and large scale. DELTA is aware that conventional energy resources are finite. That is why we are investing in making our processes more sustainable and, in particular, reducing our carbon emissions. This covers our waste processing and water operations, as well as our power generation activities. In an environment that is becoming increasingly complex, we will continue to integrate our products and services so as to meet the information and convenience requirements of our customers. DELTA seeks to make its power generation activities carbon neutral by 2050. Carbon neutral means that all the energy produced is generated by carbon-free generation methods. If additional measures are taken to offset carbon emissions, power generation is also said to be carbon neutral. We do not believe that a fully sustainable power generation system will be feasible over the next few decades. Committed to cutting carbon emissions, DELTA aims to have the smallest carbon footprint of all Dutch power companies by 1 January 2016. With the closure of the coal-fired power plant in Borssele, emissions will reduce to 130g/kWh, making us the cleanest major energy producer of the Netherlands. A year later, emissions will even reduce to 90g/kWh. By that time, the Gemini wind farm will start delivering wind power. DELTA takes the view that a balanced mix of different generation methods is necessary to ensure continuity of supply. We believe that this mix should include wind, solar, biomass, natural gas, and nuclear power. Nuclear power is needed to keep the reliability of supply at an acceptable level and prevent unnecessary greenhouse gas emissions. Nuclear power generation releases no carbon emissions and emits fewer other pollutants, such as nitrogen oxides (NOx), sulphur dioxide (SO2), and soot. That is why DELTA consider this to be a responsible way of generating power. 7 1.2.3 The world we operate in Having public-sector shareholders and a regional customer base, DELTA has strong ties with its home market. The company is firmly rooted in society and readily accepts its social responsibilities. What is good for us is good for the South Western delta region. ‘DELTA is firmly rooted in society and readily accepts its social responsibilities.’ DELTA’s commitment to society is reflected in its strong reputation in Zeeland. The company has commissioned the Reputation Institute to conduct monthly reputation surveys. The survey findings are used to identify market and regional trends. DELTA has a solid reputation in Zeeland and achieves high scores because of its connection with local communities as a supplier, employer, business relation, or customer. Our reputation is therefore a key indicator. We use the monthly survey findings to identify market and regional trends and developments at an early stage. We can then adjust our external communications accordingly. In 2014, we focused in particular on improving our financial ratios. By taking a variety of measures, we successfully reduced our debt by EUR 74 million within one year. The proposed sale of our interest in waste management company Indaver should also contribute to improving our financial ratios. 1.2.4 Corporate social responsibility Corporate social responsibility mainly involves DELTA’s energy operations, particularly those conducted by its group companies and joint ventures. All its waste management activities have been transferred to Indaver, which publishes its own CSR report (available as a download at www.indaver.com). Water company Evides, in which DELTA owns a 50% share interest, is not included in the report. Evides reports on its CSR policy and related activities on its website at www.evides.nl. Below is a summary of the key statistics on DELTA’s power generation activities. More detailed information is available at www.epz.nl , www.sloecentrale.nl and www.bmcmoerdijk.nl. Share of carbon neutral and renewables Carbon neutral Nuclear Renewables* (* wind/water/biomass) DELTA’s carbon emissions (g/kWh) Social performance (in EUR) Distributions to shareholders Roosevelt Academy Sponsoring and donations 2014 24.1% 8.3% 15.8% 2013 29.3% 16.2% 13.1% 2012 27.2% 17.3% 9.9% 2014 389.7 2013 437.4 2012 421.3 2014 15,000,000 379,083 834,282 2013 20,000,000 398,854 900,000 2012 40,000,000 418,950 928,326 8 1.2.5 Accounting standards The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and the relevant provisions of the Dutch Civil Code (DCC). DELTA conducts some of its major operations with others in the form of joint ventures. Our share of assets, liabilities, income and expenses associated with operations conducted by separate legal entities in which DELTA, in its capacity as a shareholder and customer, has the same rights and obligations as its partners, have been included in our financial information since 2013. This provides a greater insight into the structure of our capital base and profits. Financial highlights (EURm) Revenue Gross margin EBITDA Net profit Investment in (in)tangible fixed assets Net debt 2014 1,931 789 312 4 102 559 2013 2,104 786 301 75 168 633 2012 2,168 826 379 81 141 630 Share of revenue ( EURm) Sale of electricity and electricity trading Sale of natural gas and natural gas trading Electricity & natural gas transmission Cable, Internet, and telecommunications Waste logistics and environmental services Other revenue Total revenue 2014 882 268 106 81 517 77 1,931 2013 970 344 118 79 514 79 2,104 2012 1,046 332 112 75 519 84 2,168 For full details of the financial statements 2014, please refer to page 47. 9 1.3 Notes to the results DELTA performed well in 2014, driven by its variety of activities on different markets and a clear focus on profit and cash generation. In spite of falling market prices and lower volumes due to mild winter conditions, the company reported EUR 1.9 billion in revenue. Net profit came to EUR 3.8 million. However, this was after recognising an impairment of DELTA’s share interest in waste company Indaver, which is likely to be sold in 2015 and the book value of which had to be revised downwards to reflect its expected market value, and after recognising an increase in tax loss carryforwards due to decreasing interest charges after debt repayment. We are proud to report an underlying pre-impairment profit of EUR 64.6 million. Net cash flow was even more robust, at EUR 94 million, before EUR 20 million in dividends paid to shareholders. Mild temperatures at the start and end of the year were helpful making the prepaid gas purchases lower. The energy market continued to deteriorate in 2014. Although the economy showed tentative signs of a recovery, prices remained under pressure from existing spare capacity. This effect was exacerbated by more renewable generation capacity arriving on the market. Although this is a socially desirable trend which we endorse, conventional generation facilities, which remain the basis of a reliable energy supply, continued to fare poorly. Electricity prices continued to decline in 2014, with gas prices falling at an even faster pace. Our gas-fired power station SloeCentrale supplied power to the grid for the best part of the year, but margins were too modest to cover the fixed costs. EPZ’s production units achieved record availability levels. DELTA has for many years been conducting a combination of activities which are mutually reinforcing in different areas. This is also financially beneficial to the group as a whole. Driven by the solid performance of Indaver, water company Evides, and DELTA Netwerkgroep's combined infrastructure and grid operations, we saw strong underlying profits, despite difficult market conditions. Our multimedia and cable business also performed well during the year, thanks to the introduction of combinations of new and existing products and services. Revenue and profit Revenue fell in 2014 compared with 2013. This was felt mainly in the energy business, including both the trading floor and sales to corporate and retail customers. In the grid segment, we achieved strong cost savings by combining our grid and infrastructure operations into a single entity, which partly compensated for the drop in revenue arising from the adjustment to what are known as the statutory ‘X factors’. The multimedia business saw a slight increase in revenue. Waste management company Indaver, in which DELTA owns a 75% share interest, reported good results, despite a number of unplanned outages at its incineration plants in Belgium and Germany. The Irish operations reported growth, driven by the expanded scope of its permit. Market prices remained under pressure, both in the waste business and in terms of energy generation revenues. The newly constructed incineration plant in the Dutch town of Alphen aan den Rijn operated in line with expectations. The Dutch operations performed above budget, driven mainly by higher composting and landfill volumes. 2014 proved to be another strong year for water company Evides, in which DELTA owns a 50% stake. Total gross margin rose by EUR 8 million on the previous financial year (up 1%), partly owing to the fact that the EPZ nuclear power plant was out of operation for a few weeks in 2013 because of a failure in the conventional section of the plant, which had a negative impact on the 2013 results. Operating costs remained contained, driven by the ongoing focus on cost control and smart purchasing and consumption solutions. Combining the grid operations delivered an efficiency gain of around EUR 5 million. Depreciation and amortisation costs increased by EUR 8.5 million, before the necessary impairment of our share interest in Indaver. This impairment amounted to EUR 92.8 million. Because Indaver is a fully consolidated subsidiary, the amount is shown fully within ‘depreciation and amortisation’, with Indaver’s minority shareholders shouldering their share of the impairment charge, i.e. EUR 24.2 million. This amount is shown within ‘non-controlling interests’ in the profit and loss account. The impairment led to the value of the put option shown in DELTA’s balance sheet being reduced by the same amount. 10 As the company becomes leaner, it has seen the number of employees fall for several years now. At the end of 2014, the different group companies employed a total of 3,349 FTEs, compared with 3,394 at the end of 2013. These numbers also cover employees working in ‘joint business operations’. The underlying drivers included a limitation on the number of new hires, a mobility programme for employees who could not remain in their existing jobs, and relocations to job openings at other group companies. It became clear in 2014 that the EPZ coal-fired power plant would be closed down by the end of 2015. Staff at the power plant will be subject to a restructuring, which unfortunately will see many of our colleagues in Operations and Support lose their jobs with EPZ. In 2014, we recognised a provision of EUR 10 million (70% share) to cover the costs of the proposed closure in 2015. Our share of associates and joint ventures amounted to EUR 41.2 million in 2014, similar to 2013 (EUR 41.5 million). The external funding requirement improved by EUR 90.4 million during the year. During the year, interest-bearing debt net of available cash and cash equivalents (net debt) fell by EUR 74.1 million to EUR 558.6 million at the end of 2014. Interest charges were EUR 24.3 million, with EUR 21.1 million in interest income being added to the provisions, up EUR 2.7 million on 2013. Financial income rose in 2014, driven by the funds received from the last tranche of the Lansbanki claim and the positive return delivered by the Borssele Nuclear Power Plant Dismantling Fees Management Fund. Net financial income was down EUR 6.8 million on 2013. In consultation with the Dutch Tax and Customs Administration, the commercial operations in the energy segment, including multimedia, were transferred to a separate fiscal unity for corporate income tax purposes. Initially, the separation was to be effective from 31 December 2013 but, in consultation with the Tax Administration, we decided to move the start date for both fiscal unities to 1 January 2014. This immediately led to tax loss carry forwards being used in 2014. Unlike in 2013, there were no unforeseen refunds from previous financial years in 2014. A further EUR 0.6 million in proceeds from the sale of our share interest in Fesil Sunergy AS in 2012 is shown within ‘discontinued operations.’ Also in 2014, proceeds were recognised from assets and liabilities of DELTA Industriële Reiniging B.V. (sold in 2013) that had not been included in the sale. We ended 2014 with a net profit of EUR 3.8 million, compared with a profit of EUR 74.8 million in 2013, attributable to the shareholders of DELTA N.V. Cash flow and investments Cash flow from operating activities was boosted by working capital control, leading to good results particularly in the corporate energy segment. Cash flow from operating activities totalled EUR 209.8 million. Cash flow from investing activities stood at EUR 115.7 million, compared with EUR 187.2 million in 2013, due mainly to substantial investments in the Kreekraksluis wind farm. Investments in grid operations remained stable at EUR 39.4 million (2013: EUR 37.9 million), with the rollout of smart meters contributing EUR 4.4 million. Investments in the EPZ production facilities fell compared with the previous year, because part of the planned investments had already been made during the prolonged product stoppage at the nuclear power plant in 2013. Investments totalled EUR 19.3 million, compared with EUR 33.7 million in 2013. As the coal-fired power station is nearing the end of its useful life in 2015, any necessary operating costs are now included in the budget, rather than being recognised as investments. Indaver invested EUR 36.7 million in its plants and software, mainly in Belgium and the Netherlands. Free cash flow came to EUR 74.1 million, net of a EUR 20 million dividend payout. It was used to reduce our debt position. 11 Financial position and solvency Net realised gains stood at EUR 64.1 million in 2014. The addition of these net gains to the reserves, the decline in value of the Indaver put option of EUR 18.2 million, and the EUR 20 million in dividends paid to our shareholders combined to reduce the equity attributable to DELTA N.V.’s shareholders to EUR 1,104 million. Our solvency ratio was 31.3% at the end of 2014 (2013: 31.8%). The profit we made in 2014, coupled with the favourable development of our debt position and the available reserves, allowed us to distribute EUR 15 million to our shareholders. Although this is less than the EUR 20 million payout last year, we are pleased to have been able to do this. Earlier, we had indicated, on the basis of the weak prospects for the energy market, that it would be very difficult to pay a dividend for 2014 because we needed to strengthen our reserves for the uncertain times ahead. We are pleased that our strong performance in 2014 allows us to accommodate our shareholders in what for them are difficult economic conditions as well. Rating We are making every effort to keep our credit rating at an acceptable level of BBB or higher. Outlook The outlook for the energy market has not improved. The sale of Indaver and the Kreekraksluis wind farm will provide sufficient financial leeway to tide us over the next few years, in which we are likely to see negative margins on energy production and will continue to invest in our existing and sustainable production facilities. Ensuring security of supply by having high-quality grids in place remains one of our main objectives. The necessary investments are funded from the cash flows from our grid operations. The rollout of smart meters will be accelerated in the coming years. Adding greater depth to and broadening our retail offerings (traditional gas, power and water supplies and services, decentralised renewable energy generation, and multimedia services, or a combination of these) will strengthen our ties with customers in Zeeland. The issue of whether we will be required to split up our business remains a key point of attention. We expect to end 2015 with a profit. It will be very difficult to pay a dividend to our shareholders for the years 2015 to 2017. We will nonetheless try our very best to make this happen. 12 1.4 Ambitions In 2014, DELTA undertook a strategy search, consulting its shareholders on numerous occasions. There were nine official strategy meetings with our shareholders to discuss a range of strategic choices so as to maintain high-quality jobs, ensure returns, and mitigate risks. The scenarios of a merger, full or partial sale of operations and continuing as an independent company were considered, as were the views of our shareholders and the expected economic conditions. Looking to the future The strategy will be shaped further in 2015. We will keep our eyes and ears open to any opportunities. DELTA: frontrunner in low carbon-efficient power generation DELTA seeks to be carbon neutral in terms of its power generation operations by 2050. To achieve this aspiration, we will need a varied and balanced production mix, including not only natural gas as a fossil fuel, but also nuclear power, wind power, and biomass. Our guiding principle is ‘renewable where possible, low carbon where necessary.’ In April 2014, we therefore decided to purchase power and green certificates from the Gemini wind farm. This, the Netherlands’ largest wind farm, will become operational in 2016. With the opening of the wind farm and closure of the coal-fired power station in 2016, DELTA will become the frontrunner in low carbon energy production in the Netherlands, taking a big leap towards achieving its goal of generating carbon neutral power by 2050. The chart on the following page shows the carbon emissions of DELTA’s entire asset portfolio. Facts & figures on the Gemini wind farm With a capacity of 600 MW and supplying 2.6 TWh of electricity, Gemini will be the Netherlands’ largest wind farm, operational in 2016. This is enough to provide more than 785,000 homes with green power sourced from within in the Netherlands. Gemini will contribute to reducing carbon emissions by 1.25 million tonnes. Today’s energy company Over the years, expectations of consumers, business customers and local authorities in their dealings with energy companies have changed. Options to cut energy bills have become widely available. Being sustainable is not a trend anymore, it is a requirement. DELTA has responded to this development in its own way. Its multi-utility concept, which has always set the company apart from the competition, is helping shape DELTA’s energy business to meet today’s demand. ‘In 2016, DELTA will be the frontrunner in low carbon energy production in the Netherlands.’ DELTA’s unique basis – its ability to combine energy and multimedia products and services – has allowed the company to transform into the business it is today. From producer and supplier to producer, supplier, intermediary, and adviser. A Zeeland-based company that helps its customers to be sustainable and control their energy bills, without having to cut back on convenience. 13 14 1.5 Energy & Multimedia DELTA produces energy, is involved in commodities (natural gas, coal, oil), electricity and emissions trading on various markets, and delivers gas and power to businesses and consumers. Its energy operations account for around two thirds of its revenue. In addition to energy, the company provides multimedia services, including Internet access and telephony services through its subsidiary company ZeelandNet. DELTA also transmits television and radio signals via its cable network. Because of this mix of service offerings, customers buy more than four products from DELTA on average. This, in turn, has led to high customer loyalty. That said, the energy market has come under severe pressure due to spare capacity and low prices. This makes it difficult for us to deliver strong margins. We expected these market conditions to continue for a number of years. The company will need to adapt to these conditions. Prices are expected to pick up in 2017. Until then, we will need to be flexible and versatile. Our retail and wholesale operations should be able to respond to changing customer requirements, market trends, and moves by the competition. To do just that, our energy and multimedia division launched its Future Proof programme in 2014. Zooming in on cost control and customer focus, the programme will be completed by mid-2015 and result in a revamped E&M organisation. 1.5.1 Energy and the corporate market Unfavourable energy market conditions continued in 2014. Spare capacity and the arrival of new coal-fired power plants, low electricity prices (relative to fuel prices), and the ongoing growth of subsidised renewable energy continued their grip on the market. However, due to the delayed commercial operation of newly constructed coal-fired power stations, problems with the temporary closure of Belgian nuclear power facilities, and relatively low gas prices (because of mild winter conditions and sufficient supply), the Sloe power station in particular was up and running during the best of the year. Unfortunately, this highly efficient gas-fired power station delivered positive but very modest margins, which were not enough to cover fixed costs. The mild winter also had a considerable impact on gas deliveries. With the high temperatures we had, our customers required less heating and so gas consumption fell. DELTA’s trading operations delivered good results during the year by responding flexibly to market fluctuations. Volatile and uncertain market conditions call for smart energy purchasing strategies that enable us to control costs and risks while at the same time improving returns. That is why in 2014 we focused on being the partner of choice for entrepreneurs, drawing on our specific knowledge of their business and the energy market. Since its liberalisation, the energy market has become a dynamic environment of supply and demand and competition. Ten years on, DELTA wants to take its activities to the next level by being a utility partner for its customers. This cuts both ways. On the one hand, we can help them define the best possible energy purchasing strategy, which goes beyond ‘merely’ buying cheap electricity. On the other, we distinguish ourselves from the competition through our commitment to long-term customer relationships and unique energy products In line with our partnership thinking, the DELTA Advisory Board met for the third time at Nyenrode Business University in Breukelen in 2014. During the meeting, presentations were given by and for the benefit of our customers about strategic and innovative energy purchasing, coupled with our new Profit-Sharing product. A perfect example of a joint undertaking. 15 Sustainability awareness Sustainability was one of the other topics discussed at length during the DELTA Advisory Board meeting. We consider it our social duty to continue to raise awareness of energy consumption. In 2014, DELTA Corporate offered green products based on biomass and wind, with the option to select the origin (the Netherlands or otherwise), and hydro power. With the Gemini project, DELTA is making a big leap in terms of renewable power generation. We will, in fact, become the largest purchaser of offshore wind power. With a 600 MW capacity, Gemini is around five times the size of the biggest wind farm currently operating in the Netherlands. Its total output will be around 2.6 TWh a year, enough to supply 785,000 homes. ‘DELTA has provided its customers in Zeeland with a comfortable home for nearly a century.’ We are also working with our business customers on a smaller scale. Examples include our cooperation with Heineken to construct four wind turbines at its Zoeterwoude brewery, and with Kloosterboer to build the first wind turbine on its site in Vlissingen Oost. Kloosterboer began generating its own green power in early 2014. We have also teamed up with Tebodin to deliver energy advice to industrial companies. 1.5.2 Energy and the retail market DELTA has provided its customers in Zeeland with comfortable homes for nearly a century. The majority of people in Zeeland are trusted customers of DELTA. At 3.3%, the switch rate in 2014 was far below the national average of 13.2%. Because we have become increasingly better at winning customers back, our customer base remained virtually unchanged in 2014. Gas and power margins were low, due in part to mild winter conditions, and consumption volumes fell as a result of improved insulation and the construction of solar panels on homes and at industrial premises. DELTA seeks to retain customers and generate additional margins by offering value-added services, such as the Comfort Indicator (Comfort Wijzer) and Guaranteed Solar (ZonGarant) programme. In late 2013, we introduced a new billing system so as to comply with changes in the law for the energy industry. In the first few months of 2014, the implementation of this new system adversely affected service levels and customer experience. However, improved efforts during the year and a personalised communications approach led to an increase in customer satisfaction by 0.1% by the end of 2014 compared to 2013. Scoring Together (Samen Scoren) In 2014, DELTA launched its Scoring Together campaign, inviting sports clubs to encourage their members to buy an All-in-1 package (including multimedia services from DELTA). In return, DELTA helped the clubs become greener by, for example, fitting solar panels. This is a perfect example of the synergy benefits offered by DELTA as a provider of multimedia products and services as well as energy. Smart Joint Savings (Samen slim besparen) DELTA takes its role as an energy savings adviser seriously. During 2014, we offered a range of different products and services to help consumers reduce their energy usage. Customers signing a new energy contract received a discount when buying a smart thermostat at the same time. At different times during the year, we offered solar panels under a Guaranteed Solar generation contract. We also successfully sold and rented out central heating boilers. 16 The new frugality People in Zeeland have a reputation for being thrifty. But is that really true? DELTA put the question to a significant number of residents as part of an independent study. The answer? Up to a certain extent. People are careful with the money they spend. However, this cautious attitude is largely lacking when it comes to energy savings. For example, people in Zeeland tend to cling on to their hot water boilers until they break down, instead of buying a more efficient and basically cheaper one earlier. DELTA wrote about ‘the new frugality’ and smart products and services to save on energy costs in its Energy Magazine. Packed with interesting did-you-knows about the ‘New Frugality' study and top saving tips, the magazine was sent to all our customers in November 2014. We also developed the New Frugality online game, which has been played by more than 12,500 people in Zeeland. Energy saving is the way to go Encouraging energy savings remains one of DELTA’s main goals on the consumer market. We will continue to develop new products and services and improve existing ones. Another key objective is to provide consumers with information. This why in 2014 we introduced our digital Energy Newsletter, a monthly newsletter with tips and facts and figures about energy and energy saving. We also set up the DELTA Home Advice online platform. Consumers can access the platform and, based on their personal data, explore ways of saving energy and read up on the equipment or devices they need to do so and the payback periods. They can also the platform to ask for a direct quote or to purchase equipment. We are operating the platform together with other regional companies, which is good for jobs. DELTA Home Advice went live in January 2015. 1.5.3 Multimedia DELTA believes in the power of connecting. Instead of offering individual products and services such as energy, Internet, telephony and television, DELTA wants to provides its customers with a full-service solution. Our aim is to make daily life more comfortable. As consumers have an increasing need for more convenience and ease, we again contacted our customers about whether they would like to switch from buying three separate products (TV, Internet, telephony) to using an all-in-one package. Of the 28,000 customers contacted, more than 9,000 accepted our offer. As a result, we ended the year with more than 30,000 All-in-One customers, double the number reported for the previous year. Leisure The leisure industry is important to DELTA. By defining a clearer focus, upscaling resources, and streamlining processes, we made major progress within this industry in 2014. We asked a group of customers and selected business partners to review our services. Co-creation leads to improved customer services, which in turn support leisure companies in serving their guests. The refurbishment and upgrade of our customer networks constituted a major improvement in 2014, with 3,000 access points being improved and made suitable for fast wireless Internet. In 2013, we had made similar improvements at holiday parks with static holiday lodges. In 2014, we added static tents and caravans at campsites and caravan parks to our portfolio. Healthcare In 2014, DELTA strengthened its ties with the healthcare sector in terms of value-added services. We successfully hosted a series of ‘Digital Local Cafes’ at different locations across Zeeland, teaming up with libraries, so as to help senior citizens use a tablet and smartphone. Moreover, at different locations, we tested mobile applications that could be the solution to some of the changes and challenges in the healthcare sector. The results have been positive, so much so that a major rollout has been scheduled across Zeeland for 2015. The growing use of outpatient systems and greater freedom of choice in the healthcare sector are creating opportunities for DELTA to enter into new partnerships and provide senior citizens in Zeeland with even more comfortable homes. 17 WifiSpots In the summer of 2014, DELTA launched a WifiSpots pilot in the town of Vlissingen. WifiSpots provides secure WiFi access to ZeelandNet customers who have a cable Internet subscription. For customers using a cable modem with a built-in WiFi router, we not only transmit a WiFi signal for the customer but also a second WiFi signal called DELTA WifiSpots. This allows customers to access the Internet at more than 25,000 locations across Zeeland through DELTA’s reliable network, while at the same timing saving on mobile data costs. Following the successful pilot in Vlissingen, WifiSpots was rolled out from August. More than 100,000 customers now have access to WifiSpots at more than 25,000 locations across Zeeland. Rural locations Throughout the Netherlands, there are homes and businesses that do not have a broadband connection and hence cannot use the Internet. There are several such rural locations in Zeeland. DELTA previously provided cable Internet access to a number of small towns with upwards of 20 connections. Compared with the national average, coverage in rural locations in Zeeland is very good. That said, there are still a number of rural places with no Internet connection. This is due mainly to expensive excavation costs and hence high connection costs. We have looked at a number of wireless technologies for these locations, such as WiFi, satellite and wireless Docsis, and have run pilots with the latter two. These showed that neither technology is reliable enough to be used as an alternative in rural locations. Working with the provincial and municipal authorities, providers and residents, we are continuing to explore ways to connect these places to our Internet services. Content and portals ZeelandNet.nl remained highly popular in 2014. With 8,270,845 unique visits a year, each lasting an average of 8 minutes, ZeelandNet.nl is the most frequented website in Zeeland. Popular pages include the notice board, where 339,556 ads were placed in 2014, and the job vacancy section, with 8,811 vacancies posted in 2014. In 2014, ZeelandNet.nl was again awarded the telecommunications industry’s best and most popular website of the year. Interactive services on the Zeeland Portal were expanded substantially, with the interactive TV channel providing 22 apps by the end of 2014. DELTA also launched the Zeeland Live TV app, which can be used to broadcast live events in Zeeland. Red carpet night at the Film by the Sea festival and the arrival of Santa Claus were broadcast live in 2014. We also introduced DELTA Church live, allowing services at three churches to be watched live. Thirty-five channels were available through Second Screen by the end of 2014. DELTA also supports FOX Sports GO. Since the spring of 2014, subscribers to this channel pack have been able to watch football live on their laptops, tablets of smartphones. Service level In the autumn of 2014, as part of Zeelandnet.nl, DELTA launched its Service Forum, a platform at which customers can ask and provide answers to questions about multimedia products and services. The platform is run by ZeelandNet (a DELTA group company) and available 24/7. There is also a FAQ section. ZeelandNet moderators respond to any unanswered questions during office hours. By the end of 2014, the forum had more than 800 members and more than 500 questions had been posted. 1.5.4 Energy generation Alongside fossil fuels and renewable energy sources, DELTA uses nuclear power to produce electricity. Around a third of its electricity is carbon neutral and generated by operating companies under joint arrangements. DELTA wants to be an entirely carbon neutral energy company by 2015. To achieve this aim, we focus strongly on wind energy. In 2014, we signed a contract for the purchase of electricity and green certificates from the Gemini offshore wind farm. This means that, with effect from 2016, we 18 will be the wind farm’s exclusive Dutch purchaser of wind power. As a result, renewable energy will account for more than 40% of our production portfolio, with the remainder being comprised of nuclear baseload production and efficient and flexible gas-fired production to compensate for the irregular and unpredictable availability of wind power. Working with other parties, DELTA operates the following power stations and wind farms: Coal-fired power station (Borssele 12); Nuclear power plant (Borssele 30); Gas-fired power station (SloeCentrale); Combined heat and power plants (including Elsta); Biomass power station (BMC); Wind farms. Coal-fired power station The arrangements initially made under the National Energy Agreement to close the 1980s coalfired power stations were held to be invalid in July 2014 on the grounds that they ran counter to the Dutch Competition Act. The Dutch government is now considering introducing efficiency requirements for coal-fired plants in the Activities Decree (Activiteitenbesluit) so as to meet the targets of the National Energy Agreement. A minimum efficiency requirement of 38% is likely to apply to coal-fired power stations from 2016. On 31 December 2015, EPZ will stop burning coal at its power plant in Borssele. The plant will subsequently be decommissioned and dismantled. This will be a major step towards a low carbon energy supply system. We are also exploring the possibilities for extending the useful life of the power plant's existing infrastructure and converting it into a biomass and/or residual waste treatment plant (the waste being supplied by local industrial companies) so as to get a bio-based economy off the ground. EPZ obtained the necessary licences to operate a 100% biomass-fired power station in mid-2013. Although the coal-fired power station did not generate a profit in 2014, the return for 2014 was better than expected, driven mainly by lower coal input prices and operational cost savings. Nuclear power plant In February 2014, the Council of State declared the long-term operational permit for the Borssele nuclear power plant to be irrevocable. On behalf of its shareholders DELTA and RWE, EPZ can now continue to operate the plant until the end of 2033. As a condition for extending its operations until 2033, the Borssele nuclear power must demonstrate that it is one of the 25% safest nuclear power plants in the Western world. This is in line with a previous agreement between EPZ, its shareholders, and the Dutch government. To achieve this, EPZ will implement a challenging and sizeable investment programme in the coming years, as well as carrying out careful maintenance and inspections. The programme also comprises necessary investments arising from various international benchmarks and safety reviews, in which the nuclear power plant is compared with international trends in terms of nuclear safety and protection from radiation. When changing the fissile rods in June 2014, EPZ for the first time added mixed oxide (MOX) nuclear fuel to the reactor alongside the regular fissile rods. Mixed oxide consists of a mix of uranium and plutonium oxides. Plutonium is a residual product released when recycling used nuclear fuel. Using plutonium will make EPZ less vulnerable to fluctuations in natural uranium prices. It will also reduce the use of natural uranium ore at the nuclear facility. Moreover, EPZ will no longer have to transfer its plutonium to third parties and so a by-product is put to useful use. Gas-fired power stations The Sloe gas-fired power station in Vlissingen-Oost and the ELSTA power plant in Hoek again went through a difficult year due to unfavourable market conditions. The Sloe power station was up and running for relatively long periods of time, but margins were modest. The ELSTA power station operated continually to supply steam to Dow in Terneuzen. However, additional power generation was minimal due to difficult market conditions. 