N.V. Nuon Energy
Annual Report 2011
Creating
solutions
together
Profile
N.V. Nuon Energy is a Dutch energy company with
5,862 employees or 5,490 full time equivalents (FTE)
serving 2.3 million customers, businesses and (public)
organisations in the Netherlands. Nuon produces
and supplies electricity, gas, heat and cooling and offers
its customers a wide range of energy-saving products
and services. With a turnover of € 4,450 million in 2011,
Nuon holds a top three position in the Dutch energy market.
Vattenfall AB, Nuon’s parent company, is one of the largest
generators of electricity and the largest producer of heat in
Europe. Vattenfall’s main products are electricity, heat and
gas. Vattenfall operates in all parts of the electricity and
heat value chain: generation, transmission, distribution
and sales. Vattenfall is also engaged in energy trading
and lignite mining. The company employs approximately
34,700 full time equivalents. Vattenfall AB is wholly owned
by the Swedish state.
About this report
The annual report of N.V. Nuon Energy is the integrated representation
of our company’s financial and non-financial performance for the calendar
year 2011. The scope of this report is N.V. Nuon Energy and its subsidiaries.
Nuon’s consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS) as adopted by the
European Union. The last section of the annual report includes the auditor’s
report and the profit appropriation.
With respect to Corporate Social Responsibility (CSR) reporting we report
on activities in countries where we have material operations. Consequently,
we have not included information on our CSR operations in Romania and
the UK. The subsidiaries in which Nuon held a minimum share of 50%
throughout the year are within the scope of this report. Nuon’s CSR reporting
was prepared using GRI 3.0 guidelines as well as the Electric Utilities Sector
Supplement of the Global Reporting Initiative (GRI). The GRI table can be
found at www.nuon.com/reporting.
Data is consolidated at corporate level.
Qualitative information about the Vattenfall group and its activities is included
as far as these activities affect Nuon’s customers, employees or stakeholders.
The qualitative reports were provided by experts throughout the organisation.
‘We’, ‘Nuon’, ‘Nuon Energy’, ‘the company’, ‘the Nuon Energy Group’,
‘the Nuon Group’, ‘the group’ or similar expressions are used in this
report as a synonym for N.V. Nuon Energy and its subsidiaries. The name
‘Vattenfall’ or similar expressions refer to Vattenfall AB, the parent company
of N.V. Nuon Energy, and its subsidiaries.
Contents
About Nuon
Message from the CEO 2
Mission, vision and strategy
4
Highlights of 2011
6
Report of the Management Board
8
Corporate Governance
18
Report of the Supervisory Board 26
Remuneration Report 2011
30
Corporate Social Responsibility
34
Health and safety
36
Affordability of energy
38
Security of supply
40
Sustainability of energy
45
Together53
Assurance report and GRI statement
59
Financial statements61
Financial Statements 2011
62
Other120
Auditor’s report
120
Profit appropriation
121
Ratios and definitions
122
Nuon at a glance
N.V. Nuon Energy produces and supplies electricity, gas, heat and cooling,
and helps its customers to reduce their energy use.
N.V. Nuon Energy is a subsidiary of the energy company Vattenfall AB,
which currently holds a total of 64% of the shares in N.V. Nuon Energy.
36% of the shares are owned by municipalities and provinces in the
Netherlands. During 2011, Nuon and Vattenfall have further developed
into one integrated European company with strong roots in the core
markets Sweden, Germany and the Netherlands.
After the introduction of the business-led organisational structure
in 2011, Nuon’s operations are now primarily based in the Netherlands
and structured into three operating segments. Each operating segment
comprises one or more Business divisions and each Business division
is further structured into Business units.
The Netherlands is one of the three core countries
of the Vattenfall Group.
Generation
In this segment:
■ Business division ‘Asset Development’ is
responsible for project development and
execution of new build initiatives and large
modifications within the thermal production
park as well as heat infrastructure;
■ Business division ‘Production’ is responsible
for thermal electricity generation;
■ Business division ‘Asset Optimisation and
Trading’ optimises the use of our production
assets and trades, amongst other things,
­electricity, gas, oil, coal and emission
­allowances.
Renewables
Business division ‘Renewables’ is responsible
for development, operation and maintenance
of all renewable energy operations except for
hydro power.
■ Distribution and Sales
Business division ‘Distribution and sales’
is responsible for the sale and delivery
of energy and energy-related products
to business and household customers.
In addition, the production portfolio of
heat and cold is managed in this division.
■ Core country, the Netherlands
Other core countries
Work areas
More information about the Vattenfall structure can be found in the annual report 2011 of Vattenfall AB at www.vattenfall.com.
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Content s
Key figures
Operational
FTEs 5,490
Financial
■■
■■
Fossil-based electricity production
■■
Renewable production
13.2 TWh
1.5 TWh
■■
Capital expenditures € 1,098 million
■■
Net turnover € 4,450 million
■■
Net profit € 438 million
Consolidated key figures
2011
2010
2009
2008
Financial (€ million)
Net turnover
Gross margin
Operating expenses
Operating expenses excluding items affecting comparability
Earnings before interest, taxation, depreciation
and amortisation (EBITDA)
Earnings before interest, taxation, depreciation
and amortisation (EBITDA) excluding items affecting comparability
Operating profit
Operating profit excluding items affecting comparability
Net profit
Net profit excluding items affecting comparability
Capital expenditures
Cash flow from operating activities
4,450
1,440
826
810
5,458
5,112
4,811
1,869
1,381
1,345
829
998
919
817
911
897
783
1,104
484
585
588
554
350
438
299
1,098
448
743
720
835
721
196
399
648
423
434
563
200
492
342
321
585
959
698
575
910
1,655
844
Ratios
ROIC
Operating margin
10.3%
32.4%
15.0%
5.5%
12.6%
34.2%
27.0%
28.0%
5,766
6,188
5,820
847
974
1,491
6,613
7,162
7,311
41
40
38
26%
27%
23%
Employees (as at 31 December)
Number of own employees (FTE)
Number of external employees (FTE)
Total number of employees (FTE)
Average age own employees
Female employees/total employees
Work experience placements
Absenteeism1
Lost time incidents frequency (LTIF²) for own personnel
5,490
843
6,333
42
26%
37
4.0%
1.6
32
42
54
4.2%
3.9%
4.4%
4.5
5.8
n/a
Electricity production and emissions
Fossil-based electricity production (TWh)
Renewable production (GWh), including joint ventures
Renewable electricity production capacity installed (MW)
CO2 emissions per generated unit of electricity3 (g/kWh)
13.2
1,508
366
463
13.7
14.8
14.4
1,267
1,367
1,448
364
368
354
463
499
503
89.0%
88.0%
89.0%
94.5%
91.5%
93.5%
Customers
Customer satisfaction in general in the Dutch consumer market4
Customer service satisfaction in the Dutch consumer market5
88.0%
95.0%
Value for the Netherlands, excluding the subsidiaries Feenstra, Nuon Beveiliging and Nuon Isolatie, which are excluded as not all comparative figures are available.
Number of accidents leading to absenteeism divided by the total number of hours worked, multiplied by one million.
This relates to the CO2 emission factor of the energy production fuel mix.
4
Customer satisfaction in general is defined as the percentage of surveyed customers who indicated that they are satisfied/very satisfied with Nuon.
5
Customer service satisfaction is defined as the percentage of surveyed customers who indicated that they are satisfied/very satisfied with Nuon’s services.
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2
3
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A b o u t N uon
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N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Message from the CEO
We can look back on a year in which much was achieved, despite challenging
external market circumstances. N.V. Nuon Energy reports in 2011 a net profit of
€ 438 million. The net profit excluding items affecting comparability decreased
by 13% compared to the previous year to € 299 million. This decrease was mainly
due to lower gas sales as a result of warmer weather and the effects of the
turbulent energy markets. Due to continuous cost control, cost levels remained
stable at € 810 million in 2011 (2010: € 817 million).
Creating solutions with our customers
In 2011, Nuon – as part of Vattenfall – successfully carried out its
strategy aimed at being an integrated energy company that provides
reliable, affordable and sustainable energy solutions for our customers.
Our customer base remained stable compared to 2010, with 2.3 million
electricity contracts and 1.9 million gas contracts. Nuon was the first
energy company in the Netherlands to receive the Customer Operations
Performance Center (COPC) Certificate in 2011 for part of its Customer
operations. COPC is the world’s leading authority on customer
satisfaction and customer contact best practices. In 2011, our customer
satisfaction remained high.
Together with our customers we create a wide range of solutions
for better energy management. Nuon remained market leader in
the Netherlands in both energy products and services, including
high-efficiency heating, insulation, ventilation and energy-saving
consulting. Hence, Nuon’s energy-related services grew further during
the year. Insulation activities grew strongly, from approximately 9,000
contracts in 2010 to 12,500 in 2011. The number of high-efficiency
boilers sold also increased, from 17,500 in 2010 to almost 20,000 in 2011.
In the ‘large businesses’ segment, the number of customers grew by 2%
(to nearly 20,500) and both electricity and gas sales increased. Our
business partners consider us a reliable energy consultant thanks to
our efforts to create solutions for more efficient and environmentalfriendly energy consumption. One good example is the agreement
with Amsterdam Arena to provide sustainable energy. By delivering
hot water from the Nuon power station in Diemen, Amsterdam Arena
is able to achieve a CO2 reduction of approximately 50% on heating.
Environmental-friendly cooling methods, using water from nearby lakes,
will also reduce CO2 emissions by approximately 75%.
‘E-mobility’ is another example of our efforts to be a reliable energy partner
for our customers. Together we create solutions for more efficient and
environmental-friendly energy consumption. In collaboration with
business partners and municipalities, Nuon has installed infrastructure
for electric cars, including charging stations. Vattenfall and Volvo have
closely collaborated in developing technology for a ‘plug-in’ hybrid car,
which will run primarily on electricity (plug-in) but can also use diesel
fuel (hybrid). This substantially reduces the emissions of this car – which
is expected to be introduced to the market later in 2012.
Investing in the future
Going forward, Nuon wants to remain market leader in providing
energy solutions for the Dutch market. A clear example of this goal
is the introduction of the Nuon E-Manager. With this remote control
tool, customers can monitor and manage their electricity consumption
in real time, and compare energy consumption or CO2 emissions over
a period of time via computer or smart phone. The first users of the
Nuon E-Manager are very enthusiastic and Vattenfall wants to roll out
this product to other core countries.
In 2011, Nuon invested a record € 1,098 million – an increase of
14% compared to 2010. Investments were made in new and efficient
gas-fired power stations in Amsterdam (435 MW), Diemen (435 MWe/­
260 MWth) and in the port of Eemshaven (1,311 MW). The new power
stations will provide electricity to approximately 3.5 million households
starting in 2012 and 2013, and will replace older, less efficient power
plants in the electricity market. In addition, Nuon invested in existing
production capacity and heat networks.
Affordability ranks high on our agenda. In addition to our focus on
keeping cost levels low, adhering to an international trading strategy
and helping our customers save energy, we also provide assistance
to vulnerable customers. In order to find practical solutions for
these customers, we are working closely with various stakeholders,
including debt relief departments of municipal organisations.
In May 2011, Nuon began constructing a heat transportation pipeline,
from the power station in Diemen across the IJmeer to the city of Almere.
Residual heat from electricity production in Diemen will be used to heat
homes in Almere. This pipeline, which is unique in the Netherlands,
is expected to fully operate by mid-2012. The combined efficiency
of the new power station in Diemen will be over 85%, as it uses such
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Abou t N uon
Content s
A b o u t N uon
Mes sage from th e CEO
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a large portion of residual heat from the production of electricity. It will
replace the old, less efficient heat producing power plants in Almere.
In early 2011, the new pan-European organisational structure of
Vattenfall was implemented, whereby the former country-based
structure was replaced by a business-led structure. We are part of
All our projects were executed in close collaboration with our stakeholders.
A good example was the preparation of the construction of the Magnum
power plant in the port of Eemshaven. A constructive dialogue with
environmental, nature and wildlife organisations, governments, local
residents and other interested parties has resulted in clear agreements.
a large, robust company, which is also expressed in the ‘Part of Vattenfall’
addition to our logo. We are not only proud of this, but are also convinced
that our customers will positively benefit from our European scale. We
will improve our ability to provide gas, electricity and heat 24 hours a day,
at competitive prices, by further increasing our operational excellence in
our plants and customer service. This is what we have always stood for and
what we continue to stand for. The key difference is that we now operate
on a much larger European scale. This will not only be advantageous to
our customers but also for our employees, who will have access to enhanced
career opportunities.
At the end of 2011, Nuon began constructing the Zuidlob wind farm
(122 MW). The successful initiation of one of the largest on shore wind
farms in the Netherlands was particularly due to Nuon’s effective
collaboration with residents, the municipality of Zeewolde, the province
of Flevoland and the Dutch Government. Zuidlob will consist of 36 wind
turbines which will be operational in 2013 and will produce electricity
for approximately 88,000 households. This is in line with our strategy
to increase sustainable electricity production capacity in general and
our focus on wind energy in particular. Nuon’s investments in renewable
production capacity increased to € 56 million in 2011 compared to
€ 6 million in 2010.
In 2011, our wind energy portfolio generated 17% more electricity
than in 2010. This was due to better wind conditions in the Netherlands
compared to the previous year and due to more focus on preventive
maintenance. Nuon’s unique Solar Island in Almere celebrated its
first anniversary in June 2011, at which time it exceeded generation
expectations by 10%. The Solar Island’s yearly heat generation is
equal to energy required for approximately one million hot showers.
Creating solutions with Vattenfall and implementing
the new strategy
The execution of our strategy – as part of Vattenfall – aimed at focus
on core activities, increased financial flexibility, lower CO2 emissions
and a higher profitability is well underway. We have successfully
divested our gas fields in the North Sea and our Belgian activities
on good commercial terms. Both transactions are important steps
towards concentrating the Vattenfall activities in the three core
countries: Sweden, Germany and the Netherlands.
Amsterdam, 17 April 2012
Huib Morelisse (CEO)
N.V. Nuon Energy
In May 2010, we initiated an international search for a strategic investment
partner for Helianthos, the Nuon company that developed flexible solar
cell foil. Over 150 potential investors were approached, but unfortunately
none were willing to co-invest in further development. In light of this,
Nuon decided in September 2011 to discontinue the activities of this
company and to execute a public sale in early 2012 for the assets of
Helianthos through an online auction. This will give interested parties
a fair opportunity to take over all or part of the assets.
Together with our employees
The safety of our employees is always a top priority. The number of
incidents leading to lost time involving Nuon employees (measured
as LTIF) has decreased significantly in 2011, indicating that we have
maintained a very positive trend. In our development projects we focus
on increasing safety among employees as well as contracted staff.
Several safety milestones in our development activities were recorded,
such as no injuries leading to lost time at the Hemweg 9 construction
site. Unfortunately, serious incidents did occur during other development
activities. This shows that although safety is managed in a responsible way,
we will never cease to strive for improvement and we will maintain
a relentless focus on controlling all safety aspects of our operations.
Our employees’ strong commitment forms the basis of Nuon’s performance
and results. Together, we achieved a great deal in 2011 under challenging
market conditions. On behalf of the Management Board, I wish to
sincerely thank all Nuon employees for their contribution to the continued
success of our company!
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A b o u t N uon
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N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Mission, vision and strategy
The year 2011 was the first year of implementation of the new strategic direction
of Vattenfall, in which Nuon is now fully integrated. Embedded in the strategy
and our new organisation are the three core values of Vattenfall – Safety,
Performance and Cooperation.
Implementing the new strategic direction
as part of Vattenfall
As part of Vattenfall, Nuon can count on a stronger platform for both
continued growth and value creation. The main objective for Vattenfall
is to generate a market rate of return by operating a commercial energy
business, enabling Vattenfall to be among the European leaders in
developing environmentally sustainable energy production. In 2011
Vattenfall made an effort in working on the strategic direction set by
the Vattenfall Board of Directors in 2010, which is based on four pillars:
■■ Greater focus on profitability and value creation;
■■ Focus on three core markets – Sweden, Germany and the Netherlands;
■■ Three main products – electricity, heat and gas;
■■ Reduction of CO2 exposure and growth of low CO2-emitting energy
production and gas.
Being a European leader in the development of environmentally
sustainable energy production requires substantial investments in order
to change the composition of the production portfolio. One key element
is to reduce Vattenfall’s CO2 exposure to a yearly 65 million tonnes
by 2020 from today’s yearly 89 million tonnes (calculated according
to ownership share). For these efforts to be successful, profitability
and value creation must initially be improved.
This is why Vattenfall has broken down the implementation of its
strategy into two phases – a consolidation phase to be followed by a
growth phase. During the consolidation phase, 2011-2013, the focus
is on improving value creation by reducing costs, divesting non-core
assets and revising the investment programme. This will pave the way
for a transition towards a more sustainable energy production portfolio.
In addition, the new business-led organisational structure of Vattenfall
was established to promote synergies between the different countries
of operations.
Nuon translates Vattenfall’s strategic pillars in such a way that the
company contributes to overall value creation while fulfilling the needs
of its shareholders and local stakeholders. The new business divisions
have full responsibility for managing their business, all with the mission
of delivering on the pillars of the new strategy.
Greater focus on profitability and value creation
Nuon continues to focus on cost reduction and control, while
delivering continuous operational excellence in our services
and our generation activities.
The new business-led organisation provides further potential for Nuon
to improve the efficiency of its operations and create synergies in the
areas of cost efficiency, staffing and knowledge sharing. During the
first year, the organisational change has already contributed to efficiency
improvements. In the coming years, further cross-border alignment
with best practices will be pursued to realise additional synergies.
For our customers, the focus on value creation will translate into increasing
operational excellence in our customer service, among other things.
Nuon also remains strongly committed to helping our customers realise
energy savings and providing support to more vulnerable customers.
In addition, we strive to keep energy affordable and in this effort we
rely, among other things, on the international scope of Vattenfall’s
trading and sourcing activities to mitigate the effect of energy markets’
price fluctuations.