19 Sloe power station In 2014, DELTA submitted a bid as part of a Belgian tender to construct new power stations to replace the country’s nuclear power plants, which will be phased out over time. The bid involved one of the units at the Sloe power station. The new power stations were to be efficient gas-fired power stations so as to meet the growing need for flexible power generation in Belgium. They would receive a fixed fee in Belgium if they were connected to the Belgian grid and available for the Belgian market. This would considerably improve the profitability of the Sloe power station. In its bid, DELTA presented two options to directly connect to the Belgian grid. However, in the course of 2015, the Belgian government decided to withdraw the tender because it was found to be in violation of EU competition rules. Moerdijk biomass power station The biomass power station in Moerdijk (BMC) again had a good year, despite a period of bird flu, when supply of poultry litter was limited. It is the only power station on the European mainland to convert poultry litter into green electricity. In 2017, the Environmental Quality of Electricity Production (MEP) subsidy will come to an end. Since this will put pressure on profitability, DELTA is exploring ways to ensure a second future for the power plant. We have plans to extend the useful life of the BMC plant after 2017, but BMC will then have to succeed in obtaining a subsidy under the SDE+ Extended Useful Live Scheme. However, one of the requirements is that BMC will need to provide combined heat and power, but there is no demand for heat locally. Supported by the ministry of Economic Affairs and the RVO, DELTA is looking at other ways to ensure that BMC will be eligible for this subsidy even if it only supplies power. If this works out well, BMC will be able to process poultry litter and supply renewable electricity to the grid for another 12 years. Wind farms In 2014, DELTA was involved in developing various onshore wind farm projects. At least one of these projects will be implemented in 2015. The sale of the Kreekraksluis wind farm took up the best part of 2014 and will be completed in 2015. Although it prefers not to own any existing or future wind farms, DELTA does wish to continue to sell the wind power generated. DELTA’s fuel mix for energy generation in 2014 Fuel Natural gas Natural CoGen Coal Nuclear Wind Solar Biomass Total GWh 1,916.2 642,0 1,604.4 2,711.4 420.0 2.4 241.1 7,537.5 % 25.42% 8.52% 21.29% 35.97% 5.57% 0.03% 3.20% 100.00% 1.5.5 Sustainable projects under the Borssele Agreement In 2006, the Dutch ministry of Economic Affairs and the owners of the nuclear power station in Borssele (DELTA and RWE/Essent) signed what is known as the Borssele Agreement, pursuant to which permission was granted for the nuclear facility to remain open until 2034. DELTA and RWE/Essent each agreed to invest at least EUR 125 million in new and innovative projects to produce sustainable energy and reduce carbon emissions. DELTA is committed to achieving these innovation and reduction goals and has devoted a great deal of attention to performing the agreement. 20 The agreement consist of two parts: the AIP part, under which DELTA is obliged to carry out Additional Innovative Projects worth at least EUR 100 million in investments and has a reasonable efforts obligation to cut its carbon emissions by at least 235 ktonnes/year. an investment fund (SET fund) to support energy innovation start-ups, into which DELTA and Essent must each pay EUR 25 million. DELTA previously submitted a number of additional innovative projects to the external AIP Committee for approval and qualification as AIP projects. The company was reluctant to disclose the details of these projects because they involved competitively sensitive information. With DELTA and Essent adjusting their share interests in EPZ, from 50/50 to 70/30, the same ratio has been applied to their AIP project obligations. This means that DELTA’s target is now to invest EUR 140 million and to cut its carbon emissions by 329 ktonnes. Essent’s target is to invest EUR 60 million and reduce emissions by 141 ktonnes. In 2013, we decided to be more transparent about the projects submitted to and approved by the AIP Committee. A number of these projects have since been implemented. Due to worsening economic conditions, we have not been able to achieve all of the proposed projects. One of the conditions set out in the agreement is that projects must be economically viable. The AIP Committee has to date approved ten project proposals, four of which have actually been carried out. Two projects fell through because the companies involved went bankrupt, and four projects were based on insufficiently solid business cases. Projects can be submitted to the AIP Committee until 2017. Pyrolysis project EPZ wind project STBE project Solar wafer project Green gas Wind farm Solsilc Kreekraksluis wind farm Guaranteed Solar Oosterschelde hydro power This project involves developing a pyrolysis plant which can co-fire far greater quantities of biomass than the coal-fired power station. The project involves constructing two large wind turbines at a coal storage facility operated by OVET and owned by Zeeland Seaports. The project involves developing and marketing a patent pursuant to which glycerine (a biodiesel byproduct) is converted into STBE, a diesel substitute that can be mixed with biodiesel. The project involves devising an entirely new procedure to manufacture wafers (the chip used in solar cells), including investments in large-scale production (constructing and fitting out a production facility). Green gas is one of the pillars of the government’s transition policy. The aim is to replace 10% of natural gas with green gas by 2020, produced from biomass fermentation and gasification. DELTA wants to make a contribution by submitting two project proposals. This is a pilot project to construct one or two very large turbines, to be followed by a larger project involving eight or nine of these turbines on other locations in Zeeland. This is a pilot project, the first factory to produce this semi-finished product for the solar cell industry from special raw materials in a new way. This is a new wind farm located 8 km from the Woensdrecht airbase, consisting of four sub-farms owned by DELTA, Eneco, Winvast, and Scheldewind, respectively. The project will have a spin-off effect, in that it improves the business case for potential wind farm projects near other Dutch airfields. This project involves leasing solar panel systems to consumers in Zeeland, coupled with an Energy Management System and active monitoring, so as to take all the hassle away from customers. This is a pilot project in which three turbines will be fitted on to the tidal barrier in the river Oosterschelde. The hydro power is generated by horizontal (currents) and vertical (waves) movements. 21 1.6 Grids, mains, and networks On 1 January 2014, DELTA Netwerkbedrijf (DNWB) and DELTA Infra merged into DELTA Netwerkgroep (DNWG). The organisational change had been prompted by the need to achieve greater synergy benefits and to operate more efficiently. The new company went full steam ahead surprisingly quickly. In 2014, several processes were adjusted to further optimise the organisation. Proposed cost-saving targets were achieved as a result. In 2014, much time and effort was devoted to aligning the different cultures at DNWB and DELTA Infra. One of the measures taken by DNWG was to bring under one roof the organisational units that needed to work closely together. DNWG also launched a Management Development programme for all executive staff. 2014 proved to be a good year for DNWG all around, both financially and in terms of safety and reliability of supply. DNWG Within the DELTA Group, DELTA Netwerkbedrijf (DNWB) occupies an independent position conferred by law. As a grid operator, DNWB ensures the safe, reliable and efficient operation of the gas and power grids. DNWB’s Supervisory Board is responsible for supervising its operations. Within DELTA Netwerkgroep, DELTA Infra is responsible for constructing and servicing the gas and power grids, water mains and data networks. It also renders services to industrial customers, including outside Zeeland. Safety Safety is and remains DNWG’s top priority. DNWG distinguishes between two types of safety. Safety at work refers to the safety of staff when carrying out their duties Staff includes our own employees but also those of third-party contractors. Process safety refers to the gas and power grids and their impact on local residents and the environment. Process safety is firmly embedded in the planning phase. By designing, constructing, operating and decommissioning the grids safely, DNWG minimises existing and future risks to local residents and visitors as well as staff working the grids. Personal safety is ensured through training and education. DNWG seeks to provide a proactive safety culture. Safety awareness at work is the key to achieving this. Amongst other things, DNWG hosted a safety workshop about how to learn from incidents. Reliability of supply As in previous years, reliability of gas and power supply was good. The number of outage minutes was well below our target and below the national average. Reliability of supply is all to do with the quality of the grids and having an effective maintenance policy in place. Moreover, DNWG operates an efficient emergency procedure that identifies any breakdowns or outages quickly, enabling its service engineers to resolve any problems quickly, 24 hours a day. Annual power outage times 2014 2013 DNWB Achieved 16.5 17.6 DNWB Target 21 21 National 20 23 Annual outage time (in minutes per connection) = average disruption time (in minutes) x disruption frequency. 22 Annual gas outage times 2014 DNWB Achieved 21 seconds DNWB Target 30 seconds 2013 18 seconds 30 seconds National 3 minutes and 14 seconds 1 minute and 1 second Staff Because of the age distribution of its service engineers, in particular, DNWG will see a relatively large number of technical staff leave the company in the next few years. Teaming up with InstallatieWerk Brabant-Zeeland (training company) and ROC Markiezaat College (regional training centre) in Bergen op Zoom, DNWG has set up a combined work and training programme called the DELTA Infra Vocational Training Course (DIVO). Technically talented students are trained to become an electricity/COAX service engineer or a gas/water service engineer in a two-year programme. The on-the-job-training programme allows the ‘old guard’ to pass on their knowledge to the young engineers in the making. A milestone was reached when the first group of service engineers completed the course in 2014. Eleven students got a job at DNWG as well as receiving a certificate. In addition to hiring new staff, DNWG invested substantially in its existing employees. Managerial staff have a key role to play in achieving the company’s objectives and ensuring that their team members are motivated and performing well. This is why DNWG launched a Management Development programme. The MD programme focuses on culture, personal leadership, and integrated management. It provides all managers with the same set of tools. An added benefit is that they get to know each other in a different setting. The Management Development programme consisted of five modules: 1. Performance management 2. Result-oriented arrangements and reviews 3. Leadership 4. Communication skills 5. Team development Smart meters Since 2012, DELTA Netwerkbedrijf has been replacing old-style meters by smart meters. By the end of 2014, more than 15% of Zeeland households had been fitted with a smart meter. This smallscale promotional project involved installing smart meters in new-built homes, major renovations, and regular replacements. Preparations are underway to offer smart meters on a large scale. This large-scale approach will be launched in 2015. All households and small business customers in Zeeland will be provided with smart meters by 2020. Outlook DNWG reported a solid performance in 2014. By investing smartly, joining forces with others where possible, and keeping costs at an acceptable level, it is expected to continue to perform well in future. ‘By investing smartly, joining forces with others where possible, and keeping costs at an acceptable level, DNWG is expected to continue to perform well in future.’ 23 1.7 Waste management With a 75% interest, DELTA is the largest shareholder in Indaver. Vlaamse Milieuholding holds 16% of the shares, with a group of industrial shareholders owning the remaining 9%. In 2014, DELTA set in motion the process of selling its share interest so as to allow Indaver to grow its business. The sale is expected to be completed by the end of the second quarter of 2015. Indaver has a clear mission, strategy, and geographical focus. Its core activities and service offerings are sharply defined and geared to a variety of industrial companies and local authorities, its geographical focus also clearly delineated. Indaver is committed to sustainable waste management, based on sustainable materials and energy management. Core activities Intelligent waste management systems and complex and innovative treatment plants are Indaver’s core activities. The company processes industrial and hazardous waste, domestic and commercial waste and organic waste, while consistently focusing on sustainable materials and energy management. Indaver has been helping to build a circular economy for many years. Quality, safety, sustainability, and cost efficiency Indaver has a clear policy. The company provides high-quality, safe, sustainable and cost-efficient waste management solutions to industrial companies and local authorities, specifically tailored to their needs. Indaver offers a flexible solution for any type of waste, thanks to its wide range of waste processing facilities. Where necessary, waste will be treated at third-party facilities, but under its directions. Service concepts Indaver pursues two strategic service concepts. In the industrial and hazardous waste segment, the company seeks to be a leading European provider of Total Waste Management solutions for major industries (chemical, life sciences, and metallurgical), providing environmentally safe thermal processing at state-of-the-art treatment plants. If required, Indaver can provide full-service waste management, from on-site collection to treatment through to administrative handling, so that its customers can fully focus on their own business. In the domestic and commercial waste segment, the company seeks to be the preferred partner of local authorities in Belgium, the Netherlands, Ireland and other countries through its Public Waste Partnership concept, offering thermal processing, energy recuperation, and high-quality recycling services. Based on this strategy and approach, Indaver has developed into a European-wide company, treating around 5 million tonnes of waste every year. In recent years, it has expanded its business substantially through acquisitions, strategic partnerships, and new operations. Indaver is the number two hazardous waste treatment company in Europe. All geographical units (Belgium, the Netherlands, Ireland & the UK, and Germany) made a substantial contribution to the company’s profit. In 2014, the focus was on consolidation. New projects were implemented and improvements made at various sites. This allows Indaver to deliver continuous, safe, cost-efficient and sustainable services to its customers – local authorities and businesses – at state-of-the-art facilities. Indaver is fully committed to conducting all of its business activities in a socially responsible way. Ensuring the health and safety of its 1,685 employees and everyone else involved is its number one priority. Indaver also seeks to minimise the environmental impact of its operations. These pillars of Corporate Social Responsibility are also Indaver’s priorities. They have been embedded in all of its operations and commercial decisions. Indaver reports annually on its performance in terms of health, safety, quality, and transparency. Its sustainability reports are available at its websites. 24 1.8 DELTA and corporate social responsibility DELTA is inextricably connected with Zeeland. It is connected by the pipes and cables that supply gas, power and Internet access to local residents, but also because we are one of the region’s major employers and because we take our responsibility to society seriously by sponsoring projects and events. We want to be open about this too. In 2014, we focused specifically on CSR policy and will continue to shape our policy and focal points in 2015. We will discuss this process and the outcomes in more detail in our 2015 report. At DELTA, CSR is reflected in three areas: energy transition, responsible operational management, and a dedicated organisation based in Zeeland. This section looks at our CSR performance at company level in 2014. The individual divisions are responsible for defining and achieving their own CSR targets. Details of their CSR performance are given in the relevant sections. We are aware that gains can still be made in the field of CSR. Our policy is modelled on the ISO 26000 guidance standard, which defines seven key principles of social responsibility: accountability, transparency, ethical behaviour, respect for stakeholder interests, respect for the rule of law, respect for international norms of behaviour, and respect for human rights. Communication DELTA has organised its communication channels in such a way as to allow its stakeholders to engage with the company at any time. Its Communications and Public Affairs department publishes information on key events, reports on the company’s financial performance, maintains contact with stakeholders through the press and social media, and also face to face. Socioeconomic impact DELTA contributes EUR 600 million to Zeeland’s gross regional product through its head office and consumer spending on the part of its employees. As such, DELTA is a key driver of employment in the region and makes a substantial contribution to the regional economy. ‘We are aware that gains can still be made in the field of CSR.’ Responsible operational management DELTA seeks to make responsible choices in conducting its business. These choices concern not only procurement, energy usage, recycling, and car use, but also the way in which we deal with our employees and issues such as safety, personal development, and absenteeism. For more information, please refer to the section ‘DELTA and its employees’. 1.8.1 Carbon footprint DELTA will start developing a CSR policy with measurable targets in 2015. As part of the policy, we will also calculate and benchmark our carbon footprint. 1.8.2 Stakeholder engagement At DELTA, we are happy to enter into a dialogue with anyone who is in any way involved with our organisation and operations. Our customer service desk is still located at the company’s head office in Middelburg. Customers can call our customer service team free of charge, but will also be given an opportunity to visit the customer service desk at our head office. We ensure that the company engages with all of its stakeholders and everyone’s interests are considered when making policy choices. We are proud of, and have every intention of preserving, our role and reputation in local communities in Zeeland. 25 This requires exercising due care when interacting with our stakeholders. We actively approach stakeholders who are directly involved so as to consult them on particular issues. They must have or represent a clear interest in those issues. We regularly explore new and important themes with our stakeholders during regular or ad-hoc meetings. We try to act as proactively as possible by attending regional sporting or cultural events and professional meetings that are linked to the company’s areas of work or which are relevant to the region. DELTA’s stakeholders include its customers (businesses and consumers), professional and trade associations and networking organisations (energy, waste, grids, multimedia, general), the authorities (local, national, EU), societal organisations, suppliers and business partners, educational institutions, sports clubs, cultural and other organisations, regulators, financiers, and, of course, our shareholders. Our employees are also a very important group of stakeholders, see page 32. Coal dialogue In June 2010, EnergieNederland took the initiative to set up a ‘coal dialogue’ in order for energy companies, mining companies, NGOs and trade unions to discuss what supply chain responsibility should be about. The reason for this initiative were publications about Dutch energy companies buying coal from mining companies in Colombia and South Africa that were allegedly involved in serious human rights violations. DELTA is taking part in the coal dialogue, which continued in 2014. ‘We actively approach stakeholders who are directly involved so as to consult them on particular issues .’ Smart DELTA Resources In early 2013, DELTA was the driving force behind a manifesto to have its coal-fired power station converted into a bioenergy power plant. On Tuesday 15 January 2013, the manifesto was signed by prominent representatives of eight organisations in Zeeland, calling on politicians to subsidise what was a unique sustainable project in the Netherlands. In early 2014, the manifesto was followed up by the setting up of the Smart DELTA Resources platform, in which twelve companies that make intensive use of energy and raw materials, including DELTA, joined forces to strengthen industry in Zeeland. Between them, they account for around 25% of total gas consumption in the Netherlands. This offers many opportunities for synergy and innovation. The companies taking part in the Smart DELTA Resources platform are jointly exploring smart solutions to address their current international competitive disadvantage and the loss of jobs resulting from adverse energy and commodities conditions. Customer focus DELTA wants to know what is important to its customers and how they value our services. To gain an insight into this, we perform qualitative and quantitative studies and surveys and receive feedback from customers during regular contact times. Advisory boards were set up in 2013. In 2014, ZeelandNet.nl was awarded the telecommunication industry’s best and most popular website of the year for the fourth year running. This time around, awards were also given in the energy industry. DELTA landed the award for best website. Government authorities The energy industry operates on a strongly regulated market, with rules being imposed by both the national and EU legislatures. Sustainability challenges and security of supply are high on the political agenda. To properly define our position in these debates and to inform political and official stakeholders, DELTA has a Public Affairs department. The department’s responsibilities are not just national or European, but also regional in nature. DELTA maintains close contact with political and official stakeholders in Zeeland, and carries out various projects in collaboration with local authorities. 26 Society DELTA engaged in various dialogues with its stakeholders in 2014. DELTA is also involved with the ‘Celebrate Life' foundation, which helps elderly people to get out and about. Knowledge DELTA is taking part in discussions hosted by the Zeeland Scientific Council (WRZ) about the knowledge infrastructure in Zeeland as a driver of innovation and regional economic growth. A new batch of service engineers completed DELTA Infra’s professional training course (DIVO), set up in partnership with InstallatieWerk Brabant-Zeeland (training company) and Markiezaat College (regional training centre) in Bergen op Zoom in 2012. Shareholders Similar to 2013, DELTA’s future was the most important topic of discussion in 2014. Three options were discussed: to continue as an independent business or to engage in a merger or takeover. It was ultimately decided, on the basis of these talks, that DELTA would continue as an independent business, but we will keep an open mind on any alternatives that may benefit the company. 1.8.3 Donations and sponsorships DELTA is closely involved with keeping local communities in Zeeland liveable. This is not just because we are an employer, but because we consider this to be our social responsibility. One of the ways in which we make a contribution to society is by funding the DELTA Zeeland Fund. In 2014, a number of new initiatives were funded, ranging from arts, nature, sports to healthcare. The fund selected 96 applications which it expects will make a long-term contribution to local communities, paying out a total of EUR 302,950. The fund seeks to allocate its funds proportionately, but there are not enough applications in some categories. It should perhaps be added that it is not DELTA that decides where the money should go. The fund has a board consisting of seven members, with only the vice chairman being a DELTA employee. The other six board members come from all parts of Zeeland and are experts in at least one of four main areas. Amounts in euros Arts & Culture Nature & Environment Sports & Leisure Healthcare & Wellness Total 2014 98,800 24,000 93,150 87,000 302,950 2013 132,850 11,500 99,500 76,250 320,100 2012 133,000 32,500 139,576 93,250 398,326 2011 131,500 43,500 120,000 87,200 382,200 Sponsorships DELTA sponsored three major events in Zeeland in 2014. It was one of the main sponsors of the Concert at Sea and one of the sponsors of the Ride Before the Roses. The national Ride for the Roses bike ride started and finished in Goes this year. It is not just DELTA, but the whole of Zeeland that embraces this event. We therefore decided to also host a Ride Before the Roses. One of the aims of sponsoring these events is to showcase the essential services, such as power and water, that we can supply to events of this size. ‘The ultimate aim is to strengthen our ties with Zeeland.’’ At the Concert at Sea, DELTA supplied water, power and Internet facilities and cleaned up the venue after the event. The 2014 Ride for the Roses generated no less than EUR 1,176,336.05. That is including the proceeds from the DELTA Ride Before the Roses. In addition, we support annual activities that focus on two specific groups: vulnerable elderly people and young people with a disability. We review our sponsorship policy once every three years. In 2014, we started on a review of our current policy and brainstormed about any changes we might want to make. The ultimate aim is to strengthen our ties with Zeeland and show how we can add value to the region. 27 1.9 DELTA and its employees DELTA and Zeeland are inextricably linked. People in Zeeland buy our products and services, and we are one of the largest employers in the region. We provide a safe and pleasant working environment for our employees, as well as many career opportunities. 1.9.1 Number of employees At 31 December 2014, DELTA (including its subsidiaries) employed a total of 3,349 staff (FTEs). Of this total, 1,270 were employed by its divisions in Goes, Middelburg, and Vlissingen. Number of FTEs (including subsidiaries) 2014 2013 3,349 3,394 2012 2,954 2011 2,975 Key staff figures for EPZ and Indaver are not included in this report. Both subsidiaries publish their own reports. ‘DELTA will continue to critically review its policy on having staff on loan from third parties.’ In DELTA’s divisions in Zeeland, 74% of the workforce are men. This is mainly because of the large proportion of technical staff. This percentage is reflected in management positions. The average age rose slightly to 45.3 in 2014 compared to 2013. With the exception of several board members and heads of department, all our staff fall within the scope of the collective agreement for production and supply companies. 1.9.2 Inflow/outflow The number of employees in our divisions in Zeeland fell last year, due in part to the restructuring of the divisions and staff at the holding company. In 2014, 84 employees left the company and we welcomed 72 new staff, 15 of whom are on work experience placements and 11 are newly recruited service engineers who completed our DIVO training programme. We will continue to critically review our policy on having staff on loan from third parties. We want to provide more career advancement opportunities for our own employees so as to develop and make more use of their potential. They are also more likely to stay on if they can move up through the organisation. Not only will they have more opportunities, but we will also save on costs because we will need fewer expensive hired-in staff. Because a considerable number of employees are approaching retirement, a relatively large group of colleagues will be leaving the company in the coming years. About 20% of staff will retire over the next five years. Teaming up with InstallatieWerk Brabant-Zeeland (training company) and Markiezaat College (regional training centre) in Bergen op Zoom, DELTA Netwerkgroep has set up a combined work and training programme to recruit and train young service engineers. Eleven new service engineers completed the programme and were subsequently hired by DELTA in 2014. There are also close contacts with other schools. DELTA organises annual introduction meetings for potential trainees. We also take responsibility by offering work experience placements to people at a distance from the job market. DELTA is also a member of the Employment Market and Training Committee of the Brabant-Zeeland Employers’ Association. 1.9.3 Key HR objectives 28 The holding company defines DELTA’s HR policy. Policy implementation has been entrusted to the individual divisions. Each division has its own HR manager, who reports to the divisional director. In 2013, HR policy focused mainly on internal mobility. In 2014, we set ourselves the challenge of improving the quality of our operations so as to become a more flexible and more professional business that is ready for the future. We defined three key HR objectives for 2014. Mobility & Strategic HR Planning At DELTA, we believe that strategic HR planning is one of the most important ways to achieve our strategy and offer our staff a suitably challenging working environment. It allows us to assess the feasibility of operational choices by analysing which employees will be needed at a particular location at a particular time relative to current capacity. This way, we can take timely action to address any discrepancies. Internal mobility remains important in order to ensure DELTA’s future. Development opportunities motivate our staff and enhance their dedication and employability. We therefore prefer promoting our own (redundant) staff to higher positions, even if they do not initially meet all the job requirements, and giving them priority in the event of any vacancies, rather than recruiting external personnel. This policy covers the entire organisation, including the group companies in which DELTA owns a majority interest. Arrangements have been made with Indaver and EPZ to share job vacancies and relocate redundant employees. Personal leadership & culture Personal leadership and culture constitute the link between business targets and personal targets. They are, in fact, one of the critical success factors for achieving DELTA’s strategic goals. Personal leadership means that everyone within the organisation (across all levels) takes responsibility for the value they add to the company. The key indicators are flexibility and employability. The team managers play an important role in promoting personal leadership. Working with their team members and based on a dialogue, they are the ones that translate the company’s strategy and objectives into straightforward individual targets and behaviour. The team managers are provided with a range of tools to achieve this. Through tailored management development programmes, DELTA ensures that its managers develop appropriate skills to be able to successfully perform these tasks. ‘DELTA wants its employees to remain employable in the long term.’ Long-term employability & performance management We expect all of our employees to contribute to achieving DELTA’s strategy by adding value. The value they add varies from one position to another. This is why the company’s targets are converted into individual operational targets. The performance appraisal system is one of the tools used to guide this process. Aside from the company’s interests, it is also important that the appraisal cycle considers the employees' individual targets. DELTA wants its employees to remain employable in the long term and to have the flexibility and skills to be able to move with market dynamics. To us, long-term employability means that our employees remain fit, motivated and skilled, regardless of their age or life phase, whether they are employed by us or others. That is why we promote employability, motivation and aspirations, as well as skills development. 29 Not everyone is able to respond to changes or keep up with the pace of changes. Employees may lack the knowledge, skills and/or required attitude or mindset. In these situations, in particular, the team manager should recognise the problem in a timely fashion and discuss it with the employee so as to find a solution and agree on improvements together. DELTA uses the potential appraisal method as a tool to measure the performance and potential of its employees and identify any necessary follow-on actions. 1.9.4 Employee satisfaction In 2014, as in 2012, an employee satisfaction survey was conducted among DELTA employees based in Middelburg, Goes, and Vlissingen. The aim of the survey was to establish whether the measures implemented on the basis of the previous survey had actually led to improvements. The scores were the same on some subjects, but lower on others. The survey also provided an insight into the ‘mental well-being’ of our staff. It included questions such as ‘how satisfied and dedicated are the employees?’ and ‘how many employees suffer from stress or, worse, run the risk of a burnout?’ 73% of our employees took part in the survey (anonymously). That is up 10% on 2012. ‘Safety comes first. Safety awareness improved further in 2014.’ The main survey findings were: Employees were as much involved with the organisation in 2014 as in 2012 (64%). That is a higher percentage than the national average (59%). Employee satisfaction fell slightly from 86% in 2012 to 82% in 2014. Employees’ sense of social safety remained the same (score of 7.2). Employee dedication was dampened due to unclear task definitions, but encouraged by development opportunities and variation of work. The likelihood of a burnout increased due to unclear task definitions and emotional stress, but decreased as development opportunities were provided. Generational variations were identified in terms of employability and dedication. Common thread Based on the 2014 survey findings, we defined three themes to be worked out in greater detail: 1. Grip on working environment and stress 2. Perspective; and 3. Generational diversity. Follow-up process DELTA’s divisional directors and heads of department have been instructed to actively use the survey findings. They will select a top three areas of improvement for each division/department, coupled with improvement actions. Progress will be monitored on a quarterly basis by a special working group comprised of representatives of, amongst other things, the Central Works Council and the HR department. 30 1.9.5 Safety At DELTA, we put safety first. Safety is not only an important issue for our grid and production operations, but it is also highlighted within the office organisation. Examples include mandatory workplace inspections and annual safety drills. Because we expect our managers to lead by example, we have made their variable pay conditional on their making a contribution to a safer organisation. The HSE portal shows that the number of lessons learned continued to increase in 2014. At the same time, the number of incidents with injuries fell. We therefore conclude that safety awareness in the divisions improved further in 2014. All the divisions achieved their safety targets in 2014. Number of safety incidents reported by the E&M, DNWG, and staff divisions 2014 2013 2012 Number of injuries with 6 5 7 absenteeism Number of injuries without 5 9 16 absenteeism TOTAL 11 14 23 Other lessons learned 467 435 238 2011 9 14 23 90 1.9.6 Social safety In 2012, DELTA introduced a code of conduct laying down the standards and values applicable across the company. Counsellors were appointed to enhance employees’ sense of social safety. In 2014, they received 34 reports relating to social safety. 1.9.7 Sickness absence Sickness absence at the Zeeland-based divisions rose from 4.1% in 2013 to 4.6% in 2014. That is in excess of the 4.5% target rate and a reason for DELTA to pay extra attention to long-term employability and health management. In 2014, we ran a pilot to reduce frequent absenteeism. A companywide programme was launched, with team managers speaking with staff who had been on sick leave more than three times a year. These interviews zoomed in on the causes of absenteeism. The pilot proved successful and led to a reduction in frequent spells of short-term absence. However, long-term absenteeism rose in 2014. To curb long-term absenteeism, we developed a long-term employability plan in 2014. It provides for measures in the areas of physical health, mental health, and ‘career-long fitness’. These will be worked out in greater detail in 2015. Sickness absence 2014 4.6% 2013 4.1% 2012 4.1% 2011 4.2% Target 4.5% 31 1.10 DELTA and corporate governance Sound business practices, integrity, respect, supervision, transparent reporting and other forms of accountability are the cornerstones of DELTA’s corporate governance policy. We are in compliance with the Dutch Corporate Governance Code, which applies to listed companies in the Netherlands. We have adopted the Code’s best-practice provisions in so far as they apply to us. Corporate governance structure DELTA N.V. is a company with a two-tier board as referred to in Section 2:154 of the Dutch Civil Code (DCC). The involvement of the General Meeting of Shareholders (GMS) and the Supervisory Board with the company’s operations is reflected in its articles of association and various sets of regulations. These are available at www.DELTA.nl/RvC. They also identify the situations in which the Executive Board requires the approval of either the Supervisory Board or the GMS for proposed board resolutions relating to DELTA and corporate governance, investments and/or takeovers or the sale of all or any part of the company. If the amount involved exceeds EUR 5 million, the proposed resolution requires approval from the Supervisory Board. If the proposal involves an investment in excess of EUR 55 million, it requires the prior approval of the shareholders. Articles of Association Shareholders - Supervisory Board - Executive Board Divisions Supervisory Board Regulations Audit, Risk & Compliance Committee Remuneration & Nomination Committee - Executive Board Regulations Group governance framework - Divisional governance framework DELTA Code of Conduct - Independent Auditors Executive Board The powers and responsibilities of the Executive Board are defined in the Executive Board Regulations. These provide for a division of duties among the Executive Board members, define internal powers of attorney, lay down decision-making procedures, and contain rules that are consistent with the Dutch Corporate Code, including rules dealing with conflicts of interest involving Executive Board members. 32 DELTA endorses the rules on a balanced composition of the Executive Board as referred to in Section 391.7, Title 9, Book 2 of the Dutch Civil Code, as introduced on 1 January 2013. These guidelines are considered as and when necessary. Supervisory Board DELTA’s Supervisory Board oversees the company’s overall performance, including compliance with its policies, the results achieved by the Executive Board, the company’s financial position and risk profile, and its financial reporting. The Supervisory Board also acts as a sparring partner for the Executive Board. In order for the Supervisory Board to properly fulfil its role, its profile should be consistent with that of the company. The profile drawn up by the Supervisory Board in the course of 2010 describes the capabilities required of its members, having regard to the extended powers of nomination vested in the Central Works Council. The Supervisory Board is also in compliance with the Code in terms of its membership composition (independence, age diversity, background, and expertise), although gender diversity remains a concern. The Supervisory Board’s powers and duties and internal decision-making and the role of its chair are set out in the Supervisory Board Regulations. These also provide for matters such as periodic reviews of the Supervisory Board’s own performance, in accordance with the Code. Audit, Risk & Compliance Committee One of the duties of the Audit, Risk & Compliance Committee, in addition to financial and tax matters, is to monitor the risks that the company wishes to take. Risk management and risk policy are regular items on the agendas of both the Audit, Risk & Compliance Committee and the Supervisory Board’s plenary meetings. Shareholders The role of DELTA’s shareholders and the powers of the General Meeting of Shareholders are set out in the company’s Articles of Association. DELTA’s shareholders are committed and dedicated, in part because they are public sector entities (all being municipalities or provincial authorities). Owing to the wide-ranging powers entrusted to the GMS under the Articles of Association, the way in which the shareholders exercise their voting rights has a significant influence on the company’s policies and operations. Two formal and three informal general meetings were held during the year. Works Council Amidst the Articles of Association, board regulations and similar arrangements, the relationship between DELTA N.V. and its Works Council and Central Works Council should not go unmentioned. It is a relationship built on mutual respect, as reflected in standing consultations between the Executive Board and (Central) Works Council. At divisional level, standing consultations are held with the divisional works councils. Compliance DELTA operates a ‘whistleblower scheme’, adopted by the Supervisory Board, which, in addition to the compliance officer’s activities, enables employees to raise concerns about malpractice with the Executive Board and/or a counsellor without running the risk of reprisals. If preferred, reports can be made to an external party. ‘DELTA’s shareholders are committed and dedicated, in part because they are public sector entities (all being municipalities or provincial authorities).’ 33 1.10.1 The members of the Executive Board In 2014, the Executive Board of DELTA N.V. comprised Arnoud Kamerbeek (CEO) and Frank Verhagen (CFO). Arnoud Kamerbeek (1973), CEO Nationality: Dutch First appointed: 16 January 2014 Frank Verhagen (1961), CFO Nationality: Dutch First appointed: 1 February 2009, reappointed for four years until 1 February 2017 Other board memberships: Advisory Board member of ADRZ hospitals Board member of employers’ assocation WENb Advisory Board member of HZ University of Applied Sciences Audit Committee member at ADRZ Audit Committee member at HZ University of Applied Sciences 34 1.10.2 Report of the Supervisory Board The Supervisory Board is pleased to report on its activities undertaken in 2014, and the way in which it has performed its supervisory and advisory duties. Membership composition In 2014, the Supervisory Board comprised: Mr C. Maas (since 16 May 2014, appointed chairman on 26 September); Mr D. van Doorn (chairman until 26 September 2014); Mr J. Bout; Mr B.P.T. de Wit (secretary); Ms A.M.H. Schöningh (vice chairman); Mr J.G. van der Werf (until 1 May 2014). Cees Maas was newly appointed to the Supervisory Board on 16 May 2014. Daan van Doorn stepped down as Supervisory Board chairman on 26 September 2014. He made a huge contribution to the company. In the turbulent times that followed Peter Boerma’s retirement as CEO and the scrapping of plans to build a second nuclear power station, Mr Van Doorn performed his supervisory tasks with vigour. We have accepted his decision to step down with respect and regret. Mr Maas was appointed to succeed Mr Van Doorn as Supervisory Board chairman on 26 September. Division of duties within the Supervisory Board and its committees It is Supervisory Board policy that all matters should preferably be discussed at its plenary meetings. From this perspective of collective responsibility, we believe that there is no place for numerous committees consisting of Supervisory Board members entrusted with primary responsibility for individual areas of work. In line with the Dutch Corporate Governance Code, we have made an exception for the Audit, Risk & Compliance Committee and the Remuneration & Nomination Committee. Meetings and other activities of the Supervisory Board In 2014, the Supervisory Board met nine times, with the Executive Board attending. The matters discussed included: Financial matters, including the quarterly reports and financial statements, and the company’s business plan and operational and financial goals. DELTA’s business strategy and related strategic issues, such as acquisitions and investments and disposals; The main risks arising from the policies implemented; Risk management; Dividend policy; Investment policy and key investments and disposals; Finance policy; Tax issues; Corporate governance. The Supervisory Board held extensive consultations with the Executive Board about the company's business strategy, in much the same way as it discussed strategy with the shareholders. It attended the meetings between the Executive Board and the shareholders’ committee to go over the various options which the shareholders previously submitted to the Supervisory Board and Executive Board. The Supervisory Board also concerned itself at great length with the proposed decisions to sell DELTA’s sizeable share interests in, for example, the Kreekraksluis wind farm and Indaver N.V. During the year, the Supervisory Board was periodically informed by the Executive Board and the board of EPZ about the situation at EPZ and the safety and other operational aspects of its nuclear power plant in Borssele. 35 The Supervisory Board also convened several times without the Executive Board attending. The main issues discussed included: The appointment of Mr Kamerbeek as the new CEO; Mr Van Doorn’s resignation as chairman of the Supervisory Board. The Supervisory Board appointed Mr Cees Maas as its new chairman; The review of the Executive Board; The recommendation to appoint the independent auditors; The formation of the Remuneration & Nomination Committee and appointment of Ms Marieke Schöning as its chair. The Supervisory Board also convened to review its own performance, without the Executive Board attending, discussing matters such as its main duties and responsibilities (oversight and advice) and cultural and behavioural aspects. Audit, Risk & Compliance Committee During the year, the Audit Committee’s mandate was expanded to include Risk & Compliance. Comprised of two members, Mr Bout (chairman) and Mr Maas, the ARCC met four times during the year. The issues discussed included the management letter, group plan, quarterly reports, halfyear report, financial statements, financial returns on projects and investments, risk management, IFRSs, tax issues, definition and details of financial functions, and several other proposals to invest or divest. The meetings were attended by the members of the Executive Board, the Group Internal Control Manager, and the independent auditors. The ARCC also spoke with the independent auditors, without the Executive Board attending. Remuneration & Nomination Committee Comprised of Ms Schöningh (chair) and Mr Maas, the Remuneration & Nomination Committee met twice during the year. On the Committee’s proposal, the General Meeting of Shareholders was asked to provide a candidate to fill the vacancy on the Supervisory Board that had arisen with the departure of Mr Van Doorn. The Governance Committee of the General Meeting of Shareholders issued its recommendation in November 2014. Executive Board membership composition In 2014, the Executive Board comprised Mr A. Kamerbeek (CEO) and Mr F. Verhagen (CFO). Executive Board remuneration The remuneration policy for Executive Board members was adopted by the General Meeting of Shareholders, in line with the Supervisory Board’s proposal. The policy’s guiding principle is that DELTA should be able to offer a pay package that allows the right people to be recruited and retained by the company. The Supervisory Board determines the remuneration of Executive Board members annually, within the limits set by this policy. Financial statements The Supervisory Board has reviewed and approved the annual report, financial statements, and notes for the 2014 financial year, as submitted by the Executive Board. The Executive Board prepared the financial statements 2014 on that basis, and the Supervisory Board recommends their unqualified adoption by the General Meeting of Shareholders. The dividend proposal, submitted for approval to the General Meeting of Shareholders, involved a pay-out of EUR 15 million, to be funded from the profit and the other reserves. On behalf of DELTA N.V.’s Supervisory Board, C. Maas Chairman 36 37 The members of the Supervisory Board Cees Maas (1947) Nationality: Dutch First appointed: 16 May 2014, appointed chairman on 26 September Current term: until 15 May 2018 Profession/main position: Former CFO of ING Group N.V. Other board memberships: Senior adviser to Cerberus Global Investment Advisors, LLC; Supervisory Board vice chairman of BAWAG P.S.K; non-executive director of HAYA Real Estate S.L.U.; Supervisory Board vice chairman of BCD Holding N.V.; Supervisory Board vice chairman of Stadion Feijenoord N.V.; Board member of Stichting Preferente Aandelen DSM; Board member of Stichting Administratiekantoor Hoofdplaat; Advisory Board member of Erasmus University Hospital; and chairman of the Nationaal Fonds 4 en 5 mei. Jan Bout (1946) Nationality: Dutch First appointed: 1 January 2011 Current term: until 12 December 2018 Profession/main position: former Executive Board chairman of Royal Haskoning Other board memberships: Supervisory Board member of Ballast-Nedam N.V.; Supervisory Board chairman of Brunel International N.V., and Audit Committee chairman; Supervisory Board member of Royal Haskoning DHV Groep B.V. and Audit Committee chairman; co-founder of Bout & Co strategic consultants; chairman of the Advisory Council on sustainable healthcare at Nijmegen University Hospital. Peter de Wit (1949) Nationality: Dutch First appointed: 1 January 2011 Current term: until 12 December 2018 Profession/main position: former CEO of Shell Netherlands B.V. Other board memberships: non-executive board director of Caithness Petroleum, London; advisory council member of Energy Delta Gas Research (EDGaR); Board Director of GlassPoint Solar Inc., California; adviser to the Mozambique government; chairman of the FreFlyers Multi Sports Club, London. Marieke Schöningh (1963) Nationality: Dutch First appointed: 17 May 2013 Current term: until 16 May 2017 Profession/main position: Global Vice President of M&S - DSM Sinochem Pharmaceuticals 38 Remuneration On the basis of the Average Household Consumer Price Index (CPI) for 2013, the remuneration of the members of the Supervisory Board was increased by 2.51%. The following amounts were paid in 2014: Cees Maas (Supervisory Board member since 16-05-2014, chairman since 26-09-2014, Audit, Risk & Compliance Committee member since 1-10-2014, Remuneration & Nomination Committee member): EUR 20,925 Jan Bout (Supervisory Board member and Audit, Risk & Compliance Committee chairman): EUR 32,400 Peter de Wit (Supervisory Board member, secretary to the Supervisory Board, Audit, Risk & Compliance Committee member until 1-10-2014): EUR 31,050 Marieke Schöningh (Supervisory Board vice chairman, Remuneration & Nomination Committee chairman since 1-10-2014): EUR 27,810 Daan van Doorn (Supervisory Board chairman until 26-09-2014): EUR 32,400 Johan van der Werf (Supervisory Board member until 1-5-2014): EUR 10,100 1.10.3 Report of the Works Council On 20, 21 and 22 May 2014, early elections were called for the Works Councils in the Energy & MultiMedia division, DELTA Netwerkgroep, and the holding company. The elections had been necessitated by the Redesign restructuring in 2013, which led to considerable changes being made in the structure and staffing of several divisions. Because there were more candidates than seats on the Works Council of DELTA Netwerkgroep, this was the only entity where elections were actually held. At DELTA, workers’ participation is organised as follows: European Works Council Works Council Energy & MultiMedia Central Works Council (COR) Works Council DNWG Works Council EPZ Works Council Staf 39 Central Works Council Composition of the Central Works Council after the elections on 28 May 2014 Executive Committee: Bram Nonnekes chairman Bart van Houte vice chairman Harrie Martens secretary Huub Knoors vice secretary Other members: Stephan de Beer Leen Boer Jack van Bruggen Martijn Hofman Peter Maljers Theo Nieuwburg Jan Scheele Hans van Stel E&M E&M DNWG EPZ E&M DNWG EPZ DNWG EPZ DNWG E&M Group Staff Formal secretary: Joop Janse Communications assistant: Gerard Schuur In 2014, the Central Works Council convened eight times and held eight formal meetings with the Executive Board and the HR director in 2014. The individual Works Councils each convened six times and held six meetings with their board. They discussed issues relating to their own division. The Central Works Council mainly discussed cross-divisional matters and issues that impacted the company as a whole. The Works Council support scheme provides how many hours employees are exempt from work to carry out their duties as works council members. The main issues discussed were: Advice on the appointment of a new CEO Advice on the sale of the Kreekraksluis wind farm Strategy discussions with the shareholders Explore future scenarios for DELTA N.V. Changes to workers’ participation agreement Consent to changes in Employee Data Privacy regulations Consent to changes in regulations on Workwear and Personal Protective Gear Corporate culture initiative Consent to HSSE manager position Composition of the European Works Council in 2014 Employee representatives: Stephan de Beer DELTA N.V. Netherlands Huub Knoors DELTA N.V. Netherlands Bram Nonnekes DELTA N.V. Netherlands Leen Boer DELTA N.V. Netherlands Karin Aspeslagh Indaver Netherlands Kristof Colman Indaver Belgium Guy Smits Indaver Belgium (secretary) Rainer Martens Indaver Deutschland Germany Rudi Wachtel Indaver Deutschland Germany 40 Employer representatives: Arnoud Kamerbeek CEO of DELTA N.V. (chairman) Paul de Bruycker CEO of Indaver Michel van Neutigem DELTA N.V.’s HR Director Karin Smet Indaver’s Group HR Manager André van Os DELTA N.V.’s secretary Main issues discussed: Proposed sale of Indaver Progress on budget 2014 Operational Plan 2015-2017 Long-term employability 41 1.11 Opportunities and risks DELTA wants to seize market opportunities while at the same time minimising risks. To achieve this, we have an intelligent risk management system in place, which we ensure is applied and complied with across the company. The system factors in the specific features of the markets in which the individual divisions operate and which are consolidated at company level. Responsibility lies primarily with the divisions, whose staff and management are responsible for properly performing risk management and internal control activities. The Executive Board has ultimate responsibility for risk management at DELTA. DELTA’s internal control framework To help the divisions perform these responsibilities, the Group Internal Control department has developed and implemented the DELTA Internal Control Framework (DICF), based on the COSO ERM model. As part of the framework, divisional management and the heads of department prepare a Management in Control Statement (MiCS) once every six months. The MiCS is substantiated by validating (i.e. establishing the effectiveness of) key controls. These controls are identified during annual Strategic Risk Assessments and multiple Process Risk Assessments. The divisional directors discuss any developments likely to impact risk levels with the Executive Board at least twice a year. Group Internal Control monitors compliance with the internal control framework, which has been designed to ensure that: DELTA is notified in a timely fashion as to when strategic, operational and financial targets have been achieved; financial reporting is reliable; DELTA operates in accordance with applicable laws and regulations; the company’s property and assets are protected; DELTA has a clear understanding of its obligations; the company’s processes are effective and efficient. Management in Control Statements Management submitted two Management in Control Statements to the Executive Board for 2014. In these statements, they confirmed that they were ‘in control’ in 2014. These statements were the basis for the Executive Board’s In Control Statement as included in this annual report. Internal audits Risk control at divisional level and various other processes are subject to regular audits by the independent Internal Audit department. Internal Audit looks at the quality assurance system and the risk management, control and compliance procedures. Independent auditors When auditing the financial statements, the independent auditors investigate the design, existence and effectiveness of the company’s internal controls on financial reporting. The audit findings and recommendations are set out in an annual Management Letter and reported to the Executive Board, Audit, Risk & Compliance Committee, and Supervisory Board. The Management Letter may lead to controls being tightened further. Supervisory Board DELTA’s Executive Board reports on, and accounts for, the design and operational effectiveness of the internal risk control system to the Audit, Risk & Compliance Committee and the Supervisory Board. External parties, including the Consumer & Markets Authority, monitor compliance with applicable laws and regulations. 42 Risks and controls in 2014 Ensuring security of supply, waste treatment, and providing access to the Internet are essential to society. DELTA is also a major employer in Zeeland and an important economic partner to the public and private sector. DELTA identifies any risks that may threaten the provision of these services and seeks to mitigate such risks where appropriate and economically feasible. DELTA is involved in international gas and electricity trading. Prices on these international markets fluctuate strongly. DELTA uses financial instruments to mitigate commodity, foreign exchange, interest rate, liquidity and credit risks, subject to the requirements set out in its Risk Policy Document and Treasury Charter. Under the auspices of the Executive Board, the E&M division’s Risk Management Committee has put in place general procedures and limits and is responsible for ensuring that DELTA’s energy trading and sales activities remain within the defined risk margins. The following paragraphs describe the different types of risk and the way in which DELTA manages the related exposures. Commodity price risk Market risks arise from price movements in the markets where DELTA buys and sells (gas, electricity, coal, oil, emission allowances, currencies, transmission capacity, imports/exports capacity, etc.). It is DELTA’s policy to mitigate the impact of price movements in the short term and track prevailing market prices in the long term. For systematic risk control purposes, asset allocations and positions are determined on the basis of expected price developments. These positions are monitored on a daily basis. Trading risks are mitigated by strictly enforcing a system of limits. Value-at-Risk DELTA uses the Value-at-Risk (VaR) method to calculate and assess market risks on its commodity markets. This method involves using various assumptions regarding possible changes in market conditions. VaR identifies the maximum portfolio losses likely to be incurred as a result of price changes over a three-day period with a confidence level of 95% (i.e. in 5% of cases the portfolio losses may exceed the VaR limit). VaR is calculated using Monte Carlo simulations based on historical volatilities and correlations. Because portfolios include opposing positions and there is an underlying correlation, the VaR of the total portfolio is smaller than the sum of sub-portfolio VaRs. VaR is an important tool for DELTA to manage its portfolios and it is therefore calculated and reported on a daily basis. Cash flow hedges DELTA uses financial instruments to minimise fluctuations in expected cash flows. The company uses derivatives, including forward contracts, options, and swaps, to control the risks of future changes in market prices. These hedging instruments are derivatives of commodities traded by DELTA and they are entered into to mitigate cash flow, price and currency risks. Hedge accounting is applied to cushion the total change in value of these derivatives. To the extent permitted, DELTA accounts for these financial instruments and the physical purchase and sale contracts in a cash flow hedge relationship in accordance with IAS 39. Currency risk Currency risk is the risk that the value of assets will change due to movements in foreign exchange rates. DELTA’s risk policy is to hedge currency risks associated with positions denominated in foreign currencies. To hedge this risk, the company uses financial instruments (forward contracts) to minimise fluctuations in expected cash flows. Currency positions arising from commodity and other contracts are reported to the Treasury department on a daily basis to be hedged at group level. Currency risk limits are set periodically in consultation with the Risk Management Committee and are monitored by the Treasury department. 43 Interest rate risk DELTA’s interest rate risk policy is to mitigate the effects of interest rate fluctuations. To hedge this risk, the company uses derivatives, including interest rate swaps. These swaps allow a floating rate to be exchanged for a fixed rate. Liquidity risk Liquidity risk is the risk that DELTA may have insufficient funds available to meet its short-term liabilities. DELTA’s capital management policy focuses on centralising its cash management and borrowing and repayment operations at holding company level as much as possible. On the basis of its business plan, the company prepares an annual financing plan to give direction to the activities undertaken by the Treasury department, and to determine the ratio of short-term to longterm debt. DELTA also ensures that it more than meets banking ratios and other ratios necessary to maintain its corporate credit rating and to optimise working capital management. The company also pursues a very strict policy in terms of providing guarantees and cash collateral. In order to meet its working capital requirement, DELTA has access to a stand-by credit facility. It allows the company the flexibility, for example, to absorb seasonal cash flow fluctuations and prefinance projects. There are separate lines of credit for independent projects, for entities that are not wholly-owned by DELTA , and for entities for which the law so requires. There is no recourse to DELTA N.V. under these facilities. Standard & Poor's downgraded the company’s credit rating to BBB with a negative outlook in 2014, due in part to difficult market conditions and poor prospects. The Executive Board is taking steps to avoid any further downgrade, for example by selling the company’s share interests in Indaver and the Kreekraksluis wind farm. Summary of the main risks The table below describes some of the main risks facing DELTA. It also shows how the company mitigates the probability and impact of these risks . We will continue to monitor any major risks in 2015 and mitigate such risks where appropriate and economically feasible. Safety risks will remain a focal point in 2015. DELTA ensures good working conditions, robust and reliable business processes, and skilled staff. At DELTA, we have a rule that says “I work safely or I don‘t work at all.” Riskk Downgrade of S&P credit rating prompted by mandatory separation of grid operations There is a chance that the grid operations may have to be hived off pursuant to a court order. This may lead to an S&P rating downgrade, which in turn could adversely affect DELTA’s trading position. Continued decline in power generation spreads Falling sales prices for electricity and input prices that are not declining at the same pace are putting pressure on the returns generated by power stations. Unplanned outages at power stations Unplanned outages at power stations may lead to planned volumes not being achieved. This could, in turn, lead to lower revenue, the need to buy back energy previously sold, and imbalance costs being incurred. Uncollectible accounts receivable As economic conditions deteriorate, there is an Control DELTA has engaged the support of top lawyers and tries to convince policymakers that the intended effects of the legislation are negligible and the negative impact will be great. Future positions are locked in, on the basis of market forecasts and models. This mitigates some of the risk of spreads declining further, but also reduces the possibility of benefiting from favourable market developments. Adequate maintenance programmes and a sufficient supply of spare parts should prevent or limit the duration of any outages. DELTA may nonetheless be confronted with prolonged unplanned outages, as events showed in 2013. DELTA operates strict procedures and credit limits for trading partners and customers. Major 44 increased risk of customers not being able to meet their financial obligations. Amounts owed by such customers may become uncollectible. Elevated risk in terms of data security Cyber attacks may cause damage to ICT systems or lead to confidential information being stolen. Unfavourable changes in the law on waste incineration Changes in the law may cause revenues from Green Steam Certificates to fall or disappear altogether and/or lead to a reduction in gate fees received. accounts are accepted only if the credit insurance company issues a limit. We also closely monitor the payment behaviour of customers and will take immediate action if necessary. In 2014, we performed an analysis of data security at the company. and, on the basis of the findings, tightened our action plans. DELTA also takes part in national public-private partnerships to share information and experiences. The board of Indaver has presented a wellargued case for leaving the legislation unchanged. Indaver also transports waste to incineration plants in the Netherlands, which reduces spare capacity there and lessens the need to amend (EU) legislation. 45 1.12 Statement by the Executive Board In Control Statement The Executive Board is responsible for the design and operating effectiveness of the company’s risk management and internal control system: the DELTA Internal Control Framework (DICF). We reviewed its design and operation during 2014, based in part on the Management in Control Statements submitted by the divisions, the internal audit report, and the independent auditors’ report. Risk-taking is inextricably linked to the company’s operations and the implementation of its strategy. The DICF framework allows DELTA to take risks by identifying, controlling, and actively monitoring those risks, and taking appropriate action where necessary. We seek to minimise the probability and impact of any errors, incorrect decisions or unforeseen events. We are aware that this does not provide absolute assurance that business targets will be achieved and misstatements, loss, fraud or breaches of the law eliminated. When auditing the financial statements 2014, the independent auditors tested the design, existence and operating effectiveness of the company’s internal controls on financial reporting. They reported their findings to the Executive Board, Audit, Risk & Compliance Committee, and Supervisory Board. On the basis of the foregoing, the Executive Board believes that the risk management and internal control system operated effectively during 2014 and provides reasonable assurance that the financial statements for the year under review contain no material inaccuracies. The Executive Board will ensure that the company will continue to strengthen and professionalise its DICF framework in 2015. Management statement To our knowledge: the financial statements give a true and fair view of the assets, liabilities, financial position and profit of DELTA N.V.; the additional information, as contained in this annual report, gives a proper view of the state of affairs as at 31 December 2014 and of DELTA N.V.’s operations during the 2014 financial year; the Opportunities and Risks section, as contained in this annual report, provides a description of potential material risks facing DELTA N.V. Middelburg, The Netherlands, 11 May 2015 The Executive Board, Arnoud Kamerbeek, CEO Frank Verhagen, CFO 46 2 Financial statements 2014 DELTA N.V. The English translation of the annual report is for information purposes only The Annual Report 2014 comprises of the Dutch text including the independent auditor’s report in Dutch 47 Contents Consolidated financial statements Consolidated balance sheet as at 31 December 2014 ......................................................................... 49 Consolidated income statement .......................................................................................................... 50 Consolidated statement of comprehensive income .............................................................................. 51 Consolidated statement of changes in equity....................................................................................... 52 Consolidated cash-flow statement ....................................................................................................... 