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Abou t N uon
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A b o u t N uon
Mi s s i on , vi s i on a n d s tra teg y
Saving energy is also a priority for business customers, both in terms
of sustainability and the costs of energy. We respond to their needs by
offering a partnership model, whereby Nuon combines commodity and
technical expertise to help them identify and realise their energy savings
potential. We offer our business customers a three-part proposition that
includes advice on optimal commodity purchase prices, tailor-made
energy savings and flexible invoicing. We also aim to increase our
business customers’ insight into consumption levels at individual sites.
In relation to operational excellence in our generation activities, the
goal is to achieve ‘best in class’ energy generation operations. This
translates into high commercial availability of our plants, continuous
improvement of operating efficiency with the aim of lowering CO2
emissions, and maintaining high safety standards. The safety of our
employees is a core value of Vattenfall and Nuon. Nuon aims to improve
the level of safety of its operations by setting high standards and
continuing development of its safety culture. Risks to health and safety
are identified and reduced through comprehensive prevention
programmes and well-established risk management systems. Our efforts
are based on a systematic approach, which allows room for feedback
and the exchange of experiences, thus promoting an open culture that
will yield continuous improvements.
Stronger focus on core markets and products
One of the pillars of Vattenfall’s strategy is the focus on its core markets
Sweden, Germany and the Netherlands and its three main products:
electricity, heat and gas. The focus on the core markets and products
has entailed a review of operations that were located outside of these
markets or were not aligned with the long-term objective to develop
environmentally sustainable energy production. This resulted in the
divestment of Nuon Exploration & Production (Nuon E&P) and our
Belgian activities.
The Netherlands is identified as a core country in the Vattenfall strategy.
Country representation is crucial in the pan-European business-led
organisation to ensure that specific local issues as well as stakeholder
dialogue are adequately managed and receive the attention they deserve.
As a result, Nuon benefits from the European dimension of Vattenfall
while maintaining its Dutch culture and presence when it comes to
interaction with our employees, the environment and society at large.
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Reduction of CO2 exposure
To be a European leader in the development of environmentally
sustainable energy production, Vattenfall must make substantial
investments to change the composition of its production portfolio.
By 2020 Vattenfall’s total CO2 exposure will be reduced to 65 million
tonnes (corresponding to Vattenfall’s share of ownership in the
respective plants), compared with 89 million tonnes in 2011.
A number of measures is needed to reduce Vattenfall’s total CO2
exposure. In the Netherlands, Nuon focuses its efforts on wind energy
and biomass opportunities as well as increasing the efficiency of the
fossil-fuelled generation portfolio. Furthermore, in terms of CO2/KWh,
the current generation portfolio will profit from the new and efficient
electricity and heat production from the three new gas-fired power
plants as from the end of 2012.
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A b o u t N uon
Content s
N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Highlights of 2011
February
Stakeholder dialogue
Nuon Magnum
Commercial considerations, as well
as the results of the long-running
­constructive stakeholder dialogue
with nature and environmental
­organisations, lead to the decision
to postpone the coal and biomass
­gasification plans for Nuon Magnum,
for now, and continue with the
­construction of the natural gas-fired
power station.
Investments in wind
energy total 131 MW in 2011
Nuon starts the replacement of the wind
turbines at Reyndersweg in IJmuiden with
more modern turbines, together with its
partner Wind Groep Holland. In October,
thanks to cooperation with the region’s
residents, the municipality of Zeewolde,
the province of Flevoland and the Dutch
Government, Nuon becomes full owner of
one of the largest planned onshore wind farms
in the Netherlands: Zuidlob (122 MW).
April
July
Further investment
in gas storage capacity
Divestments in line with
new strategic direction
In April 2011, Nuon completes its gas storage
facility in Epe, Germany. The last expansion
of approximately 70 million m3 of natural gas
brings the facility’s total storage capacity to
approximately 280 million m3 of natural gas.
This gas storage facility enables us to provide
gas to consumers with greater security of
supply and to respond to and benefit from
fluctuations in gas supply and demand.
As part of the new strategic direction and
the focus on core markets and products,
Nuon reaches agreements on the sale of
Nuon E&P and Nuon’s Belgian activities.
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Abou t N uon
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A b o u t N uon
High l ight s o f 20 1 1
7
December
Ongoing construction
of three gas-fired
power plants
September
November
Partnering with
business customers
Introducing Vattenfall
to Nuon’s customers
Working with business customers to create
solutions to meet their climate and energy
savings objectives is at the core of Nuon’s
operations in 2011. Among other constructive
partnerships, Nuon announces new agreements
with Amsterdam Arena and Ymere.
For the first time, the winter edition of the
seasonal magazine for Nuon customers carries
the Vattenfall endorsement and is sent to
1.7 million households. In addition Nuon
introduces the Nuon E-Manager, with which
consumers can manage their use of electricity
and gas online, via their smart phone or at
home. The Nuon E-Manager also provides
information comparing usage with similar
households and includes details such as
outside temperature.
In 2011, Nuon invests an all time high amount
of € 779 million in new state of the start ­
gas-fired power stations. The construction
of one of the three gas-fired power plants,
the so-called Diemen 34 power plant, is in
full swing. The gas turbine and generator
arrive at the construction site early in the
month. Diemen 34 is planned to be operational
at the end of 2012.
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A b o u t N uon
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N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Report of
the Management Board
The year 2011 was one of consolidation, with a strong focus on our core
markets and products. Nuon, as part of Vattenfall, continues to build
the foundation for a profitable, strong and diversified sustainable energy
portfolio that delivers value to its stakeholders.
2011: a turbulent year for energy markets
markets have been subject to tremendous uncertainty and pressure
The year 2011 was a turbulent one, characterised by a combination
of macro events and local actions and interventions. The earthquake
and the subsequent tsunami in Japan, which caused the disaster in the
Fukushima nuclear complex, demonstrated the level of interconnection
of the world’s energy markets with a near-instant upward pressure
effect on gas prices. This was followed by the German government’s
decision to accelerate the phase-out of its nuclear power fleet. German
electricity prices reacted immediately by increasing nearly 15% within
two working days.
over the course of the year. Against this background, we focused on
what lies ahead and what our stakeholders expect from Nuon: reliable
and more sustainable energy production as well as affordable energy
and service. 2011 was a record year in terms of Nuon’s investments,
with a total of € 1,098 million invested mainly in new gas and wind
generation capacity.
As a result of the cold last quarter of 2010, gas markets started 2011
with a strong impetus for forward prices. However, the mild autumn
and winter temperatures prompted a situation of overload at storage
locations, which all ended up running at or near capacity. The North
West European market has been particularly well-supplied due to a
combination of diverse factors. Market circumstances pushed gas-fired
plants out of the merit order on numerous occasions, and the general
gas overhang triggered by the exploration of unconventional gas has
led to the US becoming an exporting country.
In 2011, total electricity production from our plants decreased
by 0.3 TWh from 15.0 TWh to 14.7 TWh.
In a nutshell, 2011 brought about a further deterioration of spark spreads
and dark spreads. This combined with the lower demand for gas and
electricity resulting from the recession and the fact that utilities have
entered a period of substantial oversupply in the Dutch market, has
led to a significant increase in intermittent production. These factors
are reflected in our margins on electricity, gas, oil and other traded
commodities, which ended the year at the lower end of our expectations.
Delivering on the new strategy:
focus on core markets
Nuon delivered on its strategy in 2011. Operating in the new businessled organisational structure promotes higher accountability among
our employees, increased customer focus throughout the company,
stronger performance and a focus on costs. Non-core activities, like our
gas exploration and production activities as well as Nuon Belgium, have
been divested. Amidst a sequence of defining macro-events, energy
Improving the performance and flexibility
of our current portfolio
The warmer weather and deteriorating spark spreads meant we
occasionally had to reduce the operational level of our combined heat
and power plants to the minimum required for continuous heat delivery.
This was further intensified by the lack of volatility observed on
the electricity market, as illustrated by the fact that average volatility
percentages on the APX-ENDEX reached an all-time low in 2011.
Short-term markets are increasingly tackling and absorbing electricity
supply from renewable sources and thus non-price-dependent capacity.
We faced technical setbacks as well, including a boiler leak at our
Hemweg 8 plant. Then in the summer, Hemweg 8 suffered a fire in
the grid connection cable, which led to disconnection of the plant
from the grid. We managed to reconnect the plant within a month.
During the summer, our Merwedekanaal 11 and Buggenum plants
did not produce electricity due to a planned overhaul.
In order to further improve our operating performance, Nuon continued
its efficiency improvement programme. In this programme the company
has identified all possible activities that improve the efficiency, and
therefore lower the CO2 footprint, of its current power production portfolio.
For more information regarding our efficiency improvement programme
for our existing portfolio, please see the CSR chapter Sustainability of energy.
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In addition to efforts to improve efficiency of our current portfolio,
we have added flexibility to our total asset portfolio by expanding our
gas storage activities. By doing this we secured the ability to respond
flexibly to fluctuations in gas supply and demand. This enables the
company to provide customers with greater security of supply and
some ability to mitigate fluctuations in wholesale prices. In April 2011,
the final part of the Epe gas storage facility, which is connected to the
Dutch and German gas network, became operational. Nuon obtained
the irrevocable permit to expand the gas storage facility in Zuidwending,
in the province of Groningen in July. Nuon was successful in securing
a long-term contract for the sourcing of seasonal storage capacity in
the Bergermeer gas storage open season.