53 Accounting policies ............................................................................................................................. 54 Notes to the consolidated balance sheet ............................................................................................. 73 Notes to the consolidated income statement ..................................................................................... 110 Notes to the consolidated cash flow statement .................................................................................. 121 Post-balance sheet events ................................................................................................................ 122 Consolidated companies ................................................................................................................... 123 Non-consolidated companies ............................................................................................................ 125 Company financial statements 2014 Company balance sheet as at 31 December 2014............................................................................. 128 Company income statement .............................................................................................................. 129 Notes to the company balance sheet ................................................................................................. 130 Notes to the company income statement ........................................................................................... 139 Other information Profit appropriation............................................................................................................................ 141 Independent auditors’ report.............................................................................................................. 142 DELTA in financial figures, consolidated............................................................................................ 143 DELTA in key figures ........................................................................................................................ 144 48 Consolidated balance sheet as at 31 December 2014 (before profit appropriation) (EUR 1,000) Ref. nr. 31-12-2014 31-12-2013 Non-current assets Intangible assets 1 366,945 473,189 Property, plant and equipment 2 1,713,812 1,783,585 Joint ventures, associates and other investments Loans to joint ventures, associates, etc. Deferred tax assets Other financial assets Derivatives Financial assets 3 4 4 4 5 429,005 14,269 90,996 109,262 78,679 722,211 412,522 15,366 90,671 89,725 88,080 696,364 2,802,968 2,953,138 Total non-current assets Current assets Inventories 6 106,318 87,445 Trade receivables Current tax assets Other receivables Derivatives Total receivables 7 7 7 5 339,668 22,087 48,434 187,655 597,844 384,408 24,814 52,758 141,856 603,836 Assets held for sale 24 Total current assets - 143 704,162 691,424 157,844 174,115 Total assets 3,664,974 3,818,677 Shareholders’ equity Profit for the year Equity attributable to shareholders of DELTA N.V. 1,100,608 3,760 1,104,368 1,093,289 74,788 1,168,077 Non-controlling interests Group equity 41,426 1,145,794 45,352 1,213,429 Cash 8 Provisions Pension liabilities Long-term debt Deferred tax liabilities Deferred revenue Other non-current liabilities Derivatives Non-current liabilities 9 9 10 11 11 11 5 504,159 39,104 509,953 64,375 84,880 43,007 133,806 1,379,284 522,265 31,322 616,361 60,689 87,381 198,578 115,839 1,632,435 Trade payables Current tax liabilities Deferred revenue Work in progress for third parties Current portion of provisions Other liabilities Bank borrowings Derivatives Current liabilities 12 12 12 12 12 12 12 5 313,626 89,628 15,612 147 64,855 290,517 141,533 223,978 1,139,896 341,048 100,548 15,130 85,430 148,343 120,998 160,555 972,052 Liabilities held for sale 24 - 761 Current liabilities 1,139,896 972,813 Total equity and liabilities 3,664,974 3,818,677 49 Consolidated income statement (EUR 1,000) Ref. nr. Revenue 13 1,930,836 2,103,593 Cost of sales 14 (1,141,576) (1,317,921) Gross operating margin Other gains and losses (third parties) 15 Fair value gains and losses on the trading portfolio 16 Gross margin Third-party services Staff costs Depreciation, amortisation and impairment Other operating expenses Total net operating expenses 17 18 19 20 Earnings from operations Share in results of joint ventures and associates 21 Operating result Net finance income (expense) 22 Profit before tax Corporate income tax 23 24 2013 789,260 785,672 29,230 24,676 (615) (683) 817,875 809,665 275,997 258,044 275,857 16,278 826,176 287,786 256,725 174,262 9,337 728,110 (8,301) 81,555 41,209 41,548 32,908 123,103 (32,736) (39,584) 172 Profit after tax from continuing operations Profit after tax from discontinued operations 2014 83,519 (15,959) (3,278) (15,787) 80,241 642 (705) Profit for the year (15,145) 79,536 Attributable to: Non-controlling interests (18,905) 4,748 3,760 74,788 Shareholders of DELTA N.V. 50 Consolidated statement of comprehensive income Consolidated statement of comprehensive income (EUR 1,000) 2014 Profit after tax for the year (15,145) 2013 79,536 Other comprehensive income: - items not transferred to income statement Remeasurements of defined benefit obligations Remeasurements of defined benefit obligations (Deferred) corporate income tax (6,579) (3,409) 2,110 1,000 (4,469) Total other comprehensive income not transferred to income statement - items to be transferred to income statement Effective portion of gains and losses on cash flow hedges Energy deravitives Reclassification adjustments (2,409) (4,469) (2,409) (46,550) (14,737) 13,717 Interest rate derivatives Reclassification adjustments 2,112 (32,833) (12,625) (18,804) 22,011 7,403 (Deferred) corporate income tax (9,235) (11,401) 12,776 (705) (97) (44,939) Share of other comprehensive income of joint ventures and associates Share of other comprehensive income of joint ventures and associates Reclassification adjustments (Deferred) corporate income tax 54 377 2,597 - - 377 2,597 20 397 Translation reserve differences Translation reserve differences Reclassification adjustments 2,597 32 (10) - - 32 (Deferred) corporate income tax (10) - 32 Other movements Other movements Reclassification adjustments (Deferred) corporate income tax Other comprehensive income of assets held for sale Total other comprehensive income to be transferred to income statement (10) 4 - - - 4 - - 4 - - - (44,506) 2,641 Total other comprehensive income (48,975) 232 Total comprehensive income (64,120) 79,768 Non-controlling interests (20,408) 4,310 Shareholders of DELTA N.V. (43,712) 75,458 Total comprehensive income attributable to: For an explanation of movements in energy and interest-rate derivatives, please refer to Section 5. Remeasurements of defined benefit obligations under IAS 19 Employee Benefits entirely concerns changes at Indaver N.V. 51 Consolidated statement of changes in equity (EUR 1,000) Carrying amount as at 31 december 2012 Profit appropriation for 2012 Payment of dividend Other changes Transfer to liablilities due to put options Total comprehensive income Carrying amount as at 31 december 2013 Profit appropriation for 2013 Payment of dividend Other changes Transfer to liablilities due to put options Total comprehensive income Carrying amount as at 31 december 2014 Total Paid-up capital Statutory reserve Hedge reserve (34,317) 1,185,140 6,937 225,828 - - - - (40,000) - - (4,900) - (6,579) - (13,565) - Revaluation Unappropriated Non-controlling reserve Other reserves profit interests (3,132) 863,466 73,837 52,521 - 33,837 (33,837) - - - - (40,000) - - - 13,565 - (4,900) - - - - (6,579) 79,768 - 2,603 (341) (1,592) - 74,788 4,310 1,213,429 6,937 214,866 (34,658) (4,724) 910,868 74,788 45,352 - - - - - 54,788 (54,788) - - - - - - (20,000) - 1 - 5,490 - 58 - - - - 16,424 (20,000) 61 - 16,424 - - (64,120) - 436 (45,321) (2,587) - 3,760 (20,408) 6,937 209,814 (79,978) (7,311) 971,146 3,760 41,426 1,145,794 (5,488) The statutory reserve comprises undistributed profits of associates and is therefore not freely distributable. This also applies to the hedge reserve, which should be seen in relation to the unrealised income from fair value changes in derivatives used for hedging purposes. Fair value changes in derivatives after tax are shown within the hedge reserve, which is a nondistributable reserve. For more information, please refer to Section 5 Principles for the valuation of financial instruments, and 5.1.3. of the Notes to the consolidated balance sheet. Other non-distributable reserves comprise the foreign currency translation reserve (in connection with translation differences) and remeasurements of defined benefit obligations under IAS 19 Employee Benefits. Other reserves mainly comprise retained earnings. The transfer to liabilities arising from put options in 2014 concerned third-party minority interests in Indaver N.V. These shareholders, who own 25% of the shares in Indaver N.V., had previously been granted a put option. The put option is shown within non-current liabilities. Non-controlling interests in DELTA N.V.’s consolidated equity mainly comprise the share interest owned by NEIF (NIBC European Infrastructure Fund) in the German-based waste processing company Indaver Deutschland GmbH. 52 Consolidated cash-flow statement (EUR 1,000) From operating activities Earnings from operations Fair value gains and losses on the trading portfolio Adjustment for deferred income Depreciation, amortisation and impairment Provisions Inventories Trade receivables Trade payables Other receivables/payables Other From operating activities Cash flows arising from dividends received from joint ventures and associates Cash flows from finance income and expense Cash flows from taxes on profits Cash flow from operating activities 2014 2013 (8,301) 615 (4,004) 275,857 (63,783) (18,523) 44,739 (27,423) 7,961 4,856 211,994 81,555 682 2,263 174,262 (62,657) (4,038) (13,133) 37,434 8,823 (3,812) 221,379 35,664 (21,317) (16,508) 33,975 (20,991) (9,728) 209,833 224,635 From investing activities Acquisition and disposal of intangible assets and property, plant and equipment(101,925) (after deduction (167,751) of cash acquired) Acquisition of investments in subsidiaries and associates and interests in joint ventures (after deduction of cash disposed) (5,825) (10,765) Disposal of investments in subsidiaries and associates and interests in joint ventures 485 (77) Other financial assets (8,435) (8,610) Kasstroom uit investeringsactiviteiten (115,700) (187,203) From financing activities Bank borrowings Long-term liabilities Paying off borrowings Dividend payments Cash flow from financing activities 20,535 21,139 (132,078) (20,000) (110,404) (4,805) 47,257 (59,837) (40,000) (57,385) Evolvement cash flow during the year (16,271) (19,953) Cash as at 1 January Evolvement cash position during the year Cash as at 31 December 174,115 (16,271) 157,844 194,068 (19,953) 174,115 94,133 37,432 74,133 (2,568) Free cash flow before dividend Movement net debt 53 Accounting policies DELTA N.V. is a public limited liability company organised and existing under Dutch law and the parent company of a number of subsidiary companies involved in: energy generation, transmission, trading, and supply; environmental services (waste management); the delivery of cable services for analogue and digital TV, the Internet, and mobile and digital telephony; the development and production of renewable energy, including wind power, and water services. With a view to these activities, the Group owns interests in a number of joint arrangements, associates and other investments. DELTA N.V.’s shareholders are the Zeeland provincial authorities, the towns and cities in Zeeland, several towns and cities in the provinces of Zuid-Holland and Noord-Brabant, and the Zuid-Holland and Noord-Brabant provincial authorities. DELTA N.V.’s registered office is situated at Poelendaelesingel 10, Middelburg, The Netherlands. The following changes occurred within the group during 2014: 1. 2. 3. 4. 5. 6. 7. DNWG Staff B.V. was incorporated on 1 January 2014; Windpark Barrepolder B.V. was incorporated on 12 June 2014; The share interest in SET Fund II was reduced from 60.22% to 54.22% on 30 July 2014; The share interest in IVIO cvba was increased from 1.5% to 11.93% on 8 September 2014; Indaver N.V. and SLECO Centrale N.V. each acquired a 33.33% share in Ecluse cvba on 9 October 2014; A 100% interest in Produval bvba was acquired on 30 December 2014; The share interest in NPG Willebroek N.V. was raised from 49% to 50%. The following transactions and related instruments dated 31 December 2013 had an impact on the Group’s structure in 2014: DELTA N.V. transferred its shares in DELTA Energy B.V. to DELTA Com B.V. on 1 January 2014; DELTA Energy B.V. sold its shares in DELTA Comfort B.V. to DELTA Com B.V. on 1 January 2014; DELTA N.V. sold its shares in DELTA Infra B.V. to Zeeuwse Netwerkholding N.V. on 1 January 2014. The financial statements 2013 presented the changes as at 31 December 2013. The company’s functional currency is the euro. Unless otherwise stated, all amounts are presented in thousands of euros. DELTA N.V. used the option available under Part 9, Book 2, of the Dutch Civil Code to prepare the company financial statements in accordance with the International Financial Reporting Standards applied to the consolidated financial statements, with the exception of equity-accounted group companies and investments. The company income statement is presented in abridged form in accordance with Section 402, Part 9, Book 2, of the Dutch Civil Code. The financial statements 2014 were signed and released for publication by the Supervisory Board on 11 May 2015. The Supervisory Board will present the financial statements for adoption by the General Meeting on 4 June 2015. 54 1A. Compliance with IFRSs and summary of changes in IFRS recognition and measurement rules The company’s consolidated financial statements have been prepared in compliance with the International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) and the interpretations issued by the IFRS Interpretations Committee (IFRS IC) of the IASB, as endorsed by the European Commission (EC) up to and including 31 December 2014. New standards and/or supplements/improvements in relation to the previous financial year were issued by the IASB and approved by the European Commission for adoption within the European Union. Changes not yet adopted by the EC are omitted from the summary below. 1A.1. DELTA adopted the following new standards and improvements in its financial statements 2014 1. Amendments to IAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities IAS 32 was amended to provide additional guidance to reduce inconsistent application of the standard in practice. 2. Amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities, and IAS 27 (revised) Separate Financial Statements – Investment Entities IFRS 10 was amended in order to better reflect the business model of investment entities. IFRS 10 requires that investment entities account for their investments in subsidiaries at fair value through profit or loss rather than consolidating them. IFRS 12 was amended in order to require specific disclosure about such investments in subsidiaries by investment entities. Due to changes in IAS 27 (revised), investment entities also no longer have the option to account for their investments in certain subsidiaries either at cost or at fair value in their separate financial statements. They must be recognised in the entity’s separate financial statements (in accordance with IAS 39, Financial Instruments: Recognition and Measurement) at fair value with fair value changes in profit or loss. 3. Amendments to IAS 36 Impairments of Assets – Recoverable amount disclosures for non-financial assets The objective of the amendments is to clarify that the scope of the recoverable amount disclosures for assets is limited to impaired assets if the recoverable amount is based on fair value less costs of disposal. 4. Amendments to IAS 39 Financial Instruments: Recognition and Measurement – Novation of derivatives and continuation of hedge accounting The objective of the amendments is to provide relief in situations where a derivative that has been designated as a hedging instrument is required to be novated from one counterparty to a central counterparty as a result of laws or regulations. This means that hedge accounting can continue irrespective of the novation which, without the amendment, would not be allowed. 55 1A.2. DELTA adopted the following new standards and improvements in its financial statements 2013. Adoption is mandatory from the financial year starting on 1 January 2014 The following new standards, supplements and/or improvements were adopted by DELTA as early as 1 January 2013 because of their relevance to its financial information. The effects of the adoption were explained in DELTA N.V.’s consolidated financial statements 2013. 1) IFRS 10 Consolidated Financial Statements; 2) IFRS 11 Joint Arrangements; 3) IFRS 12 Disclosure of Interests in Other Entities; 4) IAS 27 Separate Financial Statements; 5) IAS 28 Investments in associates and joint ventures; 6) IFRS 10, IFRS 11 and IFRS 12 Transition Guidance. 1A.3. DELTA did not adopt the following new standards and improvements in its financial statements 2014. Adoption is mandatory from the financial year starting 1 January 2015 and subsequent financial years 1) IFRIC 21 Levies Effective for annual periods beginning on or after 17 June 2014. For DELTA, that will be the 2015 financial year. The objective of IFRIC Interpretation 21 is to provide guidance on how to properly account for levies that fall within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets, so as to make it easier for users to compare financial statements. More specifically, it answers the question as to when to recognise a liability for the payment of a levy that is accounted for in accordance with IAS 37. We do not expect this to have any material impact on our financial information. 2) Annual improvements to IFRSs, 2011-2013 Cycle (originally published by the IASB on 12 December 2013) Effective for annual periods beginning on or after 1 June 2015. For DELTA, that will be the 2015 financial year. The following approved amendments to IFRS 3 and IFRS 13 constitute clarifications or corrections. IFRS 3 Business Combinations This amendment affects the scope. The definition of the scope was adjusted to reflect the definitions in IFRS 11 Joint Arrangements. IFRS 3 excludes from its scope the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself. This amendment will be applied as and when such a situation arises. IFRS 13 Fair Value Measurement This amendment clarifies the scope of the ‘portfolio exception’. It provides that the portfolio exception includes all contracts accounted for within the scope of IAS 39 Financial Instruments: Recognition and Measurement, regardless of whether they meet the definition of financial assets or financial liabilities in IAS 32 Financial Instruments: Presentation. We do not expect this to have any material impact on our financial information. The following approved amendments to IAS40 concern changes to existing requirements or additional guidance to comply with those requirements. IAS 40 Investment Property This amendment concerns the classification of property as investment property or as property for own use, and clarifies the relationship between IAS 40 Investment Property and IFRS 3 Business Combinations. We do not expect this to have any material impact on our financial information. 56 3) Annual improvements to IFRSs, 2010-2012 Cycle (originally published by the IASB on 12 December 2013) Effective for annual periods beginning on or after 1 June 2015. For DELTA, that will be the 2016 financial year. The following approved amendments to IFRS 2 and IFRS 3 concern changes to existing requirements or additional guidance to comply with those requirements. IFRS 2 Share-based Payment provides a clarification of the definition of ‘vesting condition.’ This clarification had no impact on the financial information because DELTA had no share-based payments. IFRS 3 Business Combinations Clarifies the accounting for ‘contingent consideration’ in a business combination. This clarification also affects IAS 37 Provisions, Contingent Liabilities and Contingent Assets and IAS 39 Financial Instruments: Recognition and Measurement. This amendment will be applied as and when such a situation arises. The following approved amendments to IFRS 8, IAS 16, IAS 24 and IAS 38 constitute clarifications or corrections. IFRS 8 Operating Segments Requires the entity to disclose the judgments made by management in applying to operating segments the aggregation criteria listed in IFRS 8.12. DELTA is not required to apply IFRS 8, nor does it apply IFRS 8 on a voluntary basis. IFRS 8 Operating Segments Clarifies the provisions set out in IFRS 8.28 regarding the ‘reconciliations’ to be provided. DELTA is not required to apply IFRS 8, nor does it apply IFRS 8 on a voluntary basis. IAS 16 Property, Plant and Equipment The amendments concern the ‘revaluation method.’ They had no impact on the financial information because DELTA applies a cost model. IAS 24 Related Party Disclosures The amendments concern ‘key management personnel.’ IAS 24 was found to be unclear about the disclosures to be provided about key management personnel who were not employees of the reporting entity. The definition of related parties has been widened. A related party of the reporting entity includes ‘the entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity.' The reporting entity’s obligations to furnish detailed information on key management personnel compensation in total and for the different categories have been relaxed for those situations in which the compensation is paid to a separate ‘management entity’ (an entity which provides key management personnel services). Instead, the reporting entity discloses the amounts it incurred for the provision of key management personnel services delivered by the separate management entity. We do not expect this to have any material impact on our financial information. IAS 38 Intangible Assets The amendments concern the ‘revaluation model.’ They had no impact on the financial information because DELTA applies a cost model. 57 4) Amendments to IAS 19 Employee Benefits, Defined Benefit Plans: Employee Contributions Effective for annual periods beginning on or after 1 June 2015. For DELTA, that will be the 2016 financial year. The amendments are intended to simplify and clarify the accounting for employee or third-party contributions to defined benefit plans. We do not expect this to have any material impact on our financial information. 1B. Post-balance sheet events that are material to the financial statements 2014 As part of its new business strategy and in order improve its financial ratios, DELTA is selling two of its business divisions, more specifically its 75% (rounded-off) share interest in Indaver N.V. and its 100% stake in Windpark Kreekraksluis B.V. Talks are being held with the bodies involved in the decision-making process, including DELTA Group’s European Works Council and DELTA’s shareholders. On 6 March 2015, we reached an agreement with the buyer on the sale of our interest in Indaver N.V., subject to the usual resolutive conditions, including obtaining approval from the competition authorities and the European Works Council, and securing the consent of DELTA’s shareholders. The contract for the sale of the Kreekraksluis wind farm was signed on 5 February 2015, subject to the condition that the buyer obtains external financing and DELTA obtains the consent of its shareholders. The shareholders authorised the sale on 9 March 2015. IFRS 5 Non-current Assets Held for Sale and Discontinued Operations Given the proposed sale of these assets, the issue arises as to whether IFRS 5 Non-current Assets Held for Sale and Discontinued Operations applies to the situation at the balance sheet date. IFRS 5 provides that an asset must be classified as held for sale if the carrying amount is to be received mainly through a sale rather than the continued use of the asset. The criteria are as follows: o The asset, in its current form, is available for immediate sale; o The sale is subject only to conditions that are usual for the sale of this type of asset; o The sale is highly probable; o Management is committed to a plan for sale; o An active programme to locate a buyer and actions to complete the plan are initiated; o The asset is being actively marketed for sale at a sales price reasonable in relation to its fair value; o The sale is expected to occur within twelve months of classification as held for sale; o Actions required to complete the plan indicate that it is unlikely that the plan will be significantly changed or withdrawn. In late 2014, as part of the ongoing strategic review, DELTA’s shareholders indicated that the full or partial sale of a business division would be tested against the relevant guiding principles and that its impact would also be assessed. It also became clear that permission from the shareholders to sell our share interests in Indaver N.V. and Windpark Kreekraksluis B.V. could be based on principles other than just business and economic considerations. In view of the ongoing dialogue and the importance of ensuring the continuity of both DELTA and its subsidiaries, we expect to be able to reach agreement with the shareholders. That said, it was uncertain as at the balance sheet date as to whether the shareholders would authorise the sale of Indaver N.V. and Windpark Kreekraksluis B.V. and so we classified their consent as ‘probable’ rather than ‘highly probable.’ On that basis, we concluded that, given the approval of the sale sought from DELTA’s shareholders, Indaver N.V. and Windpark Kreekraksluis B.V. did not have to be classified under IFRS 5 as at 31 December 2014. 58 IAS 36 Impairment of Assets IAS 36 provides that, for group companies for which goodwill has been paid in the past, value in use must be measured annually so as to determine whether to recognise an impairment loss on the goodwill. If, and only if, the recoverable amount of the asset is lower than the carrying amount, the carrying amount must be reduced to the recoverable value. This reduction constitutes an impairment loss and must immediately be recognised in the profit or loss, unless the asset is revalued according to a different standard (which is not the case for DELTA). Indaver In view of the proposed sale of the Indaver Group, DELTA classified the Indaver Group as a single cash-generating unit (CGU) for impairment testing purposes as at 31 December 2014. On 6 March 2015, DELTA and Katoen Natie announced that they had signed an agreement for the sale of DELTA’s 75% share interest in Indaver N.V. to Katoen Natie. At their General Meeting on 9 March 2015, the shareholders approved the review framework for the sale of Indaver and so authorised DELTA to continue the sales process. The sale proper will still require approval from DELTA’s shareholders. The selling value less costs associated with the sale was defined in the impairment test as fair value less costs of disposal. The agreed selling price less costs of disposal was lower than the amount at which the Indaver Group was carried in DELTA Group’s financial statements. An impairment loss was therefore recognised. In the case of a CGU to which goodwill is allocated, the impairment loss is allocated first to reduce the goodwill allocated to the CGU and then to reduce its other assets. This is why the impairment loss is shown within 'Indaver goodwill’ in DELTA Group’s balance sheet. As a result, the carrying amount of its 75% share interest in the Indaver Group at 31 December 2014 equalled the agreed selling price less costs of disposal. 59 Impairment Indaver Groep as at 31 december 2014 Carrying ammount Impairment Carrying ammount (EUR 1,000) before impairment carrying ammount after impairment at at at selling value selling value selling value Non-current assets Intangible assets 423.5 (92.8) 330.7 Property, plant and equipment 483.2 483.2 Deffered tax assets 19.9 19.9 Other financial assets 61.7 61.7 Total non-current assets 988.3 (92.8) 895.5 Current assets Inventories Total receivables Cash Total current assets Total assets 13.9 121.6 29.0 164.5 1,152.8 - 13.9 121.6 29.0 164.5 (92.8) 1,060.0 - Deffered tax liabilities Provisions Other liabilities Bank borrowings Other current liabilities 47.4 67.0 90.8 105.7 157.6 - 47.4 67.0 90.8 105.7 157.6 Total liabilities 468.5 - 468.5 Carrying amount net assets Indaver Groep 684.3 (92.8) 591.5 Attributable to non-controlling interests which resulted in a decrease of the value of the put option Impairment for Indaver attributable to DELTA 24.2 (68.6) The Indaver sale will reduce interest charges in future years and hence improve the possibilities for the DELTA N.V. fiscal unity to offset losses, as a result which an additional gain of EUR 7.8 million was recognised. Kreekraksluis wind farm There were no indicators of impairment as regards Windpark Kreekraksluis B.V. On the basis of the information available in connection with the sale of Windpark Kreekraksluis B.V., fair value less costs of disposal exceeds the carrying amount, including the goodwill allocated to this CGU. 60 2. General accounting policies 2.1 Estimates and assumptions The preparation of financial statements entails the use of estimates and assumptions based on past experience and on factors considered acceptable in management’s judgement. These estimates relate primarily to the proceeds from the sale and transmission of gas and power to domestic consumers due to staggered meter readings, deferred tax assets, and the level of provisions. These estimates and assumptions will affect the information in the financial statements and the actual figures may be different. The effects of changes in estimates are recognised prospectively in the income statement. Changes in estimates may also lead to changes in assets and liabilities or equity components. Such changes in estimates are recognised in the period in which they occur. Any specific disclosures about estimates and assumptions are provided in the notes to the balance sheet and income statement. 2.2 Impairment of assets Tests are conducted annually to check for indications that assets may be impaired. If that is the case, an estimate is made of the asset’s recoverable amount, which is the higher of its fair value less costs to sell and its value in use. If the fair value less costs to sell leads to unavoidable costs, a liability is recognised. Value in use is measured as the present value of the estimated future cash flows, based on the business plans drawn up internally and approved by the Executive Board, using a pre-tax discount rate that reflects current market interest rates. Specific risks relating to the asset or the cash-generating unit are incorporated into the estimated future cash flows. Annual impairment tests are conducted for recognised goodwill. An impairment loss is recognised if the carrying amount of an asset or the cash-generating unit to which the asset belongs exceeds its recoverable amount. The impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then to reduce the carrying amounts of the other assets of the unit (or group of units) on a pro rata basis. The carrying amount of an asset should not be reduced to below its recoverable amount. An impairment loss is reversed if it there has been a change in the basis on which the recoverable amount was previously determined. An impairment loss is reversed only to the extent that the carrying amount of the asset due to reversal does not exceed its carrying amount less depreciation or amortisation if no impairment loss had been recognised. An impairment loss or reversal of an impairment loss is recognised in the profit or loss. Impairment losses for goodwill are not reversed. 2.3 Valuation of financial instruments Unless stated otherwise in the notes to the individual items in the financial statements, management believes that the carrying amounts of financial instruments are reasonable approximations of the fair value of those instruments. 2.4 Government grants Government grants are recognised as soon as it is reasonably certain that the conditions for obtaining the grant have been or will be met and the grants have been or will be received. When investment projects are capitalised, grants received and contributions to the construction costs are deducted from the acquisition cost of the assets. Operating grants are shown within revenue. Subsidies in the form of tax breaks are factored into the calculation of the taxable amount. 61 2.5 Foreign currencies Assets and liabilities denominated in foreign currencies are translated into euros at the exchange rates prevailing at the end of the reporting period. Differences arising from movements in exchange rates are recognised in profit or loss, unless relating to the net investment in foreign entities, in which case they are recognised in equity as part of other comprehensive income. Income and expenses denominated in foreign currencies are translated into euros at the exchange rates prevailing at the time of the transaction. 2.6 Taxation 2.6.1 Income taxes Income taxes comprise current taxes and movements in deferred taxes. These amounts are taken to the income statement or recognised in equity as part of other comprehensive income. Current taxes comprise amounts that are probably due and capable of being offset against the taxable profit for the year. They are calculated on the basis of the prevailing tax legislation and rates. 2.6.2 Deferred taxes Deferred taxes are recognised for differences between the carrying amount and the tax base of assets and liabilities. Deferred taxes are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on the prevailing tax legislation and rates. Deferred taxes are stated at face value. Deferred tax assets are recognised only if and to the extent that it is probable that sufficient taxable profits and/or other temporary differences will be available against which they can be utilised. A deferred tax asset is recognised for unused tax losses and unused tax credits if and to the extent that it is probable that taxable profits will be available against which such unused losses or credits can be utilised. 2.7 Comparative information Comparatives are adjusted, where necessary, for presentation purposes. 62 3. Basis of consolidation The consolidated financial statements comprise the financial information of DELTA N.V. and its group companies. Group companies are legal entities and companies over which control is exercised in terms of their governance and operational and financial policies. IFRS 10 provides that an investor controls an investee if the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to use its power over the investee to affect the amount of the investor’s returns. Existing and potential voting rights that were exercisable or convertible as at the balance sheet date are considered when determining whether DELTA N.V. controls an entity. Any other agreements that allow DELTA N.V. to determine operating and financial policy are also taken into account. Group companies are included in the consolidation from the date when control is obtained. Consolidation is discontinued from the date when control over the group company ceases. Group companies are fully consolidated, with 100% of their equity and profits included in the consolidation. If the share interest in a group company is less than 100%, the non-controlling interest is shown separately in the balance sheet and income statement. Joint arrangements are recognised in proportion to DELTA’s (group company’s) interest in the arrangement if the arrangement involves a joint operation. They are included in the consolidation from the date when the arrangement is made. Consolidation discontinues from the date when the arrangement ceases. Joint arrangements that take the form of ‘joint operations’ are consolidated according to the partial method. The investor recognises its interest in its consolidated financial statements as follows: Assets to which the investor has direct rights are recognised fully in the financial statements; Liabilities for which the investor is directly responsible are recognised fully in the financial statements; Revenue from the sale of the investor's share of the output of the joint operation by the joint operation itself is recognised fully in the financial statements (the joint operation itself being responsible for the sale of the output); Revenue from the sale of the investor's share of the output of the joint operation by the investor is recognised fully in the financial statements; Expenses allocated directly to the investor are fully recognised in the financial statements; Assets, liabilities, revenue and expenses that are not directly attributable to the investors are allocated to the investors indirectly in proportion to their interest in the joint operation. Joint arrangements that take the form of ‘joint ventures’ are accounted for according to the equity method. Associates are also recognised using the equity method. The acquisition of a group company is accounted for using the purchase accounting method. The accounting policies adopted by group companies are adjusted, where necessary, to ensure consistency with the policies applied by DELTA. In the case of put options, the corresponding non-controlling interest are classified as current or non-current liabilities. Scope of consolidation The financial statements include a separate overview of the main subsidiaries, associates and joint ventures, including the relevant share interests. 