In 2011, the fuel mix used for Nuon’s electricity production reflected
the lower production levels of our gas-fired power plants and more
favourable wind conditions. The major part of the electricity is produced
by gas-fired power plants. Overall production levels were lower in
comparison to last year. The CO2 emission factor per unit of electricity
increased slightly (from 462.5 g/kWh to 462.8 g/kWh) due to a
relatively higher share of coal-fired production in 2011.
9
Fuel mix energy production
%
31.4%
Coal
29.6%
Natural gas CHP
21.0%
Blast furnace gas1
9.9%
Wind2
7.0%
Natural gas power stations
0.8%
Biomass
0.3%
Hydro
0.0%
Solar
Fossil-based energy
Renewable energy
CO2 emission rate
Radioactive waste rate
1
2
89.02%
10.98%
462.8 g/kWh
0.00000 g/kWh
At our power plants in Velsen, the residual gas released during the steel production of
Tata Steel is used as a fuel to produce electricity. In this way this blast furnace gas is put
to good use by Nuon. The gas contains a high percentage of CO2. It has been agreed with
the Office of Energy Regulation of the Dutch Competition Authority that Nuon is to adjust
the CO2 emissions in the production fuel mix to avoid double counting. The CO2 emission
factor of blast furnace gas is calculated in this mix on the basis of the use of natural gas.
The wind energy production means all electricity that Nuon, as producer and beneficial
owner, feeds into the electricity grid via grid connection points.
Details of the Management Board
(As at 31 December 2011)
Huib Morelisse (1964)
As of 1 July 2010, Huib Morelisse (Dutch nationality) was appointed Chief Executive Officer of the Management
Board of N.V. Nuon Energy. As of the same date, Huib Morelisse also became a member of Vattenfall’s Executive
Group Management (EGM) as Head of Business Group Benelux. Due to the organisational restructuring and the
introduction of a business-led structure, Huib Morelisse became Head of Business division Asset Development,
as of 1 January 2011.
Career
Before joining Nuon, Huib Morelisse held several management positions at Essent, RWE, Goldman Sachs &
Co and Booz, Allen & Hamilton.
Peter Smink (1965)
Peter Smink (Dutch nationality) has been a member of the Management Board and Chief Financial Officer
of N.V. Nuon Energy since 1 January 2010. He is responsible for managing the company’s financial affairs
and was appointed Head of Group Finance Vattenfall as of 1 August 2011. From 28 October 2011 he took on
the role of acting Chief Financial Officer of Vattenfall AB and became a member of Vattenfall’s EGM.
Career
Peter Smink joined N.V. Nuon in 2001 and held several management positions, mainly in the area of finance.
Prior to joining Nuon, Peter Smink held various management positions at KPN and PricewaterhouseCoopers.
Supervisory board memberships/other positions
■
■
■
Amsterdam Partners: member of the Executive Committee (Treasurer);
Foundation Rural Energy Services (FRES): Member of the Supervisory Board;
Yellow & Blue Clean Energy Investments B.V.: Member of the Supervisory Board.
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10 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
In managing our production assets, safety is of paramount importance.
As a result of our continuous focus on health and safety during 2011,
the LTIF of Nuon employees decreased from 4.5 in 2010 to 1.6 in 2011.
In our energy-related services, we saw a reduction of LTIF of 65%
compared to 2010 levels. Unfortunately we were not able to prevent all
incidents in 2011, which is why we continue our focus for improvement
of health and safety management.
More information on our approach to health and safety can be found
in the CSR chapter Health and safety.
Investing in reliable supplies with a low
CO2 profile
Nuon is currently constructing a total of 2,181 MW of efficient combined
gas power generation in the Netherlands. The Nuon Magnum gas-fired
power plant will come online at the end of 2012. The Hemweg 9
gas-fired plant will be operationally ready to supply Amsterdam
with electricity by the end of 2012, resulting in increased efficiency
of our portfolio and lower emissions per kWh. In Almere, ageing heat
plants will be replaced by a new and more efficient gas-fired power
plant in Diemen, also towards the end of 2012.
Creating value for our customers
Over the course of 2011, the number of our electricity and gas supply
contracts on the Dutch consumer market remained stable at 2.3 million
and 1.9 million respectively. This is the result of our sales activities,
which offset the effect of customer switches in the Dutch market. The
number of switches remained stable compared to 2010. Gas volumes
sold decreased 15% due to the mild winter. Electricity volumes supplied
in the Netherlands increased by 5% compared to last year. This increase
stemmed mainly from higher sales volumes to business customers.
In the consumer market, our attention was specifically focused on
customer retention. In terms of our sales channels, we have put a strong
emphasis on personal and internet sales. The Ed and Eduard campaign,
which was introduced in 2011, yielded positive results as regards brand
recognition and awareness. This campaign combines two key topics:
affordability of energy and reduction of the carbon footprint.
In the area of sustainability propositions, the number of Natuurstroom
and Groenstroom customers increased slightly in the consumer market,
as we noticed a strong interest for our dual fuel proposition ‘CO2 OK’.
Annual supply of green electricity1
GWh
The largest development in our heat activities involved the construction
of a heat production and distribution complex. This comprises the
modification of our Diemen 33 plant, expansion by means of the
construction of the Diemen 34 plant, a pipeline linking Diemen to
Almere running under the IJmeer, a heat transfer station of 180 MW,
peak boilers and additional noise reduction investments for the boiler
house in Almere. A total of 11,000 households and companies in Almere
will be connected to this project.
Customers x 1,000
5,000
4,000
400
316
311
307
3,000
2,000
300
2,780 29
559
2,126
1,980
336
507
490
1,473
1,636
200
2,567
157
459
1,000
Despite a number of serious delays in the property development market
due to the current economic climate, we succeeded in adding a total
of 3,002 connections to our heating and cooling network in 2011.
The municipality of Amsterdam accepted Nuon’s offer to deliver heat
and develop the network of the Amstelkwartier phase 1. The contract
was signed in December 2011 and includes 1,482 homes and 627
student houses. On 1 July 2011, Nuon divested three small district
heating projects with 4,342 connections as part of our strategy to focus
on large-scale district heating developments.
In line with Vattenfall’s strategic objective of creating a strong and
diversified environmentally sustainable energy portfolio, Nuon focused
the renewables investments on onshore wind and investigation of
possibilities for co-firing of biomass. In addition to developing wind
farms at new locations such as Zuidlob (122 MW), we are focusing
on repowering and expanding existing wind projects. In December,
the 9 MW repowering project on the Reyndersweg in Velsen was
completed. In total, the installed capacity of renewable energy increased
slightly from 364 MW in 2010 to 366 MW in 2011.
100
0
1,951
2,192
0
2 008
Total supply Nuon GroenStroom
Total supply Nuon NatuurStroom
1
2 009
2 010
201 1
Total supply CO2 OK
Total number of customers
Relates to products for consumers/small businesses and large business customers.
In 2011, the company particularly increased its efforts in the small and
medium-sized enterprises market, which led to a significant growth
of this segment in our portfolio. The total number of business customers
also increased compared to prior years. This is the result of our sales
efforts in 2009 and 2010, which materialised in 2011. The number
of connections in the business customer market increased from 81,000
to 85,000. Thanks to the positive developments of the gas market platform
TTF, there are now increasing opportunities to optimise the company’s
sourcing position, leading to an improved gas proposition for our
customers. Last but not least, we continued growing the number of users
of our Nuon electricity trading platform, which provides access to all
relevant electricity markets (spot, OTC and imbalance) as well as advice
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regarding the best market conditions for portfolio and risk appetite.
As of the third quarter of 2012, our business customers will also be able
to trade gas via the platform.
Sales of other energy-related products and services increased
significantly, with a more than 50% increase in the surface insulated by
Nuon in 2011 compared to 2010 levels. The number of boilers installed
increased by 13% in 2011. Nuon added ventilation services to its portfolio,
the uptake of which was promising with a total of nearly 2,700 contracts
sold following the introduction in July.
Customer satisfaction remained high, rewarding our efforts to continuously
improve the way we serve our customers. In 2011 we received COPC
(Customer Operations Performance Center) certification for parts of
our customer service processes. In addition, in the beginning of 2012,
certification was received for all processes of the Customer Service
Center. COPC is the leading international industry standard for call
centre operational excellence.
11
Working together with our stakeholders
An energy company is a partner to society in many aspects. It has deeply
rooted relationships and mutual dependence with many different
stakeholders. Foundations for sustainable partnerships are trust and
confidence, something you earn. Understanding and responding to
society’s expectations is crucial to Nuon’s business. We are in constant
dialogue and try to respond to stakeholder expectations at every
level of our business. This is shown by our efforts of implementing
stakeholder engagement processes throughout business operations
and by top-level involvement in stakeholder relations such as Nuon’s
cooperation with the Council of Children, Foundation Rural Energy
Services and the Opkikker Foundation.
More information on this cooperation and our approach and efforts in
the context of working together with our stakeholders can be found in the
CSR chapter Together.
Financial overview and analysis
Financial Overview
The table below shows the results for 2011 compared to 2010.
Financial overview
For the year ended 31 December
€ million
Net turnover
Excluding
Items affecting items affecting
Reported
comparability
comparability
2011
4,450
-104
4,346
Items affecting
comparability
Reported
Excluding
items affecting
comparability
2010
5,458
-373
5,085
1,440
826
-104
-16
1,336
810
1,869
-373
1,496
829
-12
817
783
554
-195
-204
588
350
1,104
-361
743
Operating profit (EBIT)
721
-298
423
Net profit
438
-139
299
563
-221
342
Electricity production (TWh)
14.7
27.1
5.5
15.0
- Electricity
2.3 million
2.3 million
- Gas
1.9 million
1.9 million
Gross margin
Operating expenses
Earnings before interest, taxation,
depreciation and amortisation (EBITDA)
Electricity sales (TWh)
Gas sales (m3 billion)
25.7
6.5
Number of contracts
Dutch consumer market
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Net turnover by product
Operating expenses by category
EBIT
€ million
€ million
€ million
6,000
1,000
5,458
4,800
4,450
3,600
346
56
587
653
1,797
2,194
162
600
425
1,200
0
2,010
356
355
92
-47
90
-41
-250
2011
Heat and other products
Fair value movements
240
200
626
8
186
0
0
-6
-61
-200
201 1
2010
120
400
2,265
0
554
425
500
250
Electricity
Gas
829
750
2,400
721
800
826
Sub-contracted work
Other operating expenses
Net turnover
Net turnover decreased by € 1,008 million to € 4,450 million.
201 1
2 010
Personnel expenses
Own work capitalised
Generation
Renewables
2 010
Distribution & Sales
Other
This decrease stems mainly from lower fair value movements on the
derivative commodity contracts for own use, which positively impacted
2011 results by € 56 million. In 2010, a net gain of € 346 million
was reported.
Gross margin
Gross margin decreased by € 429 million to € 1,440 million. Gross margin
excluding items affecting comparability decreased by € 159 million
to € 1,336 million. This decrease was mainly due to lower spark spreads,
lower margin on heat and gas as a result of the warmer weather and
the divestment of Nuon E&P.
Nuon uses derivative commodity contracts for the physical sale
and purchase of fuels for the generation of electricity and supply to
customers. The majority of these contracts are, in accordance with IFRS,
valued at fair value. As these fair value changes are included in the
income statement as far as cash flow hedging can not be applied,
and do not reflect the underlying purpose of these commodity contracts,
the analysis of the underlying results is distorted. These fair value
movements are therefore included in the ‘items affecting comparability’.
Operating expenses
Operating expenses decreased by € 3 million to € 826 million in 2011
(2010: € 829 million).
Excluding items affecting comparability, operating expenses decreased
by € 7 million to € 810 million due to continuous cost control and the
divestment of Nuon E&P. The activities that were initiated in 2010
with a focus on structural cost savings and increased cost awareness
continued to have positive effects in 2011 and kept costs at 2010 levels.
Net turnover excluding items affecting comparability decreased by
€ 739 million to € 4,346 million. This decrease was largely driven
by the warmer weather, which prompted a decline in gas and heat
volumes supplied to the customer market. Revenues were also impacted
by the divestment of the gas exploration and production activities in
the North Sea in mid-2011 and the lower proprietary trading results
compared to 2010 due to limited market volatility.
The number of own staff decreased by 5%, from 5,766 FTEs at the
end of 2010 to 5,490 FTEs at the end of 2011. The decline was due
to the divestment of activities, synergies resulting from the transition
to a business-led organisation and focus on efficiency. There were no
forced redundancies.
Electricity and gas volumes supplied to the business market increased in
2011, following the successful sales activities of 2009 and 2010 (whereby
delivery was realised in 2011) and the improved product propositions.
Depreciation, amortisation and impairment charges
Depreciation, amortisation and impairment charges decreased from
€ 383 million in 2010 to € 229 million in 2011.
Depreciation, amortisation and impairment charges, excluding items
affecting comparability, decreased by € 82 million to € 238 million,
which is mainly due to the divestment of Nuon E&P in mid-2011.
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13
Overview of items affecting comparability included in the results
For the year ended 31 December
€ million
Gain on divestment of subsidiaries
Fair value movements on derivative contracts for own use
Costs associated with the unbundling
Other items
2011
156
2010
–
56
-6
-2
346
-17
-31
Total impact on operating profit (EBIT)
204
298
Tax items affecting comparability
Tax impact on items affecting comparability
-40
-25
-77
Total impact on net profit
139
221
EBIT
EBIT (earnings before interest and taxes) decreased from € 721 million
in 2010 to € 554 million in 2011. Lower fair value movements on the
derivative commodity contracts for own use are partly offset by the
gains on the sale of both Nuon E&P and our Belgian activities attributed
to the items affecting comparability.
EBIT excluding items affecting comparability decreased by € 73 million
from € 423 million in 2010 to € 350 million in 2011. This is mainly the
result of the warmer weather, lower spark spreads and lower proprietary
trade results.
–
Items affecting comparability included in the results
The item ‘Gain on divestment of subsidiaries’ relates to the divestments
of Nuon E&P and Nuon Belgium. The item ‘Fair value movements
on derivative contracts for own use’ relates to the fair value movements
on derivative commodity contracts which are held for the company’s
own use. These fair value movements distort a proper analysis of the
underlying results. For 2011, these fair value movements amounted
to € 56 million (2010: € 346 million).
Balance sheet
Condensed balance sheet
As at 31 December
€ million
Non-current assets
Current assets
Cash and cash equivalents
2011
4,408
2,141
299
Total assets
Shareholders' equity
Non-current liabilities
Current liabilities
Total shareholders’ equity and liabilities
2010
4,483
2,998
1,204
6,848
4,101
864
1,883
8,685
4,134
1,449
3,102
6,848
8,685
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Non-current assets
Non-current assets decreased by 2%, or € 75 million, to € 4,408 million
at the end of 2011. The increase from the investments in new gas-fired
power plants, the pipeline to supply heat in Almere, the Zuidlob wind
farm and existing assets was more than offset by the divestment of Nuon
E&P and the Belgian activities. Depreciation charges and a lower market­-­
to-market value of derivatives reduced the non-current assets further.
Current assets
Current assets decreased by 29% or € 857 million to € 2,141 million.
This decrease mainly reflects a lower value of derivatives.
Cash and cash equivalents
Cash and cash equivalents decreased by € 905 million to € 299 million
at the end of 2011. This decrease resulted from the high level of
investments in 2011, the lower cash flow from operating activities,
and repayment of debt.
Shareholders’ equity
Shareholders’ equity decreased by 1% or € 33 million, to € 4,101 million
at the end of 2011. The net profit of € 438 million was lower than
the reduction in the non-distributable cash flow hedges reserve of
€ 300 million and dividends paid of € 171 million.
Non-current and current liabilities
Non-current liabilities decreased by 40% or € 585 million to € 864 million
at the end of 2011. This is mainly attributable to the decline in deferred
tax liabilities as a consequence of the divestment of Nuon E&P, the
payment of dividends to our shareholders, and the repayment of debt.
Current liabilities decreased by 39% or € 1,219 million to € 1,883 million
resulting from a lower value of derivatives and repayment of debt.
Net cash position
Reconciliation net cash position
As at 31 December
€ million
Cash and cash equivalents
2011
299
Less: Restricted cash and cash equivalents¹
-83
Total cash and cash equivalents
Long-term interest-bearing debt
Short-term interest-bearing debt
Finance lease payables
-27
216
257
98
11
Gross debt position
Net cash position
1Including
2010
1,204
1,177
392
344
19
366
755
-150
422
clearing bank margin balances and collateral for certain bank guarantees issued but excluding bilateral margining cash balances.
Restricted cash is excluded from the net cash position as this relates
to funds that are not at the free disposal of Nuon. In the ordinary course
of trading business and in relation to mitigation of credit risks, Nuon
receives and pays cash collaterals to and from its counterparties. In
addition, Nuon holds cash balances on own bank accounts as collateral
for counterparties. These collaterals impact both Nuon’s (restricted)
cash balances and accounts receivable and payable. The movements
in accounts receivable and payable from collaterals paid or received are
presented in the cash flow from operating activities under movements
in working capital.
The net cash position at the end of 2011 amounted to € 150 million
negative, compared to € 422 million positive at the end of 2010.
The cash flow from operating activities and divestments could not
fully cover the large amount of capital expenditure and unfavourable
working capital movements, which mainly resulted from higher margin
calls of counterparties and redemption of short-term debt.
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15
Condensed cash flow statement
Condensed cash flow statement
€ million
2011
607
Operational cash flow
2010
745
-159
Movements in receivables, liabilities and derivative positions
Cash flow from operating activities
165
448
910
-934
Cash flow for the year
-796
-375
-723
Cash and cash equivalents as at 1 January
1,022
1,250
299
1,022
–
299
1,204
Cash flow used in investing activities
Cash flow from financing activities
Cash and cash equivalents as at 31 December
-204
-228
Consists of:
Debt to credit institutions
Cash and cash equivalents as at 31 December
Cash flow from operating activities
Cash flow from operating activities in 2011 decreased to € 448 million
(2010: € 910 million) due to the lower EBITDA, unfavourable changes
of working capital, the repayment of short-term debt and higher net cash
collateral positions. These effects were partially offset by lower receivables
from customers as the warmer weather resulted in lower volumes supplied.