63 4. Basis of recognition and measurement of assets and liabilities The financial statements have been prepared according to the historical cost convention, with the exception of derivatives (financial instruments), which are carried at fair value, and the differences referred to below. All transactions in financial instruments are accounted for on the transaction date. 4.1 Intangible assets Intangible fixed assets comprise goodwill arising on acquisition, development costs, software, customer contracts, and acquired transport rights. Goodwill Goodwill represents the positive difference between the acquisition cost of a group company and the fair value of the acquisition. Goodwill paid on the acquisition of a group company or joint arrangement is recognised as an intangible fixed asset. Goodwill paid on the acquisition of an interest in a joint venture or investment in an associate is included in the cost of the interest or investment. If the cost is lower than the fair value of the identifiable assets, liabilities and contingent liabilities acquired (negative goodwill), the difference is recognised directly in profit or loss. The carrying amount of goodwill is measured at historical cost less accumulated impairment losses. Goodwill is not amortised. Annual impairment tests are conducted to identify any impairment of goodwill. For the purposes of these tests, goodwill is allocated to cash-generating units. If a transaction qualifies as a transaction between owners, the difference between the acquisition cost and fair value is recognised in equity. Development costs Development expenditure is measured at historical cost and amortised over a period of 10 years according to the pattern of the additional cash flows generated by the acquired process knowledge. Software Capitalised software is carried at historical cost less amortisation. Amortisation is on a straight-line basis over a period of 5 years. The useful life is assessed annually, with any adjustments being accounted for prospectively. Customer contracts Customer contracts are measured at cost and amortised according to the pattern of the additional cash flows generated by the acquired accounts. Transport rights Transport rights are measured at cost and amortised on a straight-line basis over a period of 20 years. The useful life is assessed annually, with any adjustments being accounted for prospectively. 4.2 Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation on a straight-line basis over its estimated useful life, determined on the basis of technical and economic criteria, taking account of its estimated residual value, less any accumulated impairment losses. Land is not depreciated. In accordance with IFRIC 18, third-party contributions to the construction costs of an item of property, plant or equipment are no longer deducted from the carrying amount of the asset; instead, they are recognised within deferred revenue (liability). Property, plant and equipment also comprises the discounted amount that is expected to be necessary to cap landfill sites when landfill operations come to an end. Depreciation is based on the actual landfill capacity used during the period. Changes in residual value arising from technical or economic developments or the use of a different discount rate are shown within property, plant and equipment and recognised in profit or loss in future years through depreciation. If an asset has been fully depreciated, the difference is recognised directly in profit or loss. 64 External financing expenses for assets (construction period interest) are included in the cost if they can be allocated directly to the asset. If an asset consists of various components with different depreciation periods and residual values, the components are recognised separately. Investments to replace components are capitalised, with the replaced component being written down simultaneously. Estimated useful lives and estimated residual values are assessed annually when the business plan is prepared. If an impairment test shows an impairment loss, the carrying amount is adjusted accordingly. Property, plant and equipment under construction is stated at costs incurred as at the balance sheet date, including the costs of materials and services, direct staff costs, an appropriate share of directly attributable overhead costs, and the financing costs allocated directly to the asset. In 1999, Indaver N.V. signed a cross-border lease with a U.S. investor for the use of lines 1 and 2 at its incineration plant in Doel (Belgium). Title to and beneficial ownership of the assets remained with the company. Accordingly, these assets are shown in the consolidated financial statements on the basis of the accounting policies applied to property, plant and equipment. 4.3 Financial fixed assets General A business combination involves bringing together separate entities or businesses into one reporting entity. Business combinations are accounted for using the acquisition method. Steps in applying the acquisition method are: 1. 2. 3. Identification of the acquirer; Measurement of the cost of the business combination; Allocation of the cost of the business combination as at the acquisition date. The cost of a business combination is the aggregate of the acquisition-date fair values of the assets acquired, liabilities incurred or assumed and equity instruments issued by the acquirer. Under IFRS 3 (as approved by the EU in 2004), the aggregate is increased by the costs directly attributable to the business combination. With the revision of IFRS 3 (applied with effect from 2009), the costs directly attributable to the acquisition are no longer shown within the cost of the business combination, but recognised directly in profit or loss. Goodwill is measured as the value by which the cost of the business combination exceeds the acquirer’s interest in the net fair value of identifiable assets, liabilities and contingent liabilities. Negative goodwill is recognised directly in profit or loss, and non-controlling interests are recognised in equity. Joint ventures, associates and other investments Joint ventures are joint arrangements whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. The parties are called joint venturers. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (such as DELTA N.V. or any of its subsidiaries) have rights to the assets, and obligations for the liabilities, relating to the arrangement. These parties are called joint operators. In the case of a joint operation, DELTA recognises a proportion of the assets and liabilities, revenue and expenditure equivalent to its interest in the joint operation; its share in the joint operation’s equity is therefore not recognised as a financial non-current asset. Associates are entities over which DELTA N.V. exercises significant influence, whether directly or indirectly, but which it does not control. Generally speaking, this is the case if DELTA N.V. can exercise between 20% and 50% of the voting rights. Other investments are non-associated investments in which DELTA N.V. has an interest of less than 20%. The financial statements include an overview of the main joint arrangements and investments. 65 Valuation of joint ventures, associates and other investments Investments in joint ventures and associates are recognised in the consolidated financial statements using the equity method. Under the equity method, on initial recognition the investment is recognised at cost, i.e. the fair value of the underlying assets and liabilities, including goodwill. If the fair value exceeds the cost, the positive difference will be added to the equity participation. The share of profits or losses is recognised in the carrying amount each year and dividend distributions are deducted. If the (cumulative) losses of the joint venture and/or associate lead to a negative book value, these losses are not recognised, unless DELTA N.V. has an obligation to clear these losses or has made payments to do so. Movements in other investments are recognised in other comprehensive income, unless they involve a permanent impairment, which is then recognised directly in profit or loss. If insufficient information is available, valuation is at cost. Undistributed profits of joint ventures and associates and direct increases in equity at a joint venture or associate which cannot readily be distributed are added to the statutory reserve. The accounting policies of joint ventures and investments are adjusted, where necessary, to ensure consistent application of the accounting policies throughout the DELTA group. Loans to other investees On initial recognition, loans to investees or third parties are stated at fair value and, subsequently, at amortised cost. Amortised cost is usually equivalent to the face value of loans because they are shortterm. Where necessary, a provision is recognised for bad debts and deducted from this value. 4.4 Inventories Inventories are stated at the lower of weighted average cost, based on first-in first-out (FIFO), and net realisable value, less a provision for obsolescence. Impairment losses on inventories are recognised as an expense and disclosed separately. 4.5 Receivables On initial recognition, trade receivables are stated at fair value and, subsequently, at amortised cost less impairment losses. Amortised cost is usually equivalent to the face value of receivables because they are short-term. 4.6 Construction contracts DELTA applies the percentage-of-completion method to measure and recognise contract cost and revenue in the income statement for the reporting period. The stage of completion is based on production measurements. Contracts in progress are recognised at cost less a provision for probable losses and invoiced instalments. Profits are recognised in proportion to the percentage of completion if they can be reliably measured. 4.7 Non-current assets held for sale and discontinued operations DELTA classifies an asset (or disposal group) as held for sale if its carrying amount is recovered principally through sale rather than continued use. For this to be the case, the asset must be available for immediate sale in its present condition and the sale must be highly probable and expected to take place within one year. In the event of a (proposed) sale of a group of assets, the liabilities directly associated with those assets are also included in the carrying amount. Immediately after classification as held for sale, the assets are measured at the lower of their carrying amount and fair value less costs to sell, and depreciation ceases. Impairment losses are recognised in profit or loss. 66 4.8 Cash Cash includes not only cash but also cash equivalents that can be converted into cash with no material risk of impairment. Cash is stated at fair value. 4.9 Shareholders’ equity Movements in shareholders’ equity are presented in the consolidated statement of changes in equity. The company’s authorised capital amounts to EUR 9,080,000, divided into 20,000 shares with a par value of EUR 454. As at 31 December 2014, EUR 6,937,120 worth of shares had been issued and paid up. Dividends are recognised as a liability in the period in which they are declared. No changes occurred during the year. None of the shares come with pre-emptive rights or restrictions. 4.10 Provisions Provisions are recognised for legally enforceable, present obligations relating to operations. Provisions are carried at the present value of the expected expenditure. The present value is calculated using a pre-tax discount rate that reflects current market assessments of the time value of money. Expenditures expected to be incurred within one year of the balance sheet date are shown within current liabilities. 4.11 Employee benefits Provisions relating to pension liabilities and health insurance costs are determined on an actuarial basis. The corresponding liabilities are presented separately in the balance sheet. This is only the case for the group company Indaver. Indaver provides post-employment benefits for most of its employees. These benefits are paid under defined-contribution plans and defined-benefit plans through an insurance plan or through unfunded arrangements. Contributions paid under defined contribution plans are recognised directly in the income statement. The provision for defined benefit plans is measured separately, using the actuarial projected unit credit method. Annual pension costs comprise: costs of annual pension accruals (service costs); net finance expense or income on the pension balance (net interest); other changes in the pension balance (remeasurements). The costs of annual pension accruals, including the expenditure for past pensionable service, are recognised in the income statement. Net finance expense or income on the pension balance is recognised in the income statement. Other changes, such as actuarial results, differences between actual and expected returns on investments and changes in the effect of the limit on the pension receivable to be recognised, are shown in other comprehensive income. Differences due to remeasurements are recognised directly in equity through other comprehensive income, and will not be recognised in profit or loss in future years either. 4.12 Non-current liabilities Non-current liabilities are measured at amortised cost using the effective interest method. Repayment obligations for non-current liabilities due within one year are shown within current liabilities. In the case of a finance lease (in which all the risks and rewards of ownership are borne by the lessee), at the start of the lease term the finance lease is recorded as an asset and the obligations are recognised as a liability and measured at fair value. The asset is depreciated in accordance with the prevailing rules for property, plant and equipment. In the case of an operating lease (in which all the risks and rewards of ownership are borne by the lessor), the lease payments are recognised in the income statement over the lease term on a straightline basis. 67 The non-current portion of deferred revenue is classified as a non-current liability. The portion to be released during the next reporting period is shown within current liabilities. The portion relating to the current reporting period is shown within revenue. 4.13 Put options Put options are stated at fair value attributable to the put option holder, less any dividends paid. 68 5. Basis of recognition and measurement of financial instruments 5.1 Financial instruments DELTA uses financial instruments to manage and optimise normal market risks associated with the company’s commodities, currency and interest-rate exposures. DELTA applies IAS 32 Financial Instruments: Presentation and IAS 39 Financial Instruments: Recognition and Measurement. Under these standards, derivatives (derivative financial instruments) are measured at fair value and trading contracts are recognised in the income statement at fair value through profit or loss. Definition A derivative is a financial instrument or other contract that falls within the scope of IAS 39. It has the following three features: its value changes as a result of movements in a particular interest rate, price of a financial instrument, commodity price, exchange rate, or index of prices, interest rates or other variables, provided that, in the case of non-financial variables, the variable is not specific to a contract party (also known as the ‘underlying asset’); No, or only a minor, net initial investment is required in relation to other types of contract that respond in similar ways to movements in market factors; Settlement takes place in the future. 5.2 Derivatives DELTA is involved in gas, electricity, coal, oil, emission and currency trading contracts for the current calendar year and the following four years. The company considers the markets for these commodities to be liquid over this time horizon because reliable prices are available from brokers, markets, and data providers. The fair value of a commodity contract is calculated according to the DCF method using these prices; no in-house valuation models are used. The monthly, quarterly and annual prices published are adjusted only to reconcile them with the relative periods in the trade systems. DELTA uses derivatives, such as interest rate swaps, to hedge its interest rate risk exposure. These swaps allow a floating rate to be exchanged for a fixed rate. The fair value of interest-rate derivatives is also calculated according to the DCF method, using a yield curve that is based on data from the European Central Bank (ECB). Classification and netting A derivative is classified as a current asset if its fair value represents a gain and as a non-current liability if its fair value represents a loss. Receivables and payables in respect of derivatives for different transactions with the same counterparty are netted, if there is a contractual or legally enforceable right of set-off and DELTA also settles the relevant cash flows on a net basis. Recognition of fair value gains and losses Under IAS 39, energy commodity contracts (electricity, gas, coal, oil, emission allowances and related foreign exchange exposures) and interest rate swaps are classified as derivatives. Under IAS 32, IAS 39 and IFRS 7, all derivatives are measured at fair value on initial recognition. As a general rule, fair value changes in derivatives are recognised through profit or loss. The exceptions to this rule are: 1a. Own use: DELTA applies accrual accounting for commodity contracts intended for its own use or production and for sales and purchasing contracts entered into for the purpose of delivering physical commodities to end users. This means that any changes in value are not shown in the income statement. These transactions are recognised as sales or purchase transactions at the prevailing prices at the time of settlement; 2a. Derivatives used to hedge an own-use contract. Hedge accounting may be applied for these derivatives on certain conditions 2b. Interest rate derivatives. Hedge accounting may be applied for these derivatives on certain conditions. 69 Hedge accounting Hedge accounting allows the impact of fair value changes on profit or loss to be mitigated by taking into account the opposing effects on the profit or loss of fair value changes in the hedges and the hedged items. Fair value gains and losses on derivatives are recognised in equity (through the statement of comprehensive income) until the hedged position/transaction is settled. DELTA uses derivatives to hedge price and currency risks arising from energy commodity contracts (electricity, gas, coal, oil, and carbon emissions). Interest rate swaps are used to hedge the risk of cash-flow volatility due to movements in interest rates. DELTA uses cash-flow hedging, which involves entering into hedges to mitigate its exposure to variability of existing and future cash flows that could ultimately affect profit or loss. The hedges are allocated to a specific risk relating to a balance sheet item or highly probable forecast transaction. Criteria for applying hedge accounting Hedge accounting is subject to strict rules in terms of documentation and effectiveness testing. Hedge accounting is permitted if a derivative meets the following criteria: 1. At the time of entering into the transaction, the derivative is formally classified as a hedge, and the hedging relationship, the objectives of the hedge, and the risk management strategy are documented; 2. In the case of a cash-flow hedge, the forecast transaction that is the subject of the hedge is highly probable and expected to expose the entity to variability in existing or future cash flows that could ultimately affect profit or loss; 3. The effectiveness of the hedge can be reliably measured; 4. The hedge is expected to be highly effective; 5. The hedge is assessed on an ongoing basis and determined to have been highly effective. Hedge effectiveness testing and recognition of changes DELTA formally tests whether derivatives used as hedging instruments have been highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged item, both at the inception of the hedge and during its life. DELTA tests and determines whether changes in fair value or cash flows attributable to the hedged item are offset by changes in fair value or cash flows attributable to the hedging instrument. A range of between 80% and 125% is used to regard a hedging relationship as being effective. The effective portion of fair value changes is recognised in equity and shown within the hedge reserve (through the statement of comprehensive income). The ineffective portion of a hedging relationship, in a fair value hedge, is the extent to which changes in the fair value of the derivative differ from the changes in the fair value of the hedged item or, in a cash flow hedge, the extent to which changes in the fair value of the derivative differ from the fair value change in the expected cash flow. Ineffective hedges, the ineffective portion of a hedge and gains and losses on components of derivatives that are disregarded when testing the effectiveness of a hedge are recognised directly in the income statement. The cumulative amounts recognised in equity are taken to the income statement in the same period as the hedged transaction. DELTA discontinues hedge accounting if the hedging relationship is no longer effective or no longer expected to remain effective. 70 6. Accounting policies for the income statement 6.1 Revenue Revenue represents income arising directly from the supply of goods and services to third parties, net of any discounts and net of sales taxes, such as VAT and regulating energy tax (regulerende energiebelasting; REB) in the Netherlands. Revenue is recognised when the material risks and benefits of ownership of the goods have passed to the buyer. Revenue from services is recognised in proportion to the services delivered as at the end of the reporting period. Recognition of revenue from transport services and the supply of electricity and gas is based on supplies during the calendar year. Revenue from supplies to domestic and small-business users is partly estimated as meter readings are taken throughout the year. Recognition of revenue from electricity sales is based on the assumption that power generated by the group’s own production facilities (including joint arrangements) is supplied to third parties, while power supplied to end-users is procured entirely from third parties. For gas and electricity trading contracts that do not involve physical delivery, purchases and sales are netted if this was contractually agreed. Revenue from telecommunications covers subscription fees for signal distribution as well as revenue from Internet services and other data transmission services. Revenue from waste management services are allocated to the period in which the services are supplied. Revenue from construction contracts is recognised in the income statement using the percentage-ofcompletion method. 6.2 Net operating expenses Net operating expenses are measured on the basis of products and services purchased and in accordance with the measurement and depreciation rules set out above. Expenses are allocated to the financial year in which they are incurred. Gains are recognised in the year in which they are realised; losses are recognised in the year in which they are foreseeable. 6.3 Net finance income (expense) Finance income and expense is allocated to the period to which it relates, using the effective interest method. Costs of external financing associated with the construction or acquisition of property, plant and equipment (construction period interest) are capitalised as and when appropriate. 6.4 Discontinued operations All financial consequences of final decisions to sell and discontinue operations are shown within profit after tax from discontinued operations. Profits or losses on activities previously classified as discontinued operations for the current year are also shown within this item. 71 7. Accounting policies for the cash flow statement The cash flow statement has been prepared according to the indirect method, based on actual balance sheet movements. A distinction is made between operating, investing, and financing activities. Although the current portion of non-current liabilities is recognised in the balance sheet as part of other current liabilities, movements in the current portion of non-current liabilities is shown within the cash flow from financing activities in the cash flow statement. Cash flows relating to minority interests (dividend payments), finance income or expense, and corporate income taxes (tax assessments) are based on the actual receipts and payments. 72 Notes to the consolidated balance sheet 1. Intangible assets (EUR 1,000) Total Goodwill Software Costumer contracts Transport rights Other 2013 Carrying amount as at 1 January Investments Depreciation Disposals Other Carrying amount as at 31 December Accumulated depreciation and impairment Acquisition cost as at 31 December 480,919 7,365 (14,308) (87) (700) 430,049 (9) 36,779 7,365 (12,691) (691) 3,254 6,798 (435) - (1,182) - 4,039 (87) - 473,189 430,040 30,762 2,819 5,616 3,952 339,705 103,744 180,330 22,673 13,692 19,266 812,894 533,784 211,092 25,492 19,308 23,218 473,189 430,040 30,762 2,819 5,616 3,952 1,984 (12,959) (95,129) (140) (95,129) 38 1,984 (8,966) (2,811) (1,182) - (3,480) 7,254 - (3,952) 366,945 334,949 20,300 7,262 4,434 - 256,157 104,459 112,559 24,265 14,874 - 623,102 439,408 132,859 31,527 19,308 - 2014 Carrying amount as at 1 January Investments Depreciation Impairments Other Carrying amount as at 31 December Accumulated depreciation and impairment Acquisition cost as at 31 December Depreciation periods in years nvt 5 Allocation of goodwill to cash-generating units (EUR 1,000) Indaver Kreekraksluis 2013 Zeelandnet Totaal Goodwill Carrying amount as at 1 January Investments Depreciation Disposals Other Carrying amount as at 31 December Accumulated depreciation and impairment Acquisition cost as at 31 December Total 480,919 7,365 (14,308) (87) (700) divers 20 31-12-2014 Goodwill Software 430,049 (9) 36,779 7,365 (12,691) (691) Costumer contracts 323,716 1,390 9,843 334,949 3,254 (435) - divers 31-12-2013 Transport rights 6,798 (1,182) - Other 418,807 1,390 9,843 430,040 4,039 (87) - 473,189 430,040 30,762 2,819 5,616 3,952 339,705 103,744 180,330 22,673 13,692 19,266 812,894 533,784 211,092 25,492 19,308 23,218 473,189 430,040 30,762 2,819 5,616 3,952 1,984 (12,959) (95,129) (140) (95,129) 38 1,984 (8,966) (2,811) (1,182) - (3,480) 7,254 - (3,952) 366,945 334,949 20,300 7,262 4,434 - 2014 Carrying amount as at 1 January Investments Depreciation Impairments Other Carrying amount as at 31 December 73 Goodwill Under IFRS (IAS 36 Impairment of Assets), for group companies for which goodwill has been paid in the past, value in use is measured annually so as to determine whether to recognise an impairment loss on the goodwill. If the recoverable amount of the asset is lower than the carrying amount, the carrying amount is reduced to reflect the recoverable value. This reduction constitutes an impairment loss and is immediately recognised in the profit or loss, unless the asset is revalued according to a different standard (which is not the case for DELTA). The recoverable value of an asset or a cash-generating unit (CGU) is the highest of its fair value less costs of disposal and its value in use. Value in use is the present value of the future cash flows expected to be derived from an asset or a cash-generating unit. The DELTA Group measures the value in use of classifiable assets, i.e. assets, groups of assets, and/or cash-generating units, through impairment tests. Use of inflation expectations The impairment tests are based on an expected annual inflation rate of 2%. The ECB’s policy is to achieve an annual inflation rate of 2% or just under 2%. The ECB’s inflation objective is used to calculate cash flows projections in impairment testing, taking into account a minimum three-year horizon as reflected in the underlying business plans, and what basically is then an infinite series of those cash flow projections. Indaver As regards Indaver’s operations, impairment tests were conducted at the level of its cash-flow generating units. Management based its cash flow projections on the business plans for 2015-2019 and, in a number of cases, on a longer time horizon. For the period after this time horizon, an infinite series was used for nearly all CGUs, taking into account the available information about market developments. No use was made of extrapolations with growth rates in excess of inflation. The impairment tests were conducted using a specific discount rate for each entity. Allowing for debt-toequity ratios generally accepted by market participants, a number of discount rate scenarios were looked at, using a discount rate per CGU ranging from 7.6% to 9.1% before tax. These tests revealed an impairment loss of EUR 2.4 million for the cash-generating unit Indaver Deutschland GmbH. No impairment losses were identified for the Indaver Group’s other CGUs. The carrying amount of the assets of Indaver Deutschland GmbH included in the impairment test was lower than the value in use so calculated. The difference between the carrying amount and value in use is applied against the goodwill for KGE Indaver Deutschland GmbH. In the case of a cash-generating unit to which goodwill is allocated, the impairment loss is allocated to reduce the goodwill allocated to the unit and then to reduce the other assets of the unit (IAS 36.104). In the light of its proposed sale of the Indaver Group, DELTA classified the Indaver Group as a single cash-generating unit as at 31 December 2014. On 6 March 2015, DELTA and Katoen Natie announced that they had signed an agreement for the sale of DELTA’s 75% share interest in Indaver N.V.to Katoen Natie. The sale still requires approval from DELTA’s General meeting. The price agreed (net of selling costs) is lower than the carrying amount of the Indaver Group as shown in DELTA Group’s financial statements. The difference between the carrying amount and sales price (net of selling costs) reduces the goodwill allocated to Indaver as shown in DELTA Group’s balance sheet. In the case of a cashgenerating unit to which goodwill is allocated, the impairment loss is allocated to reduce the goodwill allocated to the unit and then to reduce the other assets of the unit (IAS 36.104). As a result, the carrying amount of the 75% share interest in the Indaver Group at 31 December 2014 is consistent with the sales price (net of selling costs) announced for the 75% interest. See also note 1B Post-balance sheet events that are material to the financial statements 2014. 74 Windpark Kreekraksluis B.V. There were no indicators of impairment as regards Windpark Kreekraksluis B.V. On the basis of the information available in connection with the sale of Windpark Kreekraksluis B.V., its fair value less costs of disposal exceeds the carrying amount, including the goodwill allocated to this cash-generating unit. Zeelandnet B.V. Impairment tests were conducted for the operations of ZeelandNet, with management basing its cash flow projections on the business plans for 2015-2017. An infinite series was used for the period after this time horizon, taking into account the available information about market developments. No use was made of extrapolations with growth rates in excess of inflation. The impairment tests were conducted using a discount rate, based on debt-to-equity ratios generally accepted by market participants, more specifically a pre-tax discount rate of 9.9%. No impairment loss was identified for this CGU. Software Investment expenses were lower in 2014 than in 2013, when the new customer registration and invoicing system for the retail market was implemented. Key investment expenses in 2014 involved extending and improving the online environment. Cleaning out fixed assets records During the year, fixed assets records were cleaned out, with assets that had already been written down and were no longer serving the production process being deleted from the accounts and records. 75 2. Property, plant and equipment (EUR 1,000) Total Land and buildings Plant and equipment 295,960 1,497,347 Other assets Assets under construction Third-party contributions 2013 Carrying amount as at 1 January Investments Capitalized interest Depreciation Impairments Disposals Other investments 1,780,017 162,379 364 (159,409) (545) (2,116) 2,895 1,578 (19,632) (545) (369) (3,097) 30,354 (135,098) (1,526) 123,777 41,497 91,099 21 (10,705) (18) 33,830 132,424 364 (203) (154,448) (145,886) (1,997) 6,026 2,832 Carrying amount as at 31 December 1,783,585 273,895 1,514,854 64,625 69,236 Carrying amount before deduction of contributions 1,922,610 273,895 1,514,854 64,625 69,236 1,663,888 203,987 1,380,212 75,211 4,478 3,586,498 477,882 2,895,066 139,836 73,714 1,783,585 273,895 1,514,854 64,625 69,236 30,891 (137,838) 176 (15,981) 70,924 (21) (77) 5,699 (1,477) 50,694 (109) 20,187 (74,483) 4 2,075 Accumulated depreciation and impairment Acquisition cost as at 31 December (139,025) 2014 Carrying amount as at 1 January Investments Depreciation Impairments Disposals Other investments 103,793 (167,359) (410) (4,007) (1,790) 1,879 (19,218) (410) (2,425) (263) Carrying amount as at 31 December 1,713,812 253,458 1,457,124 68,898 65,656 Carrying amount before deduction of contributions 1,845,136 253,458 1,457,124 68,898 65,656 1,782,542 223,276 1,494,380 63,566 1,320 3,627,678 476,734 2,951,504 132,464 66,976 Accumulated depreciation and impairment Acquisition cost as at 31 December Depreciation periods in years 0 - 40 7 - 40 5 - 15 (139,025) (131,324) n/a 76 Investments were significantly lower in 2014 than 2013, when major investments were made in Windpark Kreekraksluis B.V. (Zeeland). Investments in plant and equipment (including changes in assets under construction) mainly involved expanding and replacing gas and power grids (Netwerkbedrijf), extending and renovating waste processing plants, and investments in EPZ’s nuclear power station. Investment by type of operation: Grids Indaver EPZ Energy & Multimedia EUR 39.4 million EUR 36.6 million EUR 19.3 million EUR 8.5 million Tolling rights obtained on acquisition and allocated to the relevant production unit are amortised over the remaining useful life of the operation in question. This led to an amortisation charge of EUR 16 million during the year. In 2012, an impairment loss was recognised for the write-down of combined heat and power systems (CHP) and the write-down of a supply connection to an industrial estate. Similar to 2013, a test was conducted in 2014 to determine whether to reverse the write-down of CHPs on the basis of the portfolio of CHPs and related contract terms and expected energy price developments. However, no reversal was in order at year-end 2014 (similar to 2013). The test used a pre-tax discount rate of 8.6%. The impairment loss on the supply connection, arising from a sharp decline in purchases by businesses located on the industrial estate, was also maintained. The tests conducted in 2014 did not lead to the reversal of previous impairment losses. In accordance with IFRIC 18, third-party contributions to the construction costs of an item of property, plant and equipment are no longer deducted from the carrying amount of the asset (for which the contribution was received), and instead are shown within deferred revenue. Cleaning out fixed assets records During the year, fixed assets records were cleaned out, with assets that had already been written down and were no longer serving the production process being deleted from the accounts and records. 