Cash flow used in investing activities
Investments in fixed assets amounted to € 1,098 million, an increase
of 14% compared to € 959 million in 2010 (excluding contributions
from third parties). In addition to the regular investments in our existing
production capacity and heat networks, investments were made in
the three gas-fired power plants, the heat pipeline under the IJmeer,
the expansion of our gas storage facilities in Epe (Germany) and in the
Zuidlob wind farm. The divestments resulted in proceeds of € 298 million.
The net effect is a decrease in cash flow used in investing activities,
from € 934 million in 2010 to € 796 million in 2011.
182
Cash flow used in financing activities
Cash flow used in financing activities in 2011 amounted to € 375 million
(2010: € 204 million) and was primarily related to the payment of
dividend, internal restructuring of financing and repayment of debt.
Dividend
Based on Nuon’s dividend policy, the Management Board, in consultation
with the Supervisory Board, proposes to pay out a dividend of € 71 million
to class A shareholders and € 75 million to class B shareholders. The
Management Board proposes to add the remaining profit of € 363.4 million
to the Other reserves.
Adoption of the dividend proposal for 2011 is planned to take place
during the General Meeting of Shareholders on Tuesday 15 May 2012
in Amsterdam.
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Age structure
Diversity by gender1
%
Number
35
100%
28
28
30
80%
27 26
1,784
1,785
1,629
1,504
4,783
4,693
4,576
4,358
24 24
21
60%
18
15
14
7
3
40%
20%
5
0
0
<25
31 December 2011
25-35
35-45
45-55
>55
2 008
years
31 December 2010
Male
1
Human Resources
The main brand management activities are focused on securing our
strong reputation and brand preference in the Netherlands. Nuon
introduced new products, like the Nuon E-Manager to further build its
positioning as a company that helps customers to get the most out of
energy. The Nuon E-Manager was positively received by our customers
and public opinion. Also the ‘Ed & Eduard’ campaigns, the Nuon
customer magazines and several expert sessions with our business
customers supported the further strengthening of the brand. The
campaigns, magazines and sessions demonstrate concrete solutions
for customers to use their energy in a more efficient way.
General
the road to success of these talented athletes.
In August the Nuon solar team left for Australia to compete against
30 other teams in the World Solar Challenge. The Nuna6 was built by
the students from the Technical University of Delft and runs solely on
the power generated from the sun. The Nuna6 finished in second place.
2 010
201 1
Relates to total number of employees excluding contracted staff.
Branding and sponsoring
The international scope, in light of the partnership with Vattenfall has
been introduced incrementally. In 2011 the Vattenfall brand name
and logo was widely used in the Dutch Market for the first time, under
the header of ‘Nuon, part of Vattenfall’. This brand endorsement was
started in our customer magazine and will be more widely used in 2012.
As part of our international scope, Nuon and Vattenfall also announced
a unique cooperation with the Olympic Committees in the core markets
of Vattenfall. As a result, the Nuon/Vattenfall team was introduced.
It is a team of young talents and Olympic stars that will be supported
by Vattenfall and Nuon in achieving their Olympic dreams. The
cooperation offers Nuon the opportunity to introduce our cooperation
with Vattenfall into the Netherlands and to engage our customers on
2 009
Female
At the end of 2011, our own workforce totalled 5,490 FTEs (2010:
5,766 FTEs), and the number of external employees amounted to
843 FTEs (2010: 847 FTEs). The decrease in the total number of FTEs
is the result of increased efficiency of our operations as well as the
divestments of Nuon E&P and the Belgian activities. At year-end 2011,
there were 1,504 female employees and 4,358 male employees within
Nuon. There were 5,447 employees with a permanent contract at yearend 2011, compared to 5,640 at year-end 2010. The number of employees
with a temporary employment contract decreased from 565 in 2010
to 415 in 2011, thereby continuing the trend of recent years.
In 2011, the average age of Nuon employees in the Netherlands was
42.5. This number is impacted by an increased average age of the
Nuon’s technical and engineering workforce within our production
and installation divisions. To counterbalance this effect and ensure
continuity of operations when our employees retire, we have put various
initiatives in place to attract new talent to technical work, starting
with assisting education orientation choices. For the first time in 2011,
we participated in an event for female students of the three technical
universities in the Netherlands.
The overall ambition of Vattenfall is to firmly establish diversity as
a natural part of our daily business lives. Vattenfall aims to increase
the number of female managers to achieve a more balanced ratio
within the organisation. To this end, Vattenfall has initiated a mentoring
programme to boost the ranks of female executives within the company.
A number of Nuon’s female managers are participating in this programme.
Employer of choice
For more information on our sponsoring activities, please see the
CSR chapter Together.
In the Netherlands, Nuon provides a significant source of local
employment in the provinces where we operate. In 2011, we paid
special attention to our branding as an employer. In this effort, we
combine talent management, traineeship programmes as well as our
new platform for flexible employment benefits, in which individual
choices and flexibility play a key role. The geographical scale of
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Vattenfall allows for international exchanges and opens up new
opportunities and horizons for our employees. In December, we initiated
a traineeship at Business division level, allowing new recruits to work
in different countries during their traineeship.
Employment terms and conditions
The new Collective Labour Agreement for the energy production and
supply sector took effect on 1 May 2011 and will apply for a period of
24 months until 30 April 2013. This agreement allowed more flexibility
for additional arrangements to be made at company level. To optimally
facilitate its employees, Nuon introduced the flexible compensation
and benefit arrangement platform ‘my budget, my choice’ in April 2011.
Using this arrangement, employees can make their own personal choices
with respect to their flexible employment benefits. They can opt to
have those benefits paid out, purchase extra flexible benefits, or reserve
the benefits for payment later in the year. As part of the new Collective
Labour Agreement, Nuon has committed to additional payments to our
employees’ personal budget.
Finally, and as part of Vattenfall, we reviewed our compensation and
salary policy to align within the Vattenfall group.
Employee representation
As a result of the introduction of Vattenfall’s business-led structure,
a new employee representation structure was adopted accordingly
for Nuon at the beginning of 2011. A number of issues arose during
the year in which the employee representatives were closely involved.
Amongst others, we discussed the ongoing organisation optimisation
as result of the new organisation structure as well as investments in
the Zuidlob wind farm and the divestment of Nuon E&P.
Outlook and challenges
We face an increasing complex, volatile and uncertain operating
environment, exacerbated by political risk and a recessionary economic
environment. In the coming years, energy supplies will have to be
expanded in a way that is safe, secure, affordable and environmentally
responsible. A crucial element of the EU’s transition to a competitive
low-carbon economy by 2050 concerns the electrification of energy
consumption. Electricity generation will therefore account for an
increasingly large percentage of European energy consumption. In
the short-term, the financial crisis in Europe calls for short-term actions
and long-term reforms. For Nuon, the strategic direction of Vattenfall
will continue to provide the framework for meeting these demands in
the long term and for our day-to-day operations in the coming year.
With the new organisational structure well in place, in 2012 we will
continue our focus on cost-containment and further efficiency by
achieving and maintaining operational excellence throughout the
organisation. Among other things, this will be realised by reviews
of our product, asset, and project portfolio, further taking advantage
of synergies in the new organisation and active management of risk
exposure for the group. In addition, we will continue to review the
strategic fit and performance of our assets and operations especially
in the light of market development and circumstances.
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We will provide our customers in the consumer and business markets
with integrated solutions by means of further development of multiple
energy products into so-called ‘product bundles’. We look forward to
introducing the Nuon E-Manager in other core markets in cooperation
with Vattenfall, building on the experience gained in the Netherlands.
In the business market, we will further build on the concept of partnerships,
working together to tailor our products and services to our customers’
needs. Such services include the possibility of conducting gas transactions
on our trading platform.
The new regulatory framework for the supplier’s model of the Dutch
retail market, affecting billing and metering processes for household
customers and small and medium-sized enterprises (SMEs), will have
to be prepared in the coming year. This framework and other national
and international regulatory changes are a constant challenge for our
organisation. We need to implement the adaptations as a result of the
supplier model to our systems and processes without affecting current
customer satisfaction levels and in time for the regulatory implementation
deadline of April 2013.
In terms of security of supply, we expect to complete all three new
modern gas-fired power plants by the end of the year. With the expected
completion of wind farm Zuidlob in 2012, new renewable capacity will
come online as well. These developments will contribute to the strategic
objective of Vattenfall to grow its production portfolio in such a way that
lower CO2 exposure is achieved.
Especially considering the market circumstances, any projection of the
future is full of uncertainty; in our view, meeting these challenges will
require a collaborative approach. Because we know that the energy
future will be shaped by decisions made not just by energy market
players, but also by policymakers and consumers, in determining the
way forward we continue to strive for cooperation with our partners
in society, with our customers and with our employees and shareholders.
The Management Board’s policy is to refrain from making any statements
regarding expected future results.
We believe these targets and activities will contribute to Vattenfall’s
ambitions while accommodating the economic and environmental
landscape in the Netherlands. And of course Nuon will continue to
take the interests of our stakeholders into consideration.
A final word
We as Management Board are proud of what has been achieved
so far and realise that this would not have been possible without
the commitment and hard work of our staff. We would therefore
like to take this opportunity to express our gratitude for their efforts
and achievements in the past year.
Amsterdam, 17 April 2012
The Management Board
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Corporate Governance
Nuon has taken notice of the revised Dutch Corporate Governance Code
published by the Corporate Governance Code Monitoring Committee on
10 December 2008 and effective as per 1 January 2009.
Dutch Corporate Governance Code
The Code is specifically applicable to Dutch listed companies and is
designed to promote more efficient supervision of the Management
Board (the ‘checks’) and a more balanced distribution of influence
between the Management Board, Supervisory Board and shareholders
(the ‘balances’).
In view of the company’s size, the social role that Nuon plays in the
performance of its tasks in the field of energy supply, and because of
its strong commitment to openness and transparency, Nuon voluntarily
applies the principles and best practices of the Dutch Corporate Governance
Code. The company’s articles of association, by-laws and regulations
are fully in line with the provisions of the applicable Dutch Corporate
Governance Code.
In the table below, Nuon reports the departures from the best practice
provisions in the Code, stating the motivation for said departures from
the Code (the ‘comply or explain’ principle).
Departures from the Code
Code
III Supervisory Board
Departures from the code and motivation
Principle III.4.2: The Chairman of the Supervisory Board may not be a former
member of the Management Board of the company.
Øystein Løseth was appointed as member of the Supervisory Board by the
shareholders following nomination by the Supervisory Board. Subsequently,
the Supervisory Board appointed Øystein Løseth as Chairman of the
Supervisory Board in line with the articles of association of the company
and Vattenfall’s grandfather principle.
Principle III.5: If the Supervisory Board consists of more than four members,
it appoints from among its members an Audit Committee, a Remuneration
Committee and a Selection and Appointment Committee.
The Supervisory Board has appointed a separate Audit Committee, whereas
the tasks of the Remuneration Committee and Selection and Appointment
Committee have been combined in a Remuneration Committee, since these
are closely linked.
IV General Meeting of Shareholders
Principle IV.1: to the extent that the company is able to do so, it provides all
shareholders with distance voting facilities and the means to communicate
with each other.
Written powers of attorney are sent together with the notice to convene
shareholders meetings. In addition, all shares are registered. Because of
and with due regard to the above, distance voting contributes little to the
realisation of this provision.
Best practice provisions IV 3.1 to IV 3.4: about analysts’ meetings and reports.
These do not apply since the Nuon shares are not listed, are not freely
marketable and/or are not prone to price-sensitive information. Despite
the fact that Nuon is not a listed company, meetings are held with (major)
shareholders following the publication of financial reports. Nuon endorses
the principle of simultaneous dissemination of information to all shareholders
but deems it too costly to put in place facilities that would enable all
shareholders to simultaneously follow all the meetings and presentations
as envisaged in the Code. Nuon does ensure, however, that after the
end of the meetings concerned, the documentation is made available.
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Corporate Governance structure
Supervisory Board
General
The Supervisory Board supervises the policy of the Management Board
and Nuon’s operations in general, including the realisation of the
company’s objectives, the strategy and risks related to the business
activities, the design and operation of the internal risk management
and control systems, the financial reporting process, and compliance
with laws and regulations. In addition, the Supervisory Board functions
as the Management Board’s advisory body.
On 1 July 2009, Vattenfall AB acquired 49% of the shares in the capital
of N.V. Nuon Energy and obtained managerial control of Nuon. As a
consequence, Nuon was consolidated in the Vattenfall figures as of
1 July 2009. On 1 July 2011, Vattenfall AB acquired an additional 15%
of the shares and consequently holds 64% of the shares in the capital
of N.V. Nuon Energy. Vattenfall AB is a public limited liability company
with its registered office in Stockholm, and is subject to the Swedish
Company Act. The rules for large companies (‘structuurvennootschap’)
referred to in articles 2:158 to 2:164 of the Dutch Civil Code are
voluntarily complied with by N.V. Nuon Energy. As such, Nuon has a
two-tier management structure comprising a Management Board and
an independent Supervisory Board. The Management Board is in charge
of the day-to-day management of the company, while an independent
Supervisory Board supervises the Management Board. Both the
Supervisory Board and the Management Board are accountable to the
General Meeting of Shareholders for the performance of their duties.
Management Board
The Management Board is in charge of the company’s management.
The Management Board members are jointly responsible for the
management of Nuon.
During 2010, Vattenfall introduced its new strategic direction. To support
this new strategic direction, Vattenfall, including Nuon, has been
restructured from a regional structure to a pan-European business-led
structure as of 1 January 2011. Each of Nuon’s activities has been
allocated to one of the five Business divisions and managerially form
part of the respective Business divisions. Due to these changes,
Nuon’s legal and business governance structures are not fully aligned.
To enable the Management Board within the new business-led structure
to perform its obligations towards the Supervisory Board and its
stakeholders, the Vattenfall management will ensure that all necessary
tools and assistance are made available to the Management Board in
order to perform its fiduciary duties in this respect.
Nuon’s Supervisory Board appoints the members of the Management
Board. The Management Board consists of at least two members. The
Supervisory Board determines the remuneration and other conditions
of employment for each member of the Management Board in accordance
with the remuneration policy adopted by the General Meeting of
Shareholders. The information on the remuneration of individual
members of the Management Board can be found in the Remuneration
Report of this annual report (on page 30).
The company’s articles of association and the by-laws of the
Management Board which set out, for example, the procedures
governing the composition, tasks and powers, meetings and
decision-making, can be viewed on Nuon’s corporate website,
www.nuon.com/corporate-governance.
Pursuant to its articles of association, Nuon shall have a Supervisory
Board consisting of eight Supervisory Board members. There shall
be four Supervisory Directors A and four Supervisory Directors B. The
Supervisory Directors A are to be appointed by the General Meeting of
Shareholders upon their nomination by the Supervisory Board following
the recommendation of the class A shareholders. They shall include two
persons recommended by the Central Works Council. The Supervisory
Directors B are to be appointed by the General Meeting upon their
nomination by the Supervisory Board following the recommendation
by the class B shareholders. The Chairman of the Supervisory Board
shall be nominated by the class B shareholders. At least five members
of the Supervisory Board will reside in the Netherlands.
A Supervisory Board member must resign no later than 12 years
after his/her first appointment. Members of the Supervisory Board
are appointed for a maximum of three terms of four years each.
The Supervisory Board is made up in such a way that it has at its
disposal all the expertise required to ensure the proper performance
of its tasks, and that the members are able to operate independently
and critically in relation to each other, the Management Board and
any partial interest whatsoever.
The by-laws of the Supervisory Board can be viewed on Nuon’s
corporate website, www.nuon.com/corporate-governance.
Committees of the Supervisory Board
The Supervisory Board can appoint standing or adhoc committees
consisting of its own members and charge these committees with tasks
defined by the Supervisory Board. The Supervisory Board has two standing
committees: an Audit Committee and a Remuneration Committee.
The task of these committees is to prepare the decision-making of
the Supervisory Board. In general, each committee meeting is reported
on in the Supervisory Board meeting to serve as a basis for the decisionmaking in the Supervisory Board.
Regulations have been drawn up for both standing committees.
These regulations indicate, for example, the tasks, the composition
and the manner in which each of these committees performs its tasks.
The terms of reference for both the Audit Committee and the
Remuneration Committee can be viewed on Nuon’s corporate website,
www.nuon.com/corporate-governance.
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Audit Committee
The Audit Committee prepares, within its designated area of duties, the
decision-making of the Supervisory Board and advises the Supervisory
Board on the understanding that the entire Supervisory Board remains
collectively responsible for the fulfilment of its duties. The Audit
Committee is charged with such tasks as monitoring, amongst other
things, the integrity of Nuon’s financial statements, the operation of
the internal risk management and control systems, compliance with
recommendations and actions taken in response to comments of the
Internal Audit Department and the external auditor, the company’s
policy in relation to tax planning and the financing of the company.
The Audit Committee consists of at least three members, all of whom
must be members of the Supervisory Board. All members of the Audit
Committee should be independent within the meaning referred to in
the by-laws of the Supervisory Board, with the exception of no more
than one member. At least one member of the Audit Committee must be
a financial expert, which means that this person has acquired relevant
knowledge and experience in the fields of finance, administration
and/or accounting at listed companies or other large legal entities.
Remuneration Committee
The Remuneration Committee prepares, within its designated area of
duties, the decision-making of the Supervisory Board and advises the
Supervisory Board on the understanding that the entire Supervisory
Board remains collectively responsible for the fulfilment of its duties.
The Remuneration Committee is charged with such tasks as drawing up
selection criteria and appointment procedures relating to the members
of the Supervisory Board and the Management Board, periodically
reviewing the functioning of the individual Supervisory Board and
Management Board members, submitting proposals for appointments
or reappointments, submitting proposals on the remuneration policy
to be pursued regarding members of the Management Board (this
remuneration policy and any material change to it is to be presented
at the General Meeting of Shareholders for adoption) and submitting
proposals on the remuneration of individual Management Board members.
The Remuneration Committee consists of three members, all of whom
should be Supervisory Board members. The committee may not be
chaired by the Chairman of the Supervisory Board, a former member
of the Management Board or a member of the Management Board of
another listed company.
Shareholders
The annual meeting is held each year no later than six months after
the end of the financial year. Other General Meetings of Shareholders
can, if necessary, be held at the request of the Supervisory Board or
Management Board. Shareholders who jointly represent at least 10% of
the issued capital have the right to request that the Management Board
or the Supervisory Board convene a General Meeting of Shareholders,
stating specifically the business to be discussed. Nuon’s General Meetings
of Shareholders are generally not open to the public.
The agenda for the General Meeting of Shareholders is determined by
the Management Board and the Supervisory Board. The annual General
Meeting of Shareholders is held to discuss the items laid down in the
articles of association, the annual report, the adoption of the annual
accounts, the release from liability of the members of the Management
Board and the Supervisory Board, the allocation of profits and other
business presented for discussion by the Management Board, the
Supervisory Board or by the shareholders, the latter representing
at least one hundredth of the issued capital.
All shareholders have the right to attend the General Meeting of
Shareholders, to speak at the meeting and to exercise their voting
rights, either in person or by written proxy. At the General Meeting
of Shareholders, each share entitles the holder to cast one vote.
All decisions are taken by absolute majority of votes cast, unless
the law or the articles of association require a larger majority.
The General Meeting of Shareholders receives all information that it
requests, unless the Management Board and the Supervisory Board are
of the opinion that this is against the overriding interests of the company.
Nuon has two classes of shares, class A Shares and class B Shares as held
by the class A shareholders and class B shareholders, respectively. The
class A shareholders and class B shareholders agreed on a shareholders
agreement that sets out, for example, the terms and conditions of the
sale of the shares in the capital of the company and the course Vattenfall
will take to acquire full ownership of the company. One of the items agreed
upon is a six-year lock-up period for the class A shareholders, which
started as of 1 July 2009. During this period, conditions on offering,
selling and contracting to sell any shares apply.
Nuon Energy Public Assurances Foundation
As part of the transaction whereby Vattenfall initially acquired 49% of
the outstanding share capital from Nuon shareholders on 1 July 2009, it
was agreed that a foundation would be set up for a period of eight years.
This foundation is called ‘Nuon Energy Public Assurances Foundation’
(‘the Foundation’).
The objective of the Foundation is to safeguard the so-called Nuon
Public Assurances as envisaged by the agreement governing the
acquisition and to render binding advice on the interpretation of
the Nuon Public Assurances.
The management of Nuon will inform the shareholders and the
Foundation of any intended management decision or action that
deviates or causes a deviation from the Nuon Public Assurances.
An intended decision, action or omission of Nuon that could be
in contravention of the Nuon Public Assurances can be submitted
to the Nuon Public Assurances Foundation for review, by:
■■ The shareholders (at least two shareholders and collectively
representing 5% or more of the outstanding and issued share capital);
■■ Nuon (represented by the majority of the Supervisory Board
members); or
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One director of the Foundation within four weeks of becoming
aware of the (intent to take the) decision or action.
The Foundation can then decide whether or not to issue advice
to the management of Nuon. The Foundation can only advise to:
■■ Take the decision or action; or
■■ Reverse the decision or action, or, if not yet taken, not to take
such action or decision and correct any non-compliance.
The advice is binding for Nuon’s management except, if in doing so, the
management would violate its fiduciary duties. If management refuses
to comply with the advice, the question of whether the management
was allowed to deviate from the advice can be submitted for review
by the Netherlands Arbitrage Institute.
The Foundation consists of three members. One member is nominated
by the class A shareholders and a second by the class B shareholders.
A third member, to be the Chairman, shall be nominated by the other
two members.
The articles of association of the Foundation can be viewed on Nuon’s
corporate website, www.nuon.com/corporate-governance.
The role of auditors
External auditor
The external auditor PricewaterhouseCoopers Accountants N.V. is
appointed by the General Meeting of Shareholders based on a motion
drawn up by the Supervisory Board following advice received from
the Audit Committee and the Management Board.
The Management Board and the Audit Committee report to the
Supervisory Board annually on the developments in the relationship
with the external auditor, in particular with regard to the external
auditor’s independence. Based on this and other factors, the Supervisory
Board prepares its motion to the General Meeting of Shareholders on
the appointment of an external auditor.
At least once every four years, the external auditor’s performance is
thoroughly evaluated and reviewed by the Management Board and
the Audit Committee. The principal conclusions of this review are
communicated to the General Meeting of Shareholders in order
to assist in its review of the motion to appoint the external auditor.
Generally, the external auditor attends the meetings of the Audit
Committee. In compliance with current legislation, the external auditor
reports on his audit activities to the Management Board and the
Supervisory Board and sets out the matters he wishes to bring to the
attention of these boards. These matters could include issues with
respect to the audit, the financial figures and the operation of the
internal risk management and control system (including the reliability
and continuity of the electronic data processing) and the quality of
the internal information systems.
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The external auditor also attends the Supervisory Board meeting that
is devoted to the discussion of the financial statements to be submitted
for adoption to the General Meeting of Shareholders. In addition,
the external auditor attends the General Meeting of Shareholders
and may, on that occasion, be asked to elaborate on his audit activities
and his auditor’s report on the reliability of the financial statements.
Internal auditor
Nuon’s Internal Audit department, part of Vattenfall’s Internal Audit
department, is an independent function that provides additional
assurance to management, and the Management Board in particular,
concerning the control, effectiveness, efficiency and compliance of
the business processes. In this context, Internal Audit systematically
evaluates the processes in relation to control, risk management and
governance. In doing so, Internal Audit complies with the procedures as
laid down in the Internal Audit Charter as approved by the Management
Board and the Audit Committee.
Every year, Internal Audit draws up a plan, in which the selection of
subjects is based on, for example, a periodic evaluation of the risks
by Staff Function Internal Audit (in consultation with the external
auditor and partly on the basis of the audit findings and risk reports of
management). The annual plan must be approved by the Management
Board and the Audit Committee.
Nuon Internal Audit is an integrated part of the Staff Function Internal
Audit of Vattenfall that operates under the responsibility of the Chairman
of the Board of Vattenfall and the Audit Committee of Vattenfall.
Nuon Internal Audit reports to the Nuon Management Board and Audit
Committee. Twice a year, Internal Audit reports on the follow-up of
the audit findings by means of a monitoring report. This report is also
discussed with the Audit Committee. In this context, and for the purpose
of the planning and execution of the audit of the financial statements,
the Internal Audit department works in close collaboration with the
external auditor.
Measuring Corporate Social Responsibility
Corporate Social Responsibility targets are an integral part of management
and business unit targets. Performance is measured periodically and
remunerated as part of regular performance management measures which
are organised through the Vattenfall Human Resources organisation.
Management scorecards contain the KPIs that are important for Vattenfall
and Nuon as a whole. These KPIs are then cascaded down through the
organisation. There are scorecards applicable for all Staff Functions,
Business divisions and their units in which the Management Board
members and employees are included. The scorecards incorporate
financial and non-financial KPIs such as reputation, climate and safety
targets, which are all necessary to ensure the company operates and
develops in line with the Strategic and Business plans.
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Risk management and risk factors
■■
Risk management
Nuon is exposed to a number of risks that could have an adverse impact
on operations. A better understanding of and control over these risks
potentially generate better results from the business activities. The Nuon
Management Board is responsible for the company’s risk management
and control system. This system operates in accordance with the
Vattenfall Risk Management framework, which is based on the COSO
Enterprise Risk Management Framework (ERM). Nuon strives for
transparency when it comes to risks and recognises all risks that may
affect the company. The following paragraphs describe some of the main
risks that Nuon faces, as well as risk management efforts undertaken.
The Nuon Risk Management Framework
The objective of the Nuon Risk Management Framework is to provide
reasonable assurance that the achievement of strategic and operational
objectives is effectively monitored, that the financial reporting is
reliable, and that current laws and regulations are complied with.
The framework is designed to ensure an acceptable risk exposure,
independent oversight of Nuon’s governance and a thorough and
transparent analysis of Nuon’s risks, thus facilitating decision-making
based on an appropriate assessment of the risk-reward balance.
The framework facilitates the monitoring of risks with potential
impact on the organisation and is based on a set of best practice
policies, procedures and internal control mechanisms.
The Nuon Risk Management Framework focuses on ensuring
that the most important risks are identified and that appropriate
control measures are taken to manage these risks.
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■■
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Important components of the Nuon Risk Management Framework are:
■■ The Vattenfall Management System (VMS) that Nuon, as part of
Vattenfall, implemented, which contains regulations, guidelines
and procedures that are relevant for the relationship between
N.V. Nuon Energy and its subsidiaries, business units, staff functions
and other Vattenfall companies. VMS includes the Vattenfall Code
of Conduct and the Whistleblower Policy, which are publicly
accessible at www.nuon.com. VMS also comprises the (IFRS)
accounting manual and the reporting manual;
■■ The Vattenfall Code of Conduct, which sets the behavioural rules