77 3. Interests in joint ventures, investments in associates and other investments (EUR 1,000) Carrying amount as at 1 January 2013 Acquisitions Investments/Disposals Dividends received Total Joint Ventures Associates Other Investments 391,642 326,354 52,623 12,665 492 265 227 - 3,817 (33,975) 143 (25,621) (8,104) 3,674 (250) 41,548 33,411 8,884 (747) 8,998 9,054 Carrying amount as at 31 December 2013 412,522 343,606 53,376 15,540 Carrying amount as at 1 January 2014 412,522 343,606 53,376 15,540 Share of proftis Other movements Acquisitions Investments/Disposals Dividends received Share of proftis Other movements Carrying amount as at 31 December 2014 (254) 198 - - - 3,393 (35,664) (30,326) (403) (5,244) 3,796 (94) 41,209 32,130 7,590 1,489 7,545 8,068 429,005 353,478 (516) 54,803 (7) 20,724 Dividends received mainly comprise the water company Evides, several smaller joint ventures and associates in the field of energy generation that operate under tolling agreements with DELTA, grids and waste processing. Other movements mainly comprise a change in shareholders’ equity of a joint venture and the payments made into SET (Sustainable Energy Technology) Fund C.V. and SET Fund II C.V., and changes in their value during the year. 78 3.1 Joint ventures A summary of the information in the balance sheet and income statement relating to joint ventures (under IFRS, based on a 100% interest) EVIDES N.V. (EUR 1,000) Current assets Non-current assets Current liabilities Non-current liabilities Revenue Profit form continuing operations Profit from discontinued operations Profit for the year Other comprehensive income Total comprehensive income Dividend received by DELTA Abovementioned income statement consists among others of the following: Depreciation, amortisation and impairment External finance income/expenses Corporate income tax 31-12-2014 31-12-2013 68,188 1,026,690 (178,537) (460,533) 68,096 1,025,661 (154,133) (500,555) 2014 2013 296,558 60,731 60,731 60,731 22,400 295,303 56,802 56,802 56,802 23,550 67,068 7,865 1,573 65,837 9,286 1,321 31-12-2014 31-12-2013 Equity DELTA's interest Goodwill 455,808 50% 95,502 439,069 50% 95,502 Carrying amount as at 323,406 315,037 79 80 3.2 Associates A summary of the information in the balance sheet and income statement relating to associates (based on a 100% interest). AZN Holding B.V. (EUR 1,000) Current assets Non-current assets Current liabilities Non-current liabilities Revenue Profit form continuing operations Profit from discontinued operations Profit for the year Other comprehensive income Total comprehensive income Dividend received by DELTA Equity DELTA's interest Goodwill Other Carrying amount as at 31-12-2014 31-12-2013 40,000 225,000 (50,000) (58,597) 29,058 227,222 (38,514) (79,213) 2014 2013 125,251 21,582 21,582 21,582 1,721 140,000 24,148 24,148 24,148 2,341 31-12-2014 31-12-2013 156,403 20% 8,219 138,553 20% 11,861 39,500 39,572 IHM cvba (EUR 1,000) Current assets Non-current assets Current liabilities Non-current liabilities Revenue Profit form continuing operations Profit from discontinued operations Profit for the year Other comprehensive income Total comprehensive income Dividend received by DELTA Equity DELTA's interest Goodwill Other Carrying amount as at 31-12-2014 31-12-2013 10,038 30,984 (1,836) (4,779) 10,032 30,379 (1,999) (6,765) 2014 2013 8,044 1,837 1,837 1,837 309 8,130 1,421 1,421 1,421 457 31-12-2014 31-12-2013 34,407 30% (747) 31,647 30% (11) 9,575 9,483 81 Other associates 31-12-2014 (Bedragen x EUR 1.000) 31-12-2013 Profit from continuing operations attributable to DELTA N.V. Profit from discontinued operations attributable to DELTA N.V. Other comprehensive income attributable to DELTA N.V. Total comprehensive income attributable to DELTA N.V. 2,723 2,723 3,628 3,628 Total carrying amount as at 5,728 4,321 3.3 Other investments All entities presented as other investments are included in the list of non-consolidated companies. In 2007, as part of the Borssele Agreement, DELTA (with DELTA Investeringsmaatschappij B.V. acting as limited partner) and Essent (now an RWE company) set up the Sustainable Energy Technology Fund (SET-Fund I C.V.). Both partners own a 50% interest in the partnership. Given the Fund’s articles of association and the change in ownership interests in N.V. EPZ, a new fund (SET-Fund II C.V.) was launched on 23 December 2011. DELTA owned a 69.65% interest and Essent (RWE) a 29.85% interest in SET Fund II C.V.'s initial share capital. In view of the limited degree of control, the investments in both entities are classified as financial instruments and stated at fair value. Due in part to the entry of a new limited partner, DELTA's interest in SET Fund II C.V. (with DELTA Investeringsmaatschappij B.V. acting as a limited partner) stood at 54.22% as at 31 December 2014. 3.4 Transactions with related parties Transactions with related parties are recognised if the value of the related party is material to DELTA’s financial information and sales and purchase transactions, receivables and payables, and loans granted involve at least EUR 5 million. Transactions with Elsta B.V. are based on tolling agreements (cost-plus method). Other transactions are at arm’s length. No provision for bad debts is recognised for amounts owed by related parties because there is no need to do so. Although DELTA’s shareholders (provincial and municipal authorities) are related parties, no material transactions are conducted between DELTA and its shareholders. The remuneration paid to the Executive Board and Supervisory Board is shown within staff costs and other operating expenses. (EUR 1,000) Sales % Interest 2014 Purchases 2013 2014 Trade receivables Elsta B.V & Co C.V. 24.75% Elsta B.V. 25.00% - - 25,318 25,315 BMC Moerdijk B.V. 50.00% 1,864 1,767 5,567 5,829 Zebra Gasnetw erk B.V. 33.33% - - 408 495 - IHM cvba 30.00% 283 Vlaamse Milieu Holding N.V. Evides N.V. Totaal Trade payables Loans granted Interest 2013 31-12-2014 31-12-2013 31-12-2014 31-12-2013 31-12-2014 31-12-2013 982 983 315 401 na - - - - 50.00% - - - - 38,324 39,023 32,094 32,374 266 12 141 2,664 - - 136 1,054 1,000 12,564 12,703 - 35 9 - - 379 15 150 - - - - 549 3,735 2014 - Loans 2013 31-12-2014 31-12-2013 - - 1,275 - - - - 996 - - - - - - - - - - 20,000 - - - - - - - 9,761 7,975 12,564 12,703 996 1,275 20,000 20,000 20,000 82 3.5 Consolidated company with a significant minority interest (based on a 100% interest) Indaver Deutschland GmbH 31-12-2014 31-12-2013 Current assets Non-current assets Current liabilities Non-current liablities Equity attributable to DELTA N.V. Equity attributable to non-controlling interests 34,329 195,297 (38,633) (106,551) 43,065 41,377 34,690 209,037 (37,303) (113,846) 47,273 45,305 Revenue Costs Profit for the year 2014 141,865 (148,184) (6,319) 2013 131,916 (136,537) (4,621) Profit attributable to DELTA N.V. Profit attributable to non-controlling interests Profit for the year (3,223) (3,096) (6,319) (2,359) (2,262) (4,621) Other comprehensive income attributable to DELTA N.V. Other comprehensive income attributable to non-controlling interests Other comprehensive income (927) (890) (1,817) (10) (9) (19) Total comprehensive income attributable to DELTA N.V. Total comprehensive income attributable to non-controlling interests Total comprehensive income (4,150) (3,986) (8,136) (2,369) (2,271) (4,640) Dividend paid to non-controlling interests - - Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Evolvement cash position during the year 13,636 (5,971) (10,369) (2,704) 15,987 (6,739) (4,948) 4,300 (EUR 1,000) 83 4. Other financial assets Total (EUR 1,000) Carrying amount as at 1 January 2013 Reversal of current portion New loans Results Repayments Transferred to equity as hedge reserve Other movements Carrying amount as at 31 December 2013 Current portion of financial assets Carrying amount as at 1 January 2014 (long term) Reversal of current portion New loans Results Repayments Transferred to equity as hedge reserve Other movements Carrying amount as at 31 December 2014 Current portion of financial assets Carrying amount as at 31 December 2014 (long term) 181,727 4,025 11,702 (7,368) (3,342) (235) 10,988 197,497 (1,735) 195,762 1,735 10,586 7,016 (2,555) 2,693 600 215,837 (1,310) 214,527 Loans to joint ventures and associates etc. Deferred tax asset Other financial assets 14,352 89,094 78,281 3,985 1,257 (2,643) - (9,351) (235) 11,163 40 10,445 1,983 (699) (175) 16,951 90,671 89,875 (1,585) - 15,366 90,671 89,725 1,585 184 (1,565) (1) (2,368) 150 10,402 9,384 (990) 601 15,569 90,996 (1,300) - 14,269 90,996 2,693 - (150) 109,272 (10) 109,262 4.1 Loans to joint ventures, associates etc. These comprise loans to joint ventures, associates and other investments. Loans are stated at face value. Subordinated loans amount to EUR 12.5 million. At year-end 2014, the weighted average interest rate was 6.9% (2013: 6.9%). 4.2 Deferred tax assets (EUR 1,000) Intangible assets and property, plant and equipment Financial assets Provisions Unutilised tax losses Hedge reserve pursuant to IAS39/derivatives Other Total deferred tax asset 31-12-2014 28,547 6,570 17,030 29,182 11,474 (1,807) 90,996 31-12-2013 29,419 6,352 18,986 27,177 8,723 14 90,671 The deferred tax asset relating to intangible assets and property, plant and equipment largely arises from differences between the tax bases and carrying amounts for reporting purposes of assets as at 1 January 1998 (the opening balance sheet for tax purposes for DELTA N.V.) The deferred tax asset relating to provisions arises from liabilities recognised in the financial statements which are either not recognised or recognised in a different manner for tax purposes. In all cases, these are temporary differences which will be reflected in the effective tax rate in the coming years. 84 A deferred tax asset is also recognised for unused tax losses that are expected to be offsettable in the coming years. The losses are attributable mainly to DELTA N.V. and arose during the period when the DELTA N.V. fiscal unity comprised all of its Dutch-based wholly-owned subsidiaries. The deferred tax asset for unused tax losses is measured annually and recognised if it is expected that the losses can be set off against future taxable profits. On 1 January 2014 (previously 31 December 2013), after consulting the Dutch Tax and Customs Administration, DELTA N.V. formed a fiscal unity for corporate income tax purposes only with its grid operation subsidiary. Profits made by the grid business can be set off against losses incurred in the past and attributable to DELTA N.V. Taking into account known differences between the commercial profit and taxable profit calculations, an estimate was made of future losses offsettable within the statutory period. A mandatory separation of the grid operations under the Independent Grid Management Act (Wet Onafhankelijk Netbeheer) could affect the valuation of this deferred tax asset. Since 2006, a hedge reserve for unrealised fair value gains or losses on derivatives and trading contracts has been recognised in compliance with IAS 39/32. A deferred tax asset is recognised for unrealised fair value gains or losses. At year-end 2014, the hedge reserve was negative (hence an asset), resulting in a deferred tax asset. At 31 December 2014, no deferred tax asset was recognised for EUR 118 million in tax loss carryforwards due to uncertainty over whether and when the unused tax losses or unused tax credits might be utilised (in the Netherlands or abroad). EUR 34 million in unused tax losses will expire within 5 years. The remaining losses have a carry-forward period of more than five years. 4.3 Other financial assets At 31 December 2014, other financial assets mainly comprised prepayments. Other financial noncurrent assets also include the Foundation that provides the financial security required by the Nuclear Energy Act to ensure the presence of sufficient funds to dismantle the nuclear power station after its expected closure date. Keeping the money in a separate foundation covers the risk of the available funds being part of the assets of the permit holder in the event of the company going into liquidation. 85 5. Derivatives and risk management DELTA is involved in gas, electricity, coal, oil, emission and currency trading contracts for the current calendar year and the following four years. DELTA considers the markets for these commodities to be liquid over this time horizon because reliable prices are available from brokers, markets, and data providers. The fair value of commodity contracts is calculated on the basis of these published prices; no in-house valuation models are used. The monthly, quarterly and annual prices published are adjusted only to reconcile them with the relative periods in the trade systems. DELTA uses derivatives, such as interest rate swaps, to hedge its interest rate risk exposure. These swaps allow a floating rate to be exchanged for a fixed rate. This section covers the following topics: 5.1 Derivatives 5.1.1 Relationships of derivatives in the financial statements 5.1.2 Derivatives position 5.1.3 Changes in the hedge reserve 5.1.4 Hierarchy of financial instruments 5.2 Risk management 5.2.1 Risk management 5.2.2 Market risks 5.2.3 Liquidity risk 5.2.4 Credit risk 5.1 Derivatives 5.1.1 Relationships of derivatives in the financial statements 2014 Balance of derivatives (EUR 1,000) Assets 2014 Assets 2013 Changes in derivatives Liabilities Liabilities 2014 2013 Change in 2014, assets Change in 2013, liabilities Derivatives on the balance sheet (see 5.1.2) Non-current assets Current assets 78,679 88,080 (9,401) 187,655 141,856 45,799 266,334 229,936 36,398 Non-current liabilities 133,806 115,839 17,967 Current liabilities 223,978 160,555 63,423 357,784 276,394 81,390 (79,978) (34,657) Other balance sheet items relating to derivatives Hedge reserve (see 5.1.3) Deferred tax (see 5.1.3) 11474 8723 Non-controlling interest connected with swaps (see 5.1.3) Subtotal 11,474 8,723 264 (3,192) (174) (556) (79,888) (38,405) 1,439 2,250 (1,436) (2,104) (45,321) 2751 3,456 382 2,751 (41,483) - Purchase of interest rate derivatives by DNWB Changes in equity through profit or loss Fair value changes in equity through profit or loss Total (91) 11,474 8,723 277,808 238,659 (811) 668 524 (615) (79,976) (37,735) 2,751 (42,241) 277,808 238,659 39,149 39,149 86 5.1.2 Derivatives position ASSETS (EUR 1,000) Non-current Current 2013 Commodity contracts Gas Electricity Coal Oil Other Other derivatives Foreign exchange contracts 2013 2012 52,416 19,579 148 8 33,532 51,502 - 88,605 66,424 3,578 43,946 75,770 4,398 2,981 - 6,520 2,827 29,010 14,715 8 219 38 46 78,679 88,080 187,655 141,856 Interest rate swaps Total 2012 LIABILITIES (EUR 1,000) Non-current NET Current 2013 2012 2013 2012 2013 2012 Commodity contracts Gas Electricity Coal Oil Other (55,374) (27,853) (175) - (30,577) (47,898) (2,337) (1,239) (114,912) (59,128) (17,008) (243) - (50,923) (64,146) (13,285) (84) (7,261) (29,265) (978) (16,860) (418) 3,586 (4,022) 15,228 (11,224) 2,897 (8,500) Other derivatives Foreign exchange contracts (11,886) (6,886) (25,529) (17,408) (1,885) (6,752) Interest rate swaps (38,518) (26,902) (7,158) (7,448) (45,630) (34,085) (133,806) (115,839) (223,978) (160,555) (91,450) (46,458) Total A loss of EUR 44.2 million (2013: gain of EUR 0.2 million) on these contracts is recognised in the hedge reserve. 87 5.1.2a Offsetting financial assets Assets (EUR 1,000) Non-current assets Gross amount Commodity contracts Gas Electricity Coal Oil Other Other derivatives Foreign exchange contracts Interest rate swaps Total Offsetting Current assets Net amount Gross amount Offsetting Net amount 117,729 136,038 523 2,141 8 65,313 116,459 375 2,141 - 52,416 19,579 148 8 550,816 541,913 45,651 16,204 6,429 462,211 475,489 45,651 16,204 2,851 88,605 66,424 3,578 6,520 - 6,520 29,010 - 29,010 8 - 8 38 - 38 262,967 184,288 78,679 1,190,061 1,002,406 187,655 5.1.2b Offsetting financial liabilities Liabilities (EUR 1,000) Non-current liabilities Commodity contracts Gas Electricity Coal Oil Other Current liabilities Gross amount Offsetting Net amount Gross amount Offsetting Net amount (120,687) (144,311) (376) (2,316) - (65,313) (116,458) (376) (2,141) - (55,374) (27,853) (175) - (577,124) (534,617) (62,659) (16,446) (2,851) (462,212) (475,489) (45,651) (16,203) (2,851) (114,912) (59,128) (17,008) (243) - Other derivatives Foreign exchange contracts (11,886) - (11,886) (25,529) - (25,529) Interest rate swaps (38,518) - (38,518) (7,158) - (7,158) (133,806) (1,226,384) Total (318,094) (184,288) (1,002,406) (223,978) 88 5.1.3 Changes in the hedge reserve Changes in the fair value of derivatives after tax of the following derivatives are included in the hedge reserve. This reserve is not freely distributable. Movements in the hedge reserve in the past two years are presented below. (EUR 1,000) Commodity contracten Gas Electricity Swaps Coal Oil 18,997 (6,840) 6,012 33 Foreign Exchange CO2 Total Interest rate swaps Total 2013 Hedge reserve 1-1-2013 (gross) (11,133) (18,532) 11,225 (271) (47,008) (47,279) Changes in 2013 Recognised directly in equity 1,994 (9,818) 2,060 (1,563) (7,443) (14,737) Released to income 1,872 (5,287) 6,718 (5,844) 10,811 (6,158) 2,112 Total changes 2013 3,866 (5,254) (3,100) (3,784) 9,248 (13,601) (12,625) 12,776 (7,267) 13,743 (9,940) 2,228 (9,284) (2,376) (12,896) (34,232) (47,128) 1,817 (3,438) 2,485 3,222 8,693 11,915 - (5) - Hedge reserve 31-12-2013 (gross) Deferred tax Non-controlling interest Hedge reserve at 31-12-2013 (557) - 2,321 594 - - (5) 22,011 (9,235) 561 7,274 (7,123) 151 555 (5,450) 10,300 (7,455) 1,671 (6,963) (1,782) (9,679) (24,978) (34,658) (7,267) 13,743 (9,940) 2,228 (9,284) (2,376) (12,896) (34,232) (47,128) (65,354) 2014 Hedge reserve 1-1-2014 (gross) Changes in 2014 - 4,293 11,957 (46,550) (18,804) Released to income 7,463 (7,919) 7,232 (2,228) 7,711 1,458 13,717 7,403 21,120 Total changes 2014 (35,031) (14,240) (6,753) (2,228) 12,004 13,415 (32,833) (11,401) (44,234) Hedge reserve 31-12-2014 (gross) (42,298) Recognised directly in equity (42,494) (6,321) (13,985) (497) (16,693) - 2,720 11,039 (45,729) (45,633) (91,362) Deferred tax - (264) - - - - (264) 11,474 11,210 Non-controlling interest - (128) - - - - (128) 302 2,720 11,039 (46,121) Hedge reserve at 31-12-2014 (42,298) (889) (16,693) - (33,857) 174 (79,978) 89 The composition of the hedge reserve in relation to commodities, on a gross basis, at year-end 2014 is attributable to the years ahead as follows: Commodities hedge reserve (on a gross basis) COMMODITY CONTRACTS (EUR 1,000) Gas Electricity 2015 (29,913) 3,967 2016 (8,417) (4,514) 2017 (3,968) 2018 Total - (42,298) Coal Oil (16,693) Foreign Exchange CO2 Total - 2,711 10,644 (29,284) - 9 314 (12,608) 142 - - - 81 (3,745) (92) - - - - (92) - 2,720 11,039 (45,729) (497) (16,693) The release from the hedge reserve to profit or loss is shown within gross operating margin. The timing of expected cash flows does not always coincide with their recognition in the income statement. This is because some hedges have a ‘timing effect.’ This is the case, for example, with the majority of gas hedges, in which the gas price for the first quarter of a year can be determined on the basis of the average oil price over the six months preceding that quarter. The value of the swaps used in such a hedging relationship, settlement of which takes place in the six months preceding the quarter in which delivery is made, is recognised in the hedge reserve up to the beginning of the delivery quarter, with the gain or loss being recognised in profit or loss in the first quarter of delivery. The maximum time lag on contracts in a hedging relationship is nine months. During the year, no hedging relationships were discontinued on the basis that an expected transaction did not go ahead. 5.1.4 Hierarchy of financial instruments Financial instruments are all recurring valuations, measured at fair value, and classified according to the following hierarchy as required by IFRS 13 Fair Value Measurement: Level 1: Level 1 inputs are (unadjusted) prices quoted on active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2: Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: a) b) c) ii) Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets or liabilities in markets that are not active; Inputs other than quoted prices that are observable for the asset or liability in question, for example: i) Interest rates and yield curves that are published on a regular basis Implied volatilities and iii) credit spreads (differences in interest rates); d) Market-corroborated inputs. Level 3: Level 3 inputs are unobservable inputs for the asset or liability. 90 Assets and liabilities measured at fair value FAIR VALUE HIERARCHY (EUR 1,000) Total as at 31 December 2014 Assets Derivatives Part of other investments and other financial assets Total assets Equity and liabilities Derivatives Put options Total equity and liabilities 2013 Level 1: 2014 Level 2: 2013 2014 Level 3: 2013 2014 2013 266,334 229,936 - - 266,334 229,936 - - 120,221 386,555 95,566 325,502 100,929 100,929 81,236 81,236 266,334 229,936 19,292 19,292 14,330 14,330 357,784 138,732 496,516 276,394 156,905 433,299 - - 357,784 357,784 276,394 276,394 138,732 138,732 156,905 156,905 Movements in ‘Part of other investments and other financial assets’ in 2014 comprised EUR 24.7 million, EUR 14.6 million of which related to investments/new receivables, and EUR 10.1 million concerned a gain. Other investments comprised, inter alia, the share interest in SET Fund C.V. and SET Fund II C.V. (see also note 3.3). Other financial assets comprised , inter alia, the Foundation for managing the funds for dismantling the Borssele nuclear power station (see also note 4.3). The fair values are based on: Measurements in accordance with the International Private Equity and Venture Capital Valuation Guidelines issued by International Private Equity and Venture Capital (IPEVC) and approved by the European Private Equity and Venture Capital Association (EVCA); Specially established asset funds with their own market value per unit. A reclassification from level 3 to level 1 occurred on the basis of additional information in 2014. The reclassification was also applied to the comparatives for 2013. Several assets shown within other financial non-current assets are measured on the basis of quoted prices in active markets, and hence are categorised into level 1. Put options Put options were granted to minority shareholders in connection with the Indaver acquisition in 2007. The put options are exercisable in 2015. The share of the company’s profit attributable to non-controlling interests in Indaver is added to the obligations relating to the put options. In view of the agreement reached with Katoen Natie on the sale of DELTA’s 75% share interest in Indaver, the put option was valued at the price agreed for the 75% interest at 31 December 2014 (see also 1B Post-balance sheet events that are material to the financial statements 2014) 5.2 Risk management 5.2.1 Risk management DELTA is involved in international gas and electricity trading. Prices on these international markets fluctuate strongly. DELTA uses financial instruments to mitigate commodity, foreign exchange, interest rate, liquidity and credit risks, subject to the conditions laid down in the Risk Policy Document and Treasury Charter. Under the auspices of the Executive Board, the Risk Management Committee has put in place general procedures and limits and is responsible for ensuring that DELTA’s energy trading and sales activities remain within the defined risk margins. The following paragraphs describe the different types of risk and the way in which DELTA manages the related exposures. 91 5.2.2 Market risks 5.2.2.1 Commodity price risk Market risks arise from price movements in the markets where DELTA buys and sells (gas, electricity, coal, oil, emission allowances, currencies, transmission capacity, imports/exports capacity, etc.). It is DELTA’s policy to mitigate the impact of price movements in the short term and track prevailing market prices in the long term. For systematic risk control purposes, asset allocations and positions are determined on the basis of expected price developments. These positions are monitored on a daily basis. Trading risks are mitigated by strictly enforcing a system of limits. 5.2.2.2 Value-at-Risk DELTA uses the Value-at-Risk (VaR) method to calculate and assess market risks on its commodity markets. This method involves using various assumptions regarding possible changes in market conditions. The VaR method is an important tool to assess the company’s exposure to market risk. VaR identifies the maximum portfolio losses likely to be incurred as a result of price changes over a threeday period with a confidence level of 95% (i.e. in 5% of cases the portfolio losses may exceed the VaR limit). VaR is calculated using Monte Carlo simulations based on historical volatilities and correlations. Because portfolios include opposing positions and there is an underlying correlation, the VaR of the total portfolio is smaller than the sum of sub-portfolio VaRs. Value at Risk (EUR 1,000) Value at Risk 31-12-2013 31-12-2012 Asset Book Trade Books Diversification over Books Total 6,193 994 (1,553) 8,539 1,137 (1,837) 5,634 7,839 VaR is an important tool for DELTA to manage its portfolios and it is therefore calculated and reported on a daily basis. Although the VaRs for the Asset Book and total portfolio are reported on a daily basis, they are not used as a management parameter. The Asset Book is hedged on the basis of a predetermined disposal schedule to establish average market value. Variations from the disposal schedule fall within the Trade Books, for which VaR is the key measure of risk. 5.2.2.3 Cash flow hedges DELTA uses financial instruments to minimise fluctuations in expected cash flows. The company uses derivatives, including forward contracts, options and swaps, to control the effects of future changes in market prices. These hedging instruments are derivatives of commodities traded by DELTA and they are entered into to mitigate cash flow, price and currency risks. Hedge accounting is applied to cushion the total change in value of these derivatives. To the extent permitted, DELTA accounts for these financial instruments and the physical purchase and sale contracts in a cash flow hedge in accordance with IAS 39. The hedged item is the future purchase transaction (power stations, long-term sourcing) or sales transaction for gas or electricity. 92 Cashflow flow hegdges hedges electricity and fuel Cash AMOUNT AT FAIR VALUE (EUR 1,000) 2014 2015 2016 2017 Gas forwards Electricity forwards Coal swaps Oil swaps CO2-forwards Currency swaps (28,416) 2,310 (16,747) (9,849) (3,831) (4,243) 206 Total (30,922) (13,258) 2014 2015 (8,752) 6,887 (9,264) 2,981 (4,565) 1,525 (15) 3,252 (2,183) (2,649) (871) 163 577 - (11,189) (2,466) 740 2013 Gas forwards Electricity forwards Coal swaps Oil swaps CO2-forwards Currency swaps Total 1,965 9,966 8 414 2018 and beyond Total (177) - (42,508) (1,492) (16,747) 1,973 10,558 (3,859) (177.00) (48,216) 2016 2017 and beyond 178 - - Total (8,605) 10,716 (11,447) 2,981 (7,214) 654 Average price Contract value 0.249 44.551 72.227 (254,139) (105,051) (67,604) 6.552 0.893 (16,459) (109,673) Average price 0.266 48.395 68.622 626.694 6.832 0.899 Contract value (226,135) (460) (100,669) (33,841) (27,219) (263,676) (12,914) The hedge reserve comprises value changes in derivatives in the period in which they are included in an effective hedging relationship. Derivatives shown in the analysis of cash flow hedges comprise derivatives that were part of a hedging relationship as at the balance sheet date. A mismatch occurs because: the analysis of cash flow hedges also includes the ineffective portion of the hedging instrument; the gains and losses on the hedging instruments entered into to form a hedging relationship are also included in the analysis of cash flow hedges; the hedge reserve also includes the gains and losses on hedging instruments that were part of a hedging relationship in the past but were no longer included in a hedging relationship at the end of the financial year. The amounts recognised in the hedge reserve take account of the date on which an instrument was designated as part of a hedging relationship, which may be different from the date of the associated trade. In addition, the hedge reserve comprises only the effective portion of the total fair value of hedging instruments recognised in the hedge reserve. 5.2.2.4 Currency risk Currency risk is the risk that the value of assets will change due to movements in foreign exchange rates. DELTA’s risk policy is to hedge currency risks associated with positions denominated in foreign currencies. To hedge this risk, the company uses financial instruments (forward contracts) to minimise fluctuations in expected cash flows. Currency positions arising from commodity and other contracts are reported to the Treasury department on a daily basis to be hedged at group level. Currency risk limits are set periodically in consultation with the Risk Management Committee and are monitored by the Treasury department. The following exchange rates against the euro were used to convert currency positions as shown in the balance sheet: MIDDLE RATES US dollar Pound sterling 31-12-2014 1.2153 0.7797 31-12-2013 1.3770 0.8322 93 5.2.2.5 Interest rate risk DELTA’s interest rate risk policy is to mitigate the effects of interest rate fluctuations. To hedge this risk, the company uses derivatives, including interest rate swaps. Hedged loans DELTA holds a number of interest rate swaps, all of which were effective at the balance sheet date. Sensitivity is measured by increasing or reducing the floating spot by 10%. Several of these interest-rate derivatives can be classified as option contracts, which qualify for the exemption referred to in IAS 39.74. Changes in fair value are accounted for in the hedge reserve, with changes in the time value being recognised through profit or loss. The table shows the effects of a 10% increase and 10% decrease compared with the carrying amounts as at 31 December 2014. No Value-at-Risk (VaR) is calculated for interest rate derivatives. Sensitivity interest rate 10% increase (EUR 1,000) Position as at 31 December Value based on yield curve 10% decrease Increase in value relative to carrying amount Value based on yield curve Decrease in value relative to carrying amount 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 Derivatives Derivatives Deferred tax on derivatives (45,630) 11,474 (34,084) 8,693 (44,798) 11,266 (31,400) 8,014 832 (208) 2,684 (679) (46,466) 11,684 (36,768) 9,372 (836) 210 (2,684) 679 Total (34,156) (25,391) (33,532) (23,386) 624 2,005 (34,782) (27,396) (626) (2,005) 33,857 302 34,159 24,978 561 25,539 33,240 295 33,535 22,982 536 23,518 (617) (7) (624) (1,996) (25) (2,021) 34,476 309 34,785 26,972 586 27,558 619 7 626 1,994 25 2,019 1,436 2,104 1,436 2,118 1,436 2,088 0 Interest rate swaps Hedge reserve Non-controllig interest Total Gains and losses on swaps Total 0 14 (16) At 31 December 2014, interest-rate derivatives represented a loss. An upward movement in the yield curve will reduce this loss. The hedge reserve relating to interest-rate swaps as at 31 December 2014 constituted a debit item in equity. An upward movement in the yield curve will reduce the amount of this debit item. Unhedged loans If interest rates on unhedged variable-rate loans had been 10% higher or lower at 31 December 2014, with all other variables remaining constant, the profit or loss (before allowing for non-controlling interests) would have been EUR 0.5 million per annum lower or higher, respectively. 5.2.3 Liquidity risk Liquidity risk is the risk that DELTA may have insufficient funds available to meet its liabilities. DELTA’s capital management policy focuses on centralising its cash management and borrowing and repayment operations at holding company level (DELTA N.V.) as much as possible. On the basis of its business plan, the company prepares an annual financing plan to give direction to the activities undertaken by DELTA N.V.'s Treasury department, and to determine the ratio of short-term to long-term debt. DELTA also ensures that it more than meets banking ratios and other ratios necessary to maintain its corporate credit rating and optimise working capital management. It also operates a very strict policy on issuing guarantees and assuming obligations that carry liquidity risk. In March 2013, DELTA refinanced its revolving credit facility for a period of five years to March 2018. The RCF amounts to EUR 450 million. The facility includes an accordion option that allows the principal to be increased by EUR 50 million. The RCF is partly a standby facility and partly to be used to finance working capital and absorb seasonal fluctuations. Investments in long-term assets are financed by longterm loans. 94 In 2012, DELTA N.V. obtained EUR 180 million worth of long-term private loans, divided into tranches with different maturities. In December 2014, the term of one EUR 40 million tranche was extended to mid-2015 so as to keep the cash position at an appropriate level until it is certain that the sales proceeds of assets will be received in 2015. A number of DELTA Group companies have their own financing facilities, more specifically: 1. Indaver has access to lines of credit to finance its working capital requirements. At year-end 2014, it had withdrawn EUR 170 million under its existing lines of credit; 1. DELTA Netwerkbedrijf B.V. has had a separate line of credit since 2010. The amount of the financing remained unchanged at around EUR 150 million in 2014; 2. Sloe Centrale B.V. has been financed through project funding. At year-end 2014, an amount of EUR 192 million was outstanding (based on a 50% share interest). DELTA saw its credit rating issued by Standard & Poor's downgraded to BBB with a negative outlook in 2014. The downgrade was prompted by a deterioration of the company’s profile, driven in turn by the deteriorated outlook for the energy industry and adjustments to the regulatory frameworks for both the grid and water operations. Other reasons included adjustments to the system to allocate debt-related items, which led to an increase in the company’s debt position. To provide an insight into DELTA’s liquidity risk exposure, the following table presents the contractual maturities of its financial obligations: Contractual maturities of financial obligations as at 31 december 2014 (EUR 1,000) Trade payables Interest-bearing loans Derivatives Other Total Related interest payable < 1 year 1-5 years > 5 years Total 313,626 260,049 223,978 393,442 1,191,095 321,667 133,806 128,688 584,161 134,685 1,602 136,287 313,626 716,401 357,784 523,732 1,911,543 9,676 18,845 4,229 32,750 Contractual maturities of financial obligations as at 31 december 2013 (EUR 1,000) Trade payables Interest-bearing loans Derivatives Other Total Related interest payable < 1 jaar 1-5 jaar > 5 jaar Totaal 341,048 285,799 160,555 278,371 1,065,773 277,570 115,839 286,696 680,105 243,436 1,658 245,094 341,048 806,805 276,394 566,725 1,990,972 11,033 26,239 5,581 42,853 The contractual maturities of financial obligations reflect the expected outgoing cash flows relating to outstanding financial commitments as at the balance sheet date. Other contractual maturities mainly comprise deferred revenue, current taxation, and the Indaver put option. 95 5.2.4 Credit risk Credit risk is the risk that a counterparty will default on its contractual obligations. In order to mitigate its credit risk exposure, DELTA has set credit limits for external counterparties. Its internal rating system sets a credit limit for each external counterparty. The system uses publicly available information about the companies or guarantors concerned (financial statements, credit ratings, etc.). If the external counterparty’s or guarantor’s credit rating is not, or no longer, investment grade, no additional credit risk will be accepted. In 2014, the last few outstanding positions involving a number of such counterparties were settled, reducing the number of external counterparties with ratings below investment grade compared with 2013. The chart below shows the percentage distribution of DELTA’s external counterparties by credit rating class at 31 December 2014: AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ In addition to credit limits based on credit ratings, DELTA uses various other instruments to mitigate credit risk, including standard contracts and standard terms of business, market trading, end-user diversification, and additional collateral. The creditworthiness of end-users is determined on the basis of information from external data providers. As regards existing customers, their payment record is also taken into consideration when deciding whether or not to enter into a supply contract. DELTA has hedged its credit risk exposure to some corporate end-users through credit insurance. Additional collateral in the form of a bank guarantee, deposit or advance payment is requested where necessary. 96 6. Inventories (EUR 1,000) Raw materials CO2 rights Consumables Finished products Goods for resale Total Less: Provision for obsolescence Total inventories 31-12-2014 91,915 1,204 5,975 3,836 4,389 107,319 (1,001) 106,318 31-12-2013 71,347 5,883 6,241 4,582 88,053 (608) 87,445 97 7. Receivables 31-12-2014 (EUR 1,000) 31-12-2013 Trade receivables 339,668 384,408 Current tax assets 22,087 24,814 Work in progress for third parties - Cash not available on demand Current portion of long-term loans granted Other receivables, prepayments and accrued income Total other receivables Total receivables (excluding derivates) 202 28,569 1,310 18,555 48,434 26,739 1,735 24,082 52,556 410,189 461,980 Cash not available on demand comprises deposits relating to trading activities. A provision for possible bad debts totalling EUR 20.5 million (2013: EUR 20.1 million) is recognised for trade receivables. Aged analysis of trade receivables Age (i n da ys ) 31-12-2014 31-12-2013 319,022 15,925 4,038 1,262 19,872 364,254 13,228 2,966 2,450 21,593 Total 360,119 404,491 Bad debt provision (20,451) (20,083) Total trade receivables 339,668 384,408 < 30 31-60 61-90 91-120 > 120 The <30 days bracket includes an amount of EUR 150.6 million (2013: EUR 166,5 million) in receivables connected with trading operations. Settlement of these accounts always takes place within one month. Movements in bad debt provision (EUR 1,000) 31-12-2014 31-12-2013 Balance as at 1 January 20,083 20,248 Bad debts written off Added/released (1,374) 1,742 (2,781) 2,616 Balance as at 31 December 20,451 20,083 98 8. Cash Cash includes not only cash but also cash equivalents that can be converted into cash with no material risk of impairment. (EUR 1, 000) Deposits Cash / Bank Total cash 31-12-2014 87,022 70,822 157,844 31-12-2013 77,130 96,985 174,115 The amounts placed on deposit become available within three months. 99 9. Provisions Total (EUR 1,000) Site reconstruction costs Unprofitable contracts Employee benefits Carrying amount as at 1 January 2013 567,666 68,990 119,008 5,742 Reversal of current portion of provision Added Interest added Released Utilised Other movements 77,996 39,826 18,398 (19,307) (81,214) 4,330 9,299 89 2,970 (44) (1,238) 4,329 33,543 17,530 5,765 (17,489) (40,314) - 461 5,282 150 (784) - Carrying amount as at 31 December 2013 607,695 84,395 118,043 10,851 Current portion of provisions (85,430) (10,199) (29,033) (2,910) Carrying amount as at 31 December 2013 522,265 74,196 89,010 7,941 Reversal of current portion of provision Added Interest added Released Utilised Other movements 85,430 51,201 21,091 (9,213) (93,154) (8,606) 10,199 30 2,715 (7,339) (8,047) 29,033 13,261 4,352 (7,491) (37,414) - 2,910 10,927 154 (2,565) (1,257) (89) Carrying amount as at 31 December 2014 569,014 71,754 90,751 18,021 Current portion of provisions (64,855) (7,912) (38,108) Carrying amount as at 31 December 2014 504,159 63,842 52,643 (929) 17,092 Dismantling costs Other provisions 213,543 160,383 1,370 (328) 4,999 (4) 219,580 (1,664) 217,916 1,664 (2,763) 9,747 (29) 226,535 (10,225) 216,310 33,323 17,253 4,514 (1,770) (38,878) 1 174,826 (41,624) 133,202 41,624 29,746 4,123 843 (47,115) (470) 161,953 (7,681) 154,272 The release of provisions scheduled within one year involving an amount of EUR 64.9 million (2013: EUR 85.4 million) is shown within current liabilities. Use of inflation expectations Provisions are measured using an expected annual inflation rate of 2%. The ECB’s policy is to achieve an annual inflation rate of 2% or just under 2%. Use of discount rates The description of provisions specifies the discount rate used for each type of provision. The discount rates used are based on IAS 37, which, under Measurement of provisions, stipulates that a pre-tax discount rate should be used that reflects the current market assessments of the time value of money and the risks specific to the liability. The discount rate should not factor in risks which are already factored into the estimate of future cash flows. The discount rate is based on market interest rates (from different sources), plus a mark-up that depends on the nature, duration, amount and profile of the provision and related cash flow. 100 Provisions amounting to more than EUR 5 million are clarified below. Environmental costs Indaver recognises a provision for the capping and aftercare of its current landfill sites. An amount of approximately EUR 19.6 million is expected to be withdrawn from this provision over the next five years. The associated costs have been estimated by management using best estimates, based on existing technology and knowledge of technology developments. A discount rate of 4.0% (2013: 4.0%) was used. Indaver recognises a provision of EUR 1.9 million to cover expected costs due to contamination identified at certain sites. Unprofitable contracts In the light of current market prices for electricity (which are under pressure from economic developments in relation to available production capacity, on the one hand, and the rise in fuel prices due to growing global demand, on the other), several energy purchase/sales contracts made in the past are no longer profitable. A provision is therefore recognised for onerous contracts to cover the unprofitable part of some contracts. Withdrawals are made annually to offset the accumulated negative gross margin. Profits made by any of the production units involved are added to the provision annually because of the causal link between those profits and the recognition of the provision. Provisions are reviewed each year in the light of developments on the electricity and fuel markets, relevant legislation, and contractual agreements. Movements in electricity and fuel prices are based on the independent Pöyry mid-price curves. This provision was calculated at a discount rate of 4.25% (2013: 4.25%). The provision remaining at 31 December 2014 mainly comprises contracts with a joint operation and joint venture. As regards the gas portfolio, a separate review of related gas operations was conducted, given the strong correlation between the different assets and contracts. The main combined portfolio is the 'gas flex' portfolio, which consists of gas purchases (contracts and market trading) as fuel to generate power, and related transmission and storage capacity. The review also considered the assumed proceeds from gas-fired energy production (Sloe power plant). Movements in gas and electricity prices are based on the independent Pöyry mid-price curves. The costs of transmission (including the Zuid-Beveland pipeline) and storage capacity (Zuidwending) are based on long-term contractual arrangements. Other operations reviewed included the commercial gas customer operations, i.e. the combined heat and power systems and plants, to the extent that they are gas-fired and their main output is electricity. The review showed that there was no need to recognise a provision for unprofitable contracts for any of these (combined) operations. Employee benefits These provisions are recognised so as to be able to meet existing future financial obligations. Under the terms of the collective agreement, employees are paid long-service benefits. From the start date of employment, a provision is recognised for these benefits, based on past years of service, expected price and pay rises and probability of dismissals, invalidity and mortality rates. In addition, a provision is recognised in connection with transitional arrangements for IZA/IZR health insurance schemes (publicsector schemes) for former employees. These transitional arrangements were agreed with the unions in 2006 and cover a period of ten years. The discount rate is 4.5% (2013: 4.5%). The discount rate remained unchanged because of the longterm nature of these obligations. This provision also covers liabilities relating to staff redundancies in connection with the closure of EPZ’s conventional power station on 31 December 2015. In 2014, the decision was made to launch a restructuring. As regards staff who cannot be relocated to jobs within the Group, their employment contracts will terminate on 1 January 2016. 101 Negotiations about the details of a Social Plan were still ongoing as at the balance sheet date. The provision covers the expected costs of terminating the employment contracts, support and coaching expenses, and direct reorganisation costs. Demolition of energy generation units This provision covers the costs of future demolition of units once they stop operating. The expected ultimate demolition costs are based on the findings of periodic studies, allowing for price developments, recent insights, and an estimate of potential environmental impacts. The provision for the demolition of the nuclear power station is structured in such a way that demolition work on the nuclear power station can start as soon as it stops operating in 2034, in accordance with the arrangements made with central government under the Borssele Nuclear Power Station Agreement. The provisions are discounted using a discount rate of 4.5% (2013: 4.5%). Other provisions Other provisions comprise a provision for processing and storage costs. This provision covers current existing obligations. It is determined as the present value of the estimated future processing and storage costs, less the estimated present value of the residual products released in future and the net value of the amounts payable and receivable. The discount rate is 4.5% (2013: 4.5%). Pension liabilities Pension liabilities in the Netherlands Nearly all employees of DELTA Group’s Dutch-based operations are members of the ABP pension fund (Stichting Pensioenfonds ABP). The ABP plan is a multi-employer plan. The members bear nearly all of the actuarial and investment risks in the plan. Employers taking part in this plan have no obligation to make supplementary contributions in the event of a funding shortfall. Our obligations are limited to paying contributions as determined by the fund. The ABP Board of Trustees determines this contribution annually, based on its own data and with due observance of the parameters and requirements set by the regulator, the Dutch Central Bank (De Nederlandsche Bank). The obligation to pay contributions ensues from DELTA’s participation in the fund during the year and not from its participation in previous years. For reporting purposes, the ABP plan is classified as a defined contribution plan. The contributions are therefore recognised as an expense and no further explanatory notes are required. Pension liabilities abroad Indaver provides defined benefit plans for employees of the Indaver holding company and some of its subsidiaries that were part of the Indaver group before 1 July 2007. They involve two plans administered by different insurance companies. Indaver also operates unfunded defined benefit plans for the employees of Indaver Deutschland GmbH in Germany, largely without any assets being held in a separate fund or an insurance contract being signed for the purpose. Indaver provides defined contribution plans for new employees who joined the holding company and some of its Belgian-based subsidiaries after 1 July 2007, and for the employees of Indaver Ireland. On that basis, Indaver’s long-term pension liabilities were as follows: (EUR 1,000) Pension liabilities Total pension liabilities 31-12-2014 31-12-2013 39,104 31,322 39,104 31,322 In addition, an amount of EUR 0.8 million (2013: EUR 0.8 million) in pension liabilities for Indaver is shown within current liabilities. 102 Retirement benefit provisions outside the Netherlands (Indaver) (EUR 1,000) 31-12-2014 31-12-2013 Belgium Germany Belgium Germany 46,667 (26,264) 20,403 20,149 (1,923) 18,226 38,416 (24,114) 14,302 16,792 (1,549) 15,243 1,187 21,590 74 18,300 1,968 457 16,727 190 15,433 40,151 2,507 1,399 2,692 (2,847) 5,539 280 (84) (324) (2,100) 2,208 (62) 46,667 16,792 342 619 2,998 (44) (7) 3,049 (602) 20,149 32,835 2,264 1,354 2,567 (653) 627 2,593 282 (83) (306) (497) 38,416 15,594 316 650 835 (464) 1,299 (603) 16,792 23,881 690 927 (237) 2,139 280 (84) (324) (2,100) (30) 1,812 26,264 1,549 13 60 (47) 365 (4) 1,923 21,352 1,276 938 338 2,090 282 (83) (306) (497) 24,114 1,427 30 62 (32) 92 1,549 2,507 473 2,980 342 559 901 2,264 416 2,680 315 576 891 1 Net liability Present value of defined benefit obligation Fair value of plan assets Present value of net obligation Provision for taxes and social contributions * Defined benefit plan based on simplified actuarial calculation Net liability on the face of the balance sheet * From 2014 onw ards, provision for taxes and social contributions is not longer presented seperatly 2 Movements in present value Defined benefit obligation at beginning of the year Current servies costs Interest costs Actuarial gains and losses Experience adjustments actuarial (gains)/losses from changes in demographic assumptions actuarial (gains)/losses from changes in financial assumptions Contributions by employees Costs paid Insurance premiums paid Benefits paid Net transfer in/out Curtailments and settlements Defined benefit obligation at end of year 3 Movements in fair value Fair value of plan assets at beginning of year Return on plan assets expected return gain/(loss) Contributions by employer Contributions by employees Expenses paid Premiums paid Benefits paid Settlements Other Fair value of plan assets at end of year 4 Retirement benefit costs Current services costs Net interest defined benefit liability Net benefit expense recognised in staff costs 5 Actuarial valuation assumptions Employee benefit plan obligations Discount rate Future salary increase Medical costs trend rate 2.75% 3.50% 3.00% 2.75% 2.00% n/a 3.75% 3.50% 3.00% 3.75% 2.00% n/a (6,170) 4,516 488 (3,064) 93 n/a (5,934) 3,555 349 (2,366) 91 n/a 7,559 (3,946) (357) 3,988 (87) n/a 5,281 (4,739) (266) 3,036 (85) n/a 6 Actual return on fund investments The actual return on fund investments in 2014 was EUR 0.7 million (2013: EUR 1.3 million) 7 Sensitivity 1% increase of: Discount rate Future salary increase Medical cost trend rate 1% decrease of: Discount rate Future salary increase Medical cost trend rate 103 10. Movements in long-term debt (EUR 1,000) Carrying amount as at 1 January Loans drawn down Movements in cross-border leases Repayments Current portion Long-term debt 31-12-2014 31-12-2013 688,202 701,149 21,139 8 (132,078) 47,257 (367) (59,837) 577,271 688,202 (67,318) (71,841) 509,953 616,361 Long-term debt comprises amounts owed to credit institutions, EUR 122 million of which falls due after more than five years. At 31 December 2014, long-term debt carried an average rate of interest of 1.5% (2013: 1.7%). DELTA has EUR 450 million worth of corporate standby credit facilities with five banks. No security has been provided for these facilities. 104 11. Other non-current liabilities (EUR 1,000) Deferred tax liabilities Deferred revenue Indaver put option Other non-current liabilities Total other non-current liabilities 31-12-2014 31-12-2013 64,375 84,880 43,007 60,689 87,381 156,905 41,673 192,262 346,648 Deferred tax liabilities Deferred tax liabilities comprise valuation differences between the commercial balance sheet and tax balance sheet. Deferred tax liabilities arise mainly from past acquisitions. When a share interest is acquired, property, plant and equipment and intangible assets are stated at fair value. Fair-value adjustments are not allowed for tax purposes, necessitating the recognition of a deferred tax liability for fair value adjustments to the assets acquired. This tax liability decreases in proportion to the fair-value adjustments. A considerable part of deferred tax liabilities comprise property, plant and equipment and intangible assets relating to the DELTA Com B.V. fiscal unity. After consulting the Dutch Tax and Customs Administration, DELTA decided to transfer its production and supply operations to this fiscal unity as of 1 January 2014 (previously 31 December 2013). The fiscal unity’s (i.e. DELTA Com B.V.’s) deferred tax assets and liabilities are netted. In measuring net deferred tax liabilities, consideration was given to the extent to which the temporary differences would produce expected economic benefits and whether temporary differences would be settled net or simultaneously (partly in view of the statutory time limits on offsetting). Unlike in previous years, the joint valuation of deferred tax assets and liabilities by and within DELTA Com B.V. led to no deferred tax item being recognised for unrealised changes in the value of derivatives and trading contracts under IAS 39/32. Deferred tax liabilities comprised (EUR 1,000) Intangible assets Property, plant and equipment FVA Other Total 31-12-2014 31-12-2013 1,813 90,715 (116) (28,037) 64,375 2,347 95,638 (37,296) 60,689 Deferred revenue Deferred revenue partly comprises payments already received for waste that still has to be processed by Indaver. In 2014 as well as 2013, contributions received from third parties for new investments led to an increase in deferred revenue from grid operations. Indaver put option In 2008, DELTA increased its share interest in Indaver to 75%. In connection with the Indaver acquisition in 2007, put options were granted to the minority shareholders. These options are exercisable in 2015, which is why the put option is shown within non-current liabilities as at 31 December 2014. Other non-current liabilities These comprise N.V. EPZ’s liability for the costs of the final nuclear fuel load located in the reactor core when the nuclear power station comes to the end of its lifespan. The liability shown is based on the known nuclear fuel costs for the final fuel load at year-end 2014, and determined as the present value (at a discount rate of 4.5%) of the estimated future value of the remaining core, including reprocessing and storage costs. 105 12. Current liabilities 31-12-2014 (EUR 1,000) Trade payables 31-12-2013 313,626 341,048 3,474 6,122 Other current tax liabilities 86,154 94,426 Deferred revenue 15,612 15,130 Current tax liabilities Work in progress for third parties 147 Current portion of provision Current portion of long-term debt Put option Indaver Accruals and deferred income Other current liabilites - 64,855 67,318 138,732 84,467 85,430 71,841 76,502 290,517 148,343 Bank borrowings 141,533 120,998 Total current liabilities (excluding derivatives) 915,918 811,497 Other current tax liabilities mainly comprise VAT payable. Current tax liabilities also comprise wage tax and social security contributions, corporate income tax, and energy taxes payable. In addition to other current liabilities and accruals and deferred income, current liabilities also include repayments on long-term loans and withdrawals from provisions scheduled for 2015. Indaver put option Put options were granted to the minority shareholders in connection with the Indaver acquisition in 2007. The put options are exercisable in 2015. The share of the company’s profit attributable to non-controlling interests in Indaver is added to the obligations relating to the put options. In view of the agreement reached with Katoen Natie on the sale of DELTA’s 75% share interest in Indaver, the put option was valued at the price agreed for the 75% interest at 31 December 2014 (see also 1B Post-balance sheet events that are material to the financial statements 2014). 106 Off-balance sheet assets and liabilities A summary of off-balance sheet assets and liabilities is given below, to the extent that they have an estimated (potential) impact on the profit or loss in excess of EUR 5 million. A. Operational Energy, energy production and commodities contracts DELTA’s risk management policy aims to actively control the risk exposures arising from its production assets and long-term procurement contracts. Positions arising from trading activities are controlled through a strictly enforced system of limits, using both financial and energy derivatives, including swaps, options and forwards. Sales contracts included in the portfolio comprise energy supplies to end-users and trading partners and associated financial instruments. As at the balance sheet date, sales contracts were worth EUR 1,411 million (2013: EUR 1,314 million). Procurement contracts included in the portfolio comprise production and purchase contracts with trading partners and associated contracts for financial instruments. As at the balance sheet date, procurement contracts were worth EUR 3,039 million (2013: EUR 3,329 million). Financial instruments are measured on the basis of market values, having regard to transactions entered into for purposes of physical commodities trading. Major contracts involve existing tolling liabilities for power stations, related fuel purchases, and gas transmission and storage capacity in the Netherlands. Loss-making tolling liabilities already provided for in the balance sheet at 31 December are not included in the liabilities referred to in this section. Long-term waste processing contracts Indaver has entered into various long-term contracts for processing waste. At 31 December 2014, commitments arising from these contracts amounted to EUR 32.1 million (2013: EUR 39.9 million). These commitments are covered by upfront payments as shown in the balance sheet. In some cases, clients were granted put options conferring the right to sell part of these rights back to Indaver. No liability is recognised for these put options because it is considered unlikely that they will be exercised. Investment commitments At 31 December 2014, the company’s financial commitments for capital projects under construction involved an amount of around EUR 55.9 million (2013: EUR 55.5 million). 107 Borssele Agreement In 2006, an agreement was reached with central government to extend the service life of the nuclear power station until 2033. As part of the agreement, arrangements were also made in terms of the efforts which DELTA (and Essent) were to make to embrace and provide technical and financial support for new renewable energy developments. In addition to purchasing an interest in Sustainable Energy Technology (SET) Fund C.V., these commitments also comprise investments in additional innovative projects. In 2012, DELTA acquired an interest in Sustainable Energy Technology (SET) Fund II C.V. The remaining commitment relating to SET Fund II is EUR 6 million. There is also a re-investment commitment in relation to a future exit from both SET Funds. Stranded costs The Transitional Act for the Electricity Generation Industry (Overgangswet elektriciteitsproductiesector) came into force on 1 January 2001. Under Section 2 of the Act, Dutch power generation companies are jointly liable for the costs arising from, inter alia, contracts for gas and electricity imports entered into by NEA (formerly SEP). These stranded costs are allocated to the different power generation companies according to a formula adopted at the time by the Herkströter Commission. For EPZ, this comes down to a sizeable 28.5% share. In recent years, these stranded costs have largely been settled by commuting import contracts for the supply of electricity. Taking into account NEA’s remaining shareholders’ equity, the decision was made to continue current policy and not to recognise a provision for stranded costs. Cross-border lease on incineration plant On 17 August 1999, Indaver signed a cross-border lease with a U.S. investor for the use of lines 1 and 2 at its incineration plant in Doel (Belgium). The initial lease term was 25.4 years, with the option to enter into a maintenance contract for a further 13 years. Under the terms of the lease, Indaver received USD 135 million on the start date of the lease, USD 129.4 million of which was placed on deposit. These deposits are hedged by institutions with a high credit rating. An additional bank guarantee was provided from a reputable bank. At 16 August 2014, the bank guarantee was USD 47.8 million. Cash collateral was provided in May 2009. At 31 December 2014, the cash collateral amounted to USD 21.5 million. B. Collateral and guarantees DELTA has issued and received financial collateral as security for transactions it has entered into: Collateral granted Collateral granted for associates and joint ventures Other collateral granded Total collateral granted Collateral received Collateral received for associates and joint ventures Other collatetal received Total collateral received Term in years < 1 year 16,995 32,737 49,732 1 – 5 years 2,833 8,785 11,618 > 5 years 13,726 98,542 112,268 Total 33,554 140,064 173,618 Term in years < 1 year 16,101 16,101 1 – 5 years 45,971 45,971 > 5 years 139,798 139,798 Total 201,870 201,870 108 Main collateral granted DELTA has issued guarantees to the Zeeland provincial authorities for financial obligations relating to the capping of the Koegorspolder and North and Central Zeeland landfill sites. These guarantees involve a total amount of EUR 22.3 million. Similarly, DELTA has issued EUR 24.6 million worth of guarantees to the Zuid-Holland provincial authorities for the costs of capping the Derde Merwedehaven landfill site in Dordrecht. Indaver has issued EUR 99.5 million worth of bank guarantees, EUR 50.9 million of which relating to the transport and treatment of waste streams and EUR 35.5 million to a cross-border lease previously entered into. Main collateral received Collateral received comprises EUR 172.8 million in bank and other guarantees received mainly in connection with DELTA’s trading activities. EPZ received 21.1 million (70% share) in collateral, mainly in connection with advance fuel payments. Indaver has received bank guarantees from customers and suppliers totalling EUR 8.0 million. C. Lawsuits and claims Independent Grid Management Act (Wet Onafhankelijk Netbeheer; WON) The Dutch Minister of Transport approved the plans to split up energy companies on 2 December 2009. However, on 22 June 2010, the Hague Court of Appeal declared several sections of the Independent Grid Management Act to be non-binding. In the light of this judgment, the grid and supply operations were not split off, although the conditions stipulated by the Minister were complied with, where possible and necessary. The Dutch government took the case to the Supreme Court in an attempt to get the decision overturned. On 24 February 2012, the Supreme Court referred the case to the European Court of Justice in Luxembourg. On 14 January 2013, the parties presented their cases at a hearing before the ECJ. The ECJ issued its ruling on the questions presented in late 2013, after which the case was referred back to the Supreme Court. The Supreme Court has since adjourned its decision twice. It is now expected to hand down its decision on 26 June 2015. In recent years, DELTA has also been involved in two separate lawsuits filed by its former solar power business partners. The courts have found in favour of DELTA several times. However, our former partners continue pursuing their cases. 109 Notes to the consolidated income statement 13. Revenue 2014 (EUR 1,000) Electricity supply Gas supply Electricity and gas transport Cable, internet and telecommunications Waste management and environmental services Other revenue Total revenue 2013 881,981 268,450 106,411 80,983 970,030 343,938 118,270 78,995 517,041 75,970 514,441 77,919 1,930,836 2,103,593 The growth in revenue from Internet and telephony services continued in 2014, showing an increase of EUR 2 million. Total revenue from gas and electricity supplies to domestic and small-business users is partly estimated as staggered meter readings are taken throughout the year (similar to 2013). Gas and electricity supplies and trading declined due to relatively mild winter conditions in 2014. Despite increased price pressures, Indaver’s capacity utilisation rates remained at an acceptable level, with revenues remaining in excess of EUR 500 million. Revenue can be broken down geographically as follows: (EUR 1,000) Revenue per country 2014 2013 The Netherlands Belgium Great Britian & Ireland Germany Other EU 1,235,967 206,891 121,122 348,744 18,112 1,375,217 217,855 134,685 359,894 15,942 Total 1,930,836 2,103,593 Revenue by country is made up entirely of external revenue. Revenues outside the Netherlands were generated almost entirely by the energy and waste management operations. 110 14. Cost of sales DELTA buys part of its electricity requirement from Elsta and BMC Moerdijk, both of which are related parties (and recognised as joint ventures for reporting purposes) in which DELTA owns a share interest. The electricity is procured largely on a cost-plus basis. 15. Other gains and losses Other gains mainly comprise payments received from third parties for services rendered and compensation payments for losses. 16. Fair value gains and losses on the trading portfolio DELTA uses derivatives to hedge price and currency risks arising from energy commodity contracts (electricity, gas, coal, and oil). More specifically, the company applies cash-flow hedging, which involves entering into hedges to mitigate its exposure to variability of existing and future cash flows that could ultimately affect profit or loss. The hedges are allocated to a specific risk relating to a balance sheet item or highly probable forecast transaction. The effective portion of fair value changes is recognised in equity and shown within the hedge reserve. The cumulative amounts recognised in equity are taken to the income statement in the same period as the hedged transaction. Movements in the value of the trading portfolio that are not hedged (non-effective hedges) is recognised as a fair value change in profit or loss. Movements in energy prices in 2014 led to a net loss on the fair value of the trading portfolio of EUR 33.4 million, EUR 0.6 million of which is expensed and EUR 32.8 million of which is recognised in equity. 17. Third-party services, materials and other external charges (EUR 1,000) Third-party work and services Consumption of materials Other external charges Total 2014 2013 187,361 61,880 26,756 184,751 65,909 37,126 275,997 287,786 Third-party work and services mainly comprises costs associated with electricity, gas and digital infrastructure. They also comprise ICT costs. A large part of external charges relates to the operations of Indaver, EPZ and Sloe. Costs of materials used by Indaver, EPZ and Sloe amounted to EUR 58.5 million in 2014, costs for third-party services came to EUR 123.0 million, and other external charges totalled EUR 12.2 million. 111 18. Staff costs (EUR 1,000) Salaries Social securities contributions Pension charges Other staff costs Staff costs Capitalised staff costs Totaal Number of employees (FTEs) as at 31 December Average number of FTEs (related to the above total staff costs) 2014 2013 187,659 31,061 21,442 19,990 260,152 187,109 31,305 21,416 20,438 260,268 (2,108) (3,543) 258,044 256,725 3,182 3,189 3,216 3,256 The number of FTEs working for DELTA, including all FTEs under the joint arrangements (N.V. EPZ, Sloe Centrale B.V., SLECO Centrale N.V., and Svex N.V.) totalled 3,349 (2013: 3,394). FTE average: segment Energy + Corporate EPZ Waste management Grids and Networks Total FTE average: geographical the Netherlands Foreign Total 2014 614 62 351 1,532 630 3,189 2014 1,861 1,328 3,189 DELTA is ‘own risk bearer' in terms of its financial obligations under the Dutch Unemployment Benefit Act (Werkloosheidwet; WW). This means that it remits no unemployment benefit contributions to the UWV social security payment agency, and that unemployment benefits paid to former employees will be claimed back from DELTA. IFRS does not allow a general provision to be recognised for these liabilities. Instead, DELTA determines for each entity whether current recourse obligations as at the balance sheet date provide a reason for recognising a separate provision. 112 Remuneration of DELTA N.V.’s Executive Board members registered with the Chamber of Commerce The remuneration policy for Executive Board members was adopted by the General meeting on the recommendation of the Supervisory Board. The Supervisory Board determines the remuneration of the executive directors annually on the basis of this policy. The guiding principle of DELTA N.V.’s remuneration policy is that it should allow the company to offer a competitive pay package to attract and retain people with the right expertise and experience. The members of the Executive Board are employed on a permanent basis, with the CEO being appointed for a period of three years and the CFO for a four-year term. Their employment contracts are drafted accordingly and, in addition to a minimum notice period, provide for severance pay amounting to a maximum of one year’s salary in line with the Dutch Corporate Governance Code. No variable pay was agreed with the CEO, Arnoud Kamerbeek, for 2014. The CFO, Frank Verhagen, is entitled to variable pay, based on a number of agreed targets being achieved during the year. Variable pay is capped at 30% of the gross fixed annual salary. The targets to be achieved are defined and set annually by the Supervisory Board and the CEO. These are partly financial in nature (net profit and cash flows) and partly related to personal targets, personal performance, and the contribution made to achieving companywide objectives. The Executive Board members are covered by the same pension plan applicable to all the company’s other employees, administered by Stichting Pensioenfonds ABP. Executive Board remuneration (EUR 1,000) Gross basic annual salary Taxed expense allowances Pension contributions by employer Variable remuneration Total A. Kamerbeek CEO F. Verhagen CFO 383,870 15,853 69,344 469,067 280,000 19,364 60,233 77,700 437,298 On 16 January 2014, Arnoud Kamerbeek was appointed CEO of DELTA N.V. The variable pay component comprises the amount granted for 2014. On the basis of prior agreements, Frank Verhagen is entitled to a maximum of 30% variable pay, 92.5% of which has been granted due to agreed targets being achieved. The variable pay component will be paid in the next financial year. The total remuneration of the Executive Board members in 2013 amounted to EUR 879,343. 113 19. Depreciation, amortisation and impairment (EUR 1,000) 2014 2013 Intangible assets Amortisation Impairment 12,959 95,129 14,308 - 173,058 410 (5,699) 165,435 545 (6,026) 275,857 174,262 Property, plant and equipment Depreciation Impairment Third-party contributions released Total The impairment of intangible assets in 2014 mainly comprised the difference between the selling price less costs of disposal and the carrying amount of the share interest in Indaver. 114 20. Other operating expenses (EUR 1,000) 2014 2013 Added to provision for bad debts Other operating expenses Added to other provisions 1,742 633 13,903 2,616 3,004 3,717 Total other operating expenses 16,278 9,337 Other operating expenses also comprises the remuneration paid to members of the company’s Supervisory Board. Additions to other provisions mainly comprise additions to provisions for EPZ in relation to the nuclear power station. Remuneration of the Supervisory Board in 2014 With effect from 1 January 2011, the Supervisory Board consists of a chairman and four members. Since the chairman stepped down in September 2014, there has been a vacancy on the Supervisory Board. Supervisory Board chairman Supervisory Board members Audit, Risk & Compliance Committee members Remuneration Committee and Nomination Committee members EUR 43,200 EUR 27,000 EUR 5,400 EUR 3,240 The total remuneration of Supervisory Board members in 2014 amounted to EUR 154,685 (2013: EUR 161,100). 115 21. Share of profits in joint ventures and associates This comprises DELTA’s share of profits in joint ventures and associates. In 2014, the company’s share of profits in joint ventures and associates was EUR 41.2 million, virtually unchanged from 2013 (EUR 41.5 million). 116 22. Net finance income (expense) (EUR 1,000) External finance income External finance expense Interest added to provisions Other finance income (expense) Capitalised interest Total finance income (expense) 2014 2013 2,977 (24,311) (21,090) 9,688 (32,736) 3,709 (26,602) (18,398) 1,343 (39,948) (32,736) 364 (39,584) At EUR 24.3 million, finance expenses were down EUR 2.3 million on 2013, driven mainly by lower debt in 2014. 117 23. Corporate income tax (EUR 1,000) Corporate income tax Current corporate income tax liability Movements in deferred tax assets and liabilities Total tax Of which reported under discontinued operations Tax expense recognised in profit or loss 2014 2013 (11,194) (4,766) (15,960) - (1,834) (953) (2,787) 491 (15,960) (3,278) Current corporate tax liability The reconciliation of the profit before tax and the actual taxable amount with the resulting tax burden, is as follows: Result before corporate tax (including discontined operations) Substantial-holding privilege Temporary differences connected with carrying amounts of assets and provisions (incl. VAMIL) Other differences Taxable amount, Netherlands 172 (94,902) 83,519 (98,422) 67,476 2,822 (38,094) 1,577 (24,432) (51,420) Standard tax rate in the Netherlands as from 2011 25.00% 25.00% Tax for the year Adjustment for prior years Taxes domestic joint operations (IFRS 11) (1,178) 8,267 (3,744) Tax paid by subsidiaries outside the Netherlands (10,016) (6,356) Current corporate income tax liability (11,194) (1,833) Movements in deferred tax assets and liabilities The tax income results from differences between the reported profit and the profit calculated for tax purposes plus utilisation of tax loss caffyforwards Applicable tax loss carryforwards Temporary differences Movements in deferred tax for deductible tax losses Movements in deferred tax for deductible tax in current year 3,283 (8,464) 6,460 (4,755) 6,317 (8,957) 643 Adjustment for prior years (1,344) Changes in deferred tax position related to domestic joint operations (IFRS 11) Changes in deffered tax position related to foreign consolidated and partial consolidated companies (3,395) (1,284) 3,450 (4,765) 2,328 (953) 118 Movements in deferred tax assets and liabilities (EUR 1,000) Net 31-12-2013 Recognised in Recognised in unrealised gains result and losses Net 31-12-2014 Intangible Assets and Property, plant and equipment Financial assets Provisions Unutilised tax losses Hedge Other (68,566) 6,462 53,804 27,177 11,945 (840) 4,584 223 (13,012) 5,287 (1,847) 2,110 (735) 30 (63,982) 6,685 42,902 32,464 11,210 (2,657) Total 29,982 (4,765) 1,405 26,623 Recognised under other assets Recognised under other liabilities 90,671 (60,689) 90,996 (64,375) Total 29,982 26,621 Conciliation of current and effective tax rates 31-12-2014 (EUR 1,000) Tax at applicable rate Profit before tax Applicabel rate (NL) Impact through substantial-holding privilege Impact tax paid by subsidiaries outside the Netherlands Impact of tax rate applicable in other jurisdictions calculation of deferred taxes Amount % (43) 172 31-12-2013 Amount % (20,880) 83,519 25% 25% 7,898 3,478 8,555 6,927 397 436 Impact of non-deductible amounts (including goodwill impairment) (25,417) (1,744) Impact of repossessed or use unrecognized tax losses Impact of adjustment of prior years Other Taxes at effective tax (1,222) (1,341) 291 (15,959) (6,538) 10,710 (253) (2,787) 119 24. Assets held for sale and discontinued operations Discontinued operations in 2014 comprised a further EUR 0.6 million in proceeds from the sale of DELTA’s share interest in Fesil Sunergy AS in 2012. Also in 2014, proceeds were recognised for assets and liabilities of DELTA Industriële Reiniging B.V. which had not been included in the sale of its operations in 2013. Total cash flow from operating activities for discontinued operations amounted to EUR 0.6 million. These proceeds are shown within the line item other movements. 24.1 Income statement The combined effect of the above activities on DELTA’s income statement is as follows: (EUR 1,000) 2014 2013 Profit before tax Income tax 642 - (1,196) 491 Profit for the year 642 (705) The loss on discontinued operations in 2013 was largely attributable to the settlement of the assets and liabilities of DELTA Industriële Reiniging B.V. 120 Notes to the consolidated cash flow statement The cash flow statement has been prepared according to the indirect method. Given that a number of items in the income statement and balance sheet generate no direct cash-flow effects, cash flows for these items have been neutralised. This essentially concerns three items: Treatment of derivatives Fair value gains and losses on the trading portfolio lead to current and non-current movements in assets and liabilities in the balance sheet. Some of these gains and losses are also partly included in the operating profit or loss, and some in the hedge reserve as part of group equity. However, none of these changes generate a direct cash flow. This is why all changes are recognised in the cash flow from operating activities so that positive and negative changes cancel each other out. Share of profits in joint ventures and associates Share of profits in joint ventures and associates is only partly distributed as dividends. The undistributed profits lead to an increase in the entity’s shareholders’ equity and, accordingly, to a movement in financial fixed assets in DELTA’s balance sheet. The decision was therefore made to recognise only the actual dividends received in the cash flow. Corporate income tax Profit after taxation takes into account not only corporate income tax payable on the pre-tax profit, but also deferred tax assets and liabilities arising from unused tax losses and the agreement with the Dutch Tax and Customs Administration regarding the opening balance sheet for tax purposes in 1998. Because they generate no actual cash flows, movements in deferred tax assets and liabilities are eliminated from the cash flow. The cash flow from operating activities declined in 2014, due to lower movements in working capital. Capital expenditure was significantly lower than in 2013, when major investments were made in the Kreekraksluis wind farm and a fermentation plant in Alphen aan den Rijn. 121 Post-balance sheet events Progress on the sale of Indaver N.V. and Windpark Kreekraksluis B.V. DELTA is selling two of its business divisions, more specifically its 75% (rounded-off) share interest in Indaver N.V. and its 100% stake in Windpark Kreekraksluis B.V. The events after the balance sheet date relating to the sale of both entities are explained in section 1B. The sale of the share interest in Indaver N.V. will be discussed by the General meeting on 4 June 2015. The shareholders authorised the sale of the Kreekraksluis wind farm on 9 March 2015. Independent Grid Management Act (Wet Onafhankelijk Netbeheer; WON) Details of the legal proceedings pending on this issue are given in Off-balance sheet assets and liabilities, C - Lawsuits and claims. The Dutch Supreme Court is expected to hand down its decision on 26 June 2015. Agreement with Dow Terneuzen on the sale of a combined heat and power plant Agreement has been reached with Dow on the sale of the ‘Elsta’ combined heat and power plant which they use in their production process. Title will be transferred on expiry of the contractual term in 2018. Aside from the events described above, there were no events after the balance sheet date. 122 Consolidated companies Company Main activity Headquarters Interest in company 31-12-2014 31-12-2013 Voting rights Zeeuwse Netwerkholding N.V. Grids and networks Middelburg 100% 100% 100% DELTA Netwerkbedrijf B.V. Grids and networks Middelburg 100% 100% 100% DELTA Infra B.V. Infrastructural Middelburg 100% 100% 100% DNWG Staff B.V. Other Middelburg 100% DELTA Personeel B.V. Other Middelburg 100% 100% 100% Energy Middelburg 100% 100% 100% Energy Middelburg 100% 100% 100% Energy Middelburg 100% 100% 100% Energy Middelburg 100% 100% 100% Deltius B.V. Energy 100% 100% 100% Windpark Kreekraksluis B.V. Energy Ritthem Middelburg 100% 100% 100% DELTA Tolling Sloe B.V. Energy Middelburg 100% 100% 100% DELTA Saefthinge N.V. Energy Doel, Belgium 99.9% 99.9% 99.9% Limo Energie Nederland B.V. Energy Middelburg 100% 100% 100% Litro Energie Nederland B.V. Energy Middelburg 100% 100% 100% DELTA Energy Belgium N.V. Energy Doel, Belgium 99.9% 99.9% 99.9% Windpark Barrepolder B.V. Energy Middelburg 100% Multimedia 100% 100% 100% Multimedia Middelburg Middelburg 100% 100% 100% Multimedia Kamperland 100% 100% 100% Bergen op Zoom 100% 100% 100% DELTA Com B.V. DELTA Energy B.V. DELTA Ficus Holding B.V. DELTA Pipe B.V. DELTA Comfort B.V. DELTA Kabelcomfort Netten B.V. ZeelandNet B.V. DELTA Industriële Reiniging B.V. n/a n/a 100% 100.0% DELTA Investerings Maatschappij B.V. Other Middelburg 100% 100% 100% DELTA Onroerend Goed Ontwikkelingsmaatschappij B.V. Other Middelburg 100% 100% 100% Stichting DELTA Zeeland Fonds Other Middelburg 100% 100% 100% DELTA Development & Water B.V. Middelburg 100% 100% 100% Triqua B.V. Wageningen 100% 100% 100% DELTA Biovalue B.V. (declared bankrupt) Eemshaven 100% 100% 100% DELTA Biovalue Nederland B.V. (declared bankrupt) Eemshaven 100% 100% 100% DELTA Biopat B.V. (declared bankrupt) Eemshaven 100% 100% 100% Middelburg 100% 100% 100% Middelburg 100% 100% 100% DELTA Solar B.V. Sunergy Investco B.V. Shareholding of the parent company in the entity 123 Consolidated companies (continued) Company Main activity Headquarters Interest in company 31-12-2014 Indaver N.V. Voting rights 31-12-2013 Waste Belgium 75% 75% 75% Indaver Participaties N.V. Other Belgium 99.9% 99.9% 99.9% Indaver Logistics N.V. Waste & Transport Belgium 99.9% 99.9% 99.9% Indaver Medical Services N.V. Other Belgium 99.9% 99.9% 99.9% Indaver Italia S.R.L. Waste Italy 100% 100% 100% Indaver Ireland Ltd Waste Ireland 100% 100% 100% Other Ireland 100% 100% 100% Other the Netherlands 100% 100% 100% Indaver Gevaarlijk Afval B.V. Waste the Netherlands 100% 100% 100% Indaver Personeel B.V. Other the Netherlands 100% 100% 100% Indaver ARP B.V. Waste the Netherlands 100% 100% 100% Indaver Compost & Biomassa B.V. Waste Terneuzen 100% 100% 100% Indaver Bio Energie B.V. Waste Terneuzen 100% 100% 100% Indaver Groencompost B.V. Waste Terneuzen 100% 100% 100% Waste 100% 100% 100% Waste Terneuzen 's-Gravenpolder 100% 100% 100% Waste Westerlo, Belgium 100% Zeeuwse Reinigingsdienst B.V. Waste Terneuzen 99% 99% 99% Indaver Verwerking B.V. Waste Terneuzen 100% 100% 100% Indaver Recycling B.V. Waste Terneuzen 100% 100% 100% Indaver Perex B.V. Waste Terneuzen 100% 100% 100% Indaver Afvalberging B.V. Waste Terneuzen 100% 100% 100% Derde Merwedehaven B.V. Waste Terneuzen 100% 100% 100% Stortplaats Koegorspolder B.V. Waste Terneuzen 100% 100% 100% Stortplaats Noord en Midden Zeeland B.V. Waste Terneuzen 100% 100% 100% Waste Terneuzen 100% 100% 100% Waste Terneuzen 100% 100% 100% Other Terneuzen 100% 100% 100% Indaver Portugal SA Waste Portugal 100% 100% 100% Indaver Schweiz AG Other Switzerland 100% 100% 100% Indaver UK Ltd Waste UK 100% 100% 100% Indaver Deutschland GmbH Other Germany 51% 51% 51% SAV Zweite Beteiligungs GmbH & Co. KGHIM GmbH Other Germany 94.90% 94.90% 94.90% AVG Abfall-Verwertungs-Gesellschaft GmbH Waste Germany 99.74% 99.74% 99.74% Waste & Transport Germany 100% 100% 100% Waste Germany 93.83% 93.83% 93.83% Panse Wetzlar Entsorgung GmbH Waste & Transport Germany 100% 100% 100% DE Ingenieurgesellschaft mbH Other Germany 100% 100% 100% N.V. EPZ Energy Borsele 70% 70% 70% Sloe Centrale Holding B.V. Energy Vlissingen 50% 50% 50% Energy Vlissingen 100% 100% 100% SLECO Centrale nv Waste Belgium 50% 50% 50% Svex nv Waste Belgium 50% 50% 50% Indaver Energy Ltd Indaver Nederland B.V. Indaver Compost B.V. Indaver Impex B.V. Produval bvba Indaver Waste to Energy B.V. Depmer B.V. Indaver Afval & Milieu Personeel B.V. Gareg Umwelt-Logistik GmbH HIM GmbH n/a 100% Joint arrangements Joint operations DELTA Energy B.V.: Sloe Centrale B.V. Indaver N.V.: Shareholding of the parent company in the entity 124 Non-consolidated companies Non-consolidated companies Company Main activity Headquarters Interest in company 31-12-2014 31-12-2013 Voting rights Joint arrangements Joint Ventures DELTA Energy B.V.: Sloewind B.V. Energy Middelburg 50.00% 50.00% 50.00% Windpark Distridam vof Energy Terneuzen 50.00% 50.00% 50.00% PVNed Holding B.V. Energy Middelburg 50.00% 50.00% 50.00% PVNed B.V. Energy Middelburg 100.00% 100.00% 100.00% Arbel N.V. (Belgium) Energy Mechelen, Belgium PVNed UK Ltd Energy UK BMC Moerdijk B.V. Energy Sloe Centrale 3 B.V. Energy Windpark Kloosterboer B.V. NPG Willebroek N.V. 99.90% 99.90% 99.90% 100.00% 100.00% 100.00% Moerdijk 50.00% 50.00% 50.00% Middelburg 50.00% 50.00% 50.00% Energy Middelburg 50.00% 50.00% 50.00% Energy Antwerpen, Belgium 50.00% n/a 50.00% Waste Belgium 50.00% 50.00% 50.00% Gesellschaft für die Verwertung von Sonderabfallen mbH& Co. KG Waste Germany 50.00% 50.00% 50.00% Gesellschaft für die Verwertung von Sonderabfallen mbH Waste Germany 50.00% 50.00% 50.00% Waste Well, Limburg 50.00% 50.00% 50.00% Waste Well, Limburg 100.00% 100.00% 100.00% Evides N.V. Water Rotterdam 50.00% 50.00% 50.00% Elsta B.V. Energy Middelburg 25.00% 25.00% 25.00% Elsta B.V. & Co C.V. Energy Middelburg 24.75% 24.75% 24.75% Indaver N.V.: Wips N.V. HIM GmbH: Indaver Bio Energie B.V.: Ecofuels B.V. Laarakker Landbouw B.V. DELTA N.V.: Shareholding of the parent company in the entity 125 Company Main activity Headquarters Interest in company 31-12-2014 Voting rights 31-12-2013 Associates DELTA Netwerkbedrijf B.V.: Zebra GasNetwerk B.V. Grids and networks Middelburg 33.33% 33.33% 33.33% Zebra Activa B.V. Grids and networks Middelburg 100.00% 100.00% 100.00% Grids and networks Middelburg Grids and networks Vught Grids and networks Windpark Neeltje-Jans B.V. Windpark Zeeland 1 B.V. Zebra Pijpleiding vof 33.33% 33.33% 33.33% 100.00% 100.00% 100.00% Middelburg 66.67% 66.67% 66.67% Energy Veere 40.00% 40.00% 40.00% Energy Vlissingen/Kapelle-Schore 40.00% 40.00% 40.00% NPG Willebroek N.V. Energy Antwerpen, Belgium n/a 49.00% WT I B.V. Other Amersfoort 40.00% 40.00% 40.00% IHM cvba Waste Belgium 30.00% 30.00% 30.00% Ibogem cvba Waste Belgium 35.12% 35.12% 35.12% Intercommunale vereniging Verko N.V. Waste Belgium 39.90% 39.90% 39.90% Ecowest N.V. Other Belgium 42.61% 42.61% 42.61% Sita Decontamination Services N.V. Waste Belgium 26.00% 26.00% 26.00% Ecov N.V. Other Belgium 50.00% 50.00% 50.00% Ivago cvba Waste Belgium 49.90% 49.90% 49.90% N.V. Brussel Compost Waste Belgium 40.00% 40.00% 40.00% Entrade Pipe B.V. Zebra Pijpleiding vof DELTA Energy B.V.: n/a Indaver N.V.: Indaver Participaties N.V. Indaver Nederland B.V.: AZN Holding B.V. Waste Wijster 20.00% 20.00% 20.00% B.V. Grondbezit AVI Moerdijk Other Moerdijk 100.00% 100.00% 100.00% B.V. Grondbezit AVI Moerdijk II Other Moerdijk 100.00% 100.00% 100.00% N.V. AZN Waste Moerdijk 100.00% 100.00% 100.00% Grids and networks the Netherlands 1.65% 1.65% 1.65% Other the Netherlands 5.00% 5.00% 5.00% Sustainable Energy Technology Fund C.V. Other the Netherlands 49.93% 49.93% 49.93% Sustainable Energy Technology Fund II C.V. Other the Netherlands 54.22% 60.28% 54.22% Business Park Terneuzen B.V. Other the Netherlands 15.00% 15.00% 15.00% Zeeland Airport B.V. Other the Netherlands 18.80% 18.80% 18.80% B.V. NEA Energy Arnhem 28.50% 28.50% 28.50% Electrorisk Verzekeringsmaatschappij N.V. Energy Arnhem 4.13% 4.13% 4.13% Vliegasunie B.V. Energy Nieuwegein 14.29% 14.29% 14.29% KSG Kraftwerks-Simulator-Gesellschaft mbH Energy Germany 2.05% 2.05% 2.05% GfS Gesellschaft für Simulatorschulung mbH Energy Germany 2.05% 2.05% 2.05% Waste Belgium 34.96% 34.96% 34.96% 11.93% Others DELTA Netwerkbedrijf B.V.: Energie Data Services Nederland B.V. DELTA N.V.: Synergia Capital Partners B.V. DELTA Investerings Maatschappij B.V. N.V. EPZ: Indaver N.V.: Vlar Papier N.V. Ecowest N.V. Waste Belgium 11.93% 1.50% Ivvo cvba IVIO cvba Waste Belgium 3.46% 3.46% Ecluse cvba Waste Belgium 33.33% n/a 33.33% Waste Belgium 33.33% n/a 33.33% Waste Germany 0.036% 0.036% 0.036% 3.46% Sleco Centrale N.V.: Ecluse cvba Indaver Deutschland GmbH: GSB Sonderabfall-Entsorgung Bayern GmbH Shareholding of the parent company in the entity 126 Company financial statements 2014 127 Company balance sheet as at 31 December 2014 (before profit appropriation) (EUR 1,000) Ref. nr 31-12-2014 31-12-2013 ASSETS Non-current assets Intangible assets Property, plant and equipment Financial assets Investments in subsidiaries Other investments Receivables from subsidiaries Loans to other investment entities Other loans Deferred tax assets 1 2 3 3 3 3 3 4 864 11,907 837,768 341,969 68,490 457 60 58,897 1,515 22,287 952,987 332,052 60,619 457 9 50,903 1,307,641 1,320,412 Current assets Receivables from subsidiaries Other receivables 5 203,112 2,770 Cash 1,397,027 1,420,829 177,762 4,141 205,882 181,903 419 7,676 1,526,713 1,610,408 EQUITY AND LIABILITIES Shareholders' equity Shareholders' equity Profit for the year 6 6 Provisions 7 Non-current liabilities Payables to subsidiaries Other non-current liabilities 8 1,100,608 3,760 1,093,289 74,788 1,104,368 1,168,077 1,396 3,493 174,497 240,624 174,497 Current liabilities Payables to subsidiaries Other payables 9 157,322 89,130 240,624 130,093 68,121 246,452 198,214 1,526,713 1,610,408 128 Company income statement (EUR 1,000) 2014 2013 Profit on parent company activities Share in profits of subsidiaries, joint ventures and associates (559) (637) Profit for the year 4,319 75,425 3,760 74,788 Notes to the company financial statements DELTA N.V. is the Dutch-based holding company of a number of group companies involved in generating, transmitting and supplying energy and delivering environmental and cable services. The company’s functional currency is the euro. Unless otherwise stated, all amounts are presented in thousands of euros. DELTA N.V. used the option available under Part 9, Book 2, of the Dutch Civil Code to prepare the company financial statements in accordance with the International Financial Reporting Standards used in the consolidated financial statements, with the exception of equityaccounted group companies and investments. The company income statement is presented in abridged form in accordance with Section 402, Part 9, Book 2, of the Dutch Civil Code. Accounting policies Associates and joint ventures are measured according to the equity method and stated at net asset value (in accordance with IFRSs applied to the consolidated financial statements), adjusted for goodwill paid on acquisition and less any impairment losses on goodwill. No account is taken of non-controlling interests and the Indaver put option, which is shown within other current liabilities in the consolidated financial statements. Relevant adjustments are made to the value of the group company concerned. For the other accounting policies, please refer to the notes to the consolidated financial statements. 129 Notes to the company balance sheet 1. Intangible assets (EUR 1,000) Total Software 2013 Carrying amount as at 1 January Amortisation Other movements Carrying amount as at 31 December 2,397 (464) (418) 2,397 (464) (418) 1,515 1,515 1,515 1,515 2014 Carrying amount as at 1 January Amortisation Other movements Carrying amount as at 31 December Amortisation period in years (21) (630) (21) (630) 864 864 5 130 2. Property, plant and equipment Total (EUR 1,000) Land and buildings Plant and equipment Other assets Assets under construction Third-party contributions 2013 Carrying amount as at 1 January Investments Depreciation Disposals Other movements 26,681 28 (789) (12) (1,324) 19,108 6 (658) (455) 6,245 (661) 1,290 22 (131) (12) (99) 756 (718) (159) 50 (668) Carrying amount as at 31 December 24,584 18,001 5,584 1,070 597 Carrying amount before deduction of contributions third-party contributions 25,252 18,001 5,584 1,070 597 Accumulated depreciation and impairment Acquisition cost as at 31 December 97,809 26,126 51,815 19,868 123,061 44,127 57,399 20,938 597 24,584 18,001 5,584 1,070 597 (668) (56) (52) 91 (597) 48 962 91 (620) 91 2014 Carrying amount as at 1 January Investments Depreciation Disposals Other movements 91 (693) (1,695) (637) (450) (644) Carrying amount as at 31 December 22,287 16,914 Carrying amount before deduction of contributions third-party contributions 22,907 16,914 4,940 962 Accumulated depreciation and impairment 98,502 26,763 51,815 19,924 121,409 43,677 56,755 20,886 Acquisition cost as at 31 December Depreciation periods in years 0 - 40 4,940 7 - 40 5 - 15 91 n/a Property, plant and equipment mainly comprises investments in premises. The sale of buildings to DELTA Infra B.V. is shown within disposals. Cleaning out fixed assets records During the year, fixed assets records were cleaned out, with assets that had already been written down and were no longer serving the production process being deleted from the accounts and records. 131 3. Financial assets (excluding tax assets) Total Investments in subsidiaries (EUR 1,000) Carrying amount as at 31 December 2012 Reversal of current portion 1,347,659 (110) 1,028,770 Other investments 318,001 Receivables from subsidiaries Receivables from other investment - 600 - - - - Other receivables 288 (110) Acquisition/grant of loans 50,205 - - 50,200 - Share in profits 75,425 40,341 35,084 - - (124,841) (110,808) (23,610) 10,419 (5,305) (5,305) - - - - 2,578 - - 525 Disposals / repayments / dividends Movements in hedge reserve Other movements Carrying amount as at 31 December 2013 Reversal of current portion 3,091 1,346,124 (12) 952,987 332,052 5 - (143) (699) 60,619 457 9 425 - - - 285 140 18,131 - - 17,981 150 - 4,319 (32,937) 37,256 - - - Disposals / repayments / dividends (76,879) (37,902) (27,743) (10,110) Movements in hedge reserve (45,320) (45,320) - - Acquisition/grant of loans Share in profits Other movements Carrying amount as at 31 December 2014 1,944 940 404 1,248,744 837,768 341,969 68,490 (434) - (690) - (1) 457 601 60 The hedge reserve declined during 2014. Movements in the hedge reserve do not comprise corresponding deferred taxes. 132 4. Deferred tax assets Deferred tax assets arise from differences between the carrying amount in the financial statements and the corresponding tax base. Deferred tax assets also comprise unused tax losses. 5. Other receivables (EUR 1,000) Trade receivables Total current taxes Other receivables, prepayments and accrued income Current portion of long-term loans granted Other receivables Total 31-12-2014 31-12-2013 395 631 2,079 2,348 286 10 296 727 435 1,162 2,770 4,141 133 6. Statement of changes in equity (EUR 1,000) Carrying amount as at 31 december 2012 Profit appropriation for 2012 Total Paid-up capital 1,132,619 6,937 Statutory reserve Hedge reserve Revaluation Unappropriated reserve Other reserves profit 225,828 (34,317) (3,132) 863,466 73,837 - - - - - 33,837 (33,837) (40,000) - - - - - (40,000) 1,011 - (10,962) - (1,592) 13,565 - Movement in hedge reserve (3,321) - - (3,321) - - - Corporate income tax effect 2,980 - - 2,980 - - - 74,788 - - - - - 74,788 (34,658) (4,724) 910,868 74,788 Payment of dividend Other changes Net profit for 2013 Carrying amount as at 31 december 2013 Resultaatverdeling 2013 1,168,077 6,937 214,866 - - - - - 54,788 (54,788) Dividendbetaling (20,000) - - - - - (20,000) Overige mutaties (2,148) - (5,052) (2,587) 5,490 - Mutaties in hedgereserve energiederivaten (33,692) - - (33,692) - - - Vpb-effect (11,629) - - (11,629) - - - 3,760 - - - - - 3,760 (79,978) (7,311) Netto Resultaat 2014 Carrying amount as at 31 december 2014 1,168,077 6,937 209,814 1 971,146 3,760 The statutory reserve comprises undistributed profits of associates and is therefore not freely distributable. This also applies to the hedge reserve, which should be seen in relation to unrealised income from fair value changes in derivatives used for hedging purposes. Other non-distributable reserves comprise the foreign currency translation reserve (in connection with translation differences) and remeasurements of defined benefit liabilities under IAS 19 Employee Benefits. For an explanation of changes in equity, please refer to the consolidated financial statements. In contrast to the consolidated financial statements, non-controlling interests in group companies are deducted directly from the carrying amount of the individual group company in accordance with the equity method. 134 7. Provisions (EUR 1,000) Total Employee benefits Other provisions Carrying amount as at 31 December 2012 2,920 2,920 - Reversal of current portion of provisions Added Interest added Released Utilised 1,819 1,336 150 (4) (621) 449 1,336 150 (621) 1,370 (4) - Carrying amount as at 31 December 2013 5,600 4,234 1,366 Current portion of provisions Carrying amount as at 31 December 2013 Reversal of current portion of provisions Added Interest added Released Utilised Other movements Carrying amount as at 31 December 2014 Current portion of provisions Carrying amount as at 31 December 2014 (2,107) (741) (1,366) 3,493 3,493 - 2,107 112 154 (139) (509) (1,811) 741 112 154 (139) (509) (1,811) 1,366 - 3,407 2,041 1,366 (2,011) 1,396 (645) 1,396 (1,366) - At 31 December 2014, long-term provisions only comprised employee benefits. With the introduction of a new health insurance system in the Netherlands on 1 January 2006, the obligations underlying the provision for health care changed substantially. Of the provision formed in the past, an amount of EUR 0.2 million continues to be recognised. Under the terms of the collective agreement, employees are paid long-service benefits. From the start date of employment, a provision is recognised for these benefits, based on past years of service, expected price and pay rises (at an average rate of 2%) and probability of dismissals, invalidity and mortality rates. The discount rate is 4.5% (2013: 4.5%). 135 8. Non-current liabilities (EUR 1,000) 31-12-2014 Carrying amount as at 1 January 240,624 Reversal of current portion Loans drawn down Repayments Other movements 41,818 20,000 (91,818) 691 Repayments due in the current year Long-term debt 31-12-2013 216,885 1,818 75,000 (1,818) (9,443) 211,315 282,442 (36,818) (41,818) 174,497 240,624 136 9. Other payables (EUR 1,000) 31-12-2014 31-12-2013 Trade payables 4,787 9,461 Current tax liabilities 2,680 4,700 Current portion of non-current liabilities Current portion of provisions Other Total other payables 36,818 2,012 7,010 45,840 41,818 2,107 6,035 49,960 Bank borrowings 35,823 4,000 89,130 68,121 Carrying amount as at 31 December Other payables comprise, inter alia, the current portion of the provisions, the current portion of borrowings, and outstanding supplier accounts. Current tax liabilities comprise VAT and energy tax payable. 137 Off-balance sheet assets and liabilities A summary of off-balance sheet assets and liabilities is given below, to the extent that they have an estimated (potential) impact on the profit or loss in excess of EUR 5 million. Independent Grid Management Act (Wet Onafhankelijk Netbeheer; WON) The Dutch Minister of Transport approved the plans to split up energy companies on 2 December 2009. However, on 22 June 2010, the Hague Court of Appeal declared several sections of the Independent Grid Management Act to be non-binding. In the light of this judgment, the grid and supply operations were not split off, although the conditions stipulated by the Minister were complied with, where possible and necessary. The Dutch government took the case to the Supreme Court in an attempt to get the decision overturned. On 24 February 2012, the Supreme Court referred the case to the European Court of Justice in Luxembourg. On 14 January 2013, the parties presented their cases at a hearing before the ECJ. The ECJ issued its ruling on the questions presented in late 2013, after which the case was referred back to the Supreme Court. The Supreme Court has since adjourned its decision twice. It is now expected to hand down its decision on 26 June 2015. Other pending cases In recent years, DELTA has also been involved in two separate lawsuits filed by its former solar power business partners. The courts have already found in favour of DELTA several times. However, our former partners continue pursuing their cases. 403 Declarations DELTA N.V. has filed a statement with the Chamber of Commerce as required under Section 403, Book 2, of the Dutch Civil Code, assuming joint and several liability for debts arising from legally binding transactions of the following subsidiaries as at the balance sheet date. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. DELTA Comfort B.V. DELTA Energy B.V. DELTA Ficus Holding B.V. DELTA Infra B.V. DELTA Kabelcomfort Netten B.V. DELTA Onroerend Goed Ontwikkelingsmaatschappij B.V. DELTA Pipe B.V. DELTA Tolling Sloe B.V. DELTIUS B.V. LIMO Energie Nederland B.V. LITRO Energie Nederland B.V. ZeelandNet B.V. DELTA Com B.V. On that basis, and on the grounds of annual authorisation statements from the shareholders filed with the Chamber of Commerce, these companies are exempt from using the prescribed format in preparing their financial statements. Put options DELTA N.V. has granted put options to the non-controlling shareholders in Indaver. Fiscal unity In consultation with the Dutch Tax and Customs Administration, the commercial operations in the energy segment, including multimedia, were transferred to a separate fiscal unity for corporate income tax purposes. Initially, the separation was to be effective from 31 December 2013 but, in consultation with the Tax Administration, the start date for both fiscal unities was moved to 1 January 2014. 138 Notes to the company income statement In 2014, DELTA N.V. employed an average number of 652 FTEs (2013: 683 FTEs). The comparative for 2013 was adjusted to reflect the relocation of Infra staff to DNWG. For details of the remuneration of DELTA N.V.’s Executive Board members, please refer to note 18 (Staff costs) to the consolidated financial statements. For details of the remuneration of DELTA N.V.’s Supervisory Board members, please refer to note 20 (Other operating expenses) to the consolidated financial statements. Auditors’ fees In 2014, DELTA N.V. paid the following fees for its consolidated companies: DELOITTE ACCOUNTANTS BV (EUR 1,000) Audit of DELTA Group Annual Reports Other analysis assignments Tax consultancy Other non-analysis services Total OTHER PARTS OF DELOITTE NETWORK NLD TOTAL 2014 2013 2014 2013 2014 2013 511 553 - - 511 553 39 35 - 8 39 43 - - 12 50 12 50 55 605 37 625 43 55 209 267 98 660 246 892 No performance-related fees were paid 139 Signed: Executive Board Supervisory Board Arnoud Kamerbeek, CEO C. Maas, Chairman F. Verhagen, CFO Ms. A.M.H. Schöningh, Vice Chairman B.P. de Wit, Secretary J. Bout 140 3. Other Information Profit appropriation Profit appropriation according to the Articles of Association Article 39 of the Articles of Association provides for the appropriation of profits as follows. 1. Any loss reported in the income statement, as included in the adopted financial statements, shall be taken to the general reserve. If the general reserve holds insufficient funds to cover the said loss, the remainder of the loss shall be charged to any profits achieved in future years. 2. If the income statement, as included in the adopted financial statements, reports any profit, the Supervisory Board may use the profit to allocate funds to the general reserves. Any profit remaining shall be at the disposal of the General meeting. 3. The General Meeting has the authority to declare one or more interim dividends and/or make other interim distributions, provided the requirements of Article 105 of Book 2, paragraph 2, of the Dutch Civil Code are satisfied on the evidence of an interim statement of financial position as referred to in Article 105 of Book 2, paragraph 4, of the Dutch Civil Code. Proposed dividend payout to shareholders (EUR 1,000) Distributable profit (Art. 39,2 Articles of Association) Interim dividend charged to the other reserves (Art. 39,3 Articles of Association) Proposed dividend payout to shareholders Added to the general reserve 2014 2013 3,760 74,788 11,240 - 15,000 20,000 - 54,788 141 Independent auditors’ report For the independent auditor’s report see the Dutch version of the annual report 2014. 142 4. DELTA in financial figures, consolidated (EUR million) 2014 2013 Assets Intangible assets Property, plant and equipment Financial assets Current assets Cash 367 1,714 722 704 158 3,665 473 1,784 696 690 174 3,819 1,146 504 875 1,140 3,665 1,213 522 1,110 973 3,819 882 269 106 81 517 76 1,931 970 344 118 79 514 78 2,104 1,141 1 (29) 826 1,939 1,318 1 (25) 728 2,023 Equity and liabilities Group equity Provisions Non-current liabilities Current liabilities Revenue Electricity Gas Electricity and gas transport Telecommunications Waste management and environmental services Miscellaneous Total revenue Expenses Cost of sales Fair value gains and losses on the trading portfolio Other operating income Net operating expenses Total operating expenses Earnings from operations Share in results of joint ventures and associates Operating result Net finance income (expense) Profit before tax Corporate income tax Profit from discontinued operations Non-controlling interests Profit after tax Proposed dividend (8) 41 33 81 42 123 (33) (16) 1 19 4 15 (40) 83 (3) (1) (5) 75 20 143 DELTA in key figures (EUR million) Revenue of which: Electricity supply Gas supply Electricity and gas transport Cable, internet and telecommunications Waste management and environmental sevices Other revenue 2014 2013 1,931 2,104 882 269 106 81 517 76 970 344 118 79 515 78 818 33 4 312 810 123 84 75 301 1,146 3,665 1,213 3,819 1.5% 0.3% 31.3% 15.0 4.7% 6.4% 31.8% 13.2 Finances Gross margin Operating result Profit before tax Profit after tax EBITDA Group equity (excluding dividend) Balance sheet total Ratios Return on investment Return on equity attributable to the shareholders Equity ratio Interest coverage ratio 144 Definitions of financial ratios RETURN ON INVESTED CAPITAL (ROIC) Operating profit + interest income from financial fixed assets + share of profits or losses in joint ventures and associates, divided by capital employed x 100%. CAPITAL EMPLOYED Sum total of non-current assets and net working capital as at the balance sheet date. RETURN ON EQUITY (ROE) Net profit attributable to DELTA N.V.’s shareholders, divided by shareholders’ equity attributable to DELTA N.V.’s shareholders. EQUITY RATIO Group equity divided by total assets x 100% INTEREST COVERAGE RATIO Operating profit + depreciation/amortisation charges + interest income, divided by net external finance income or expense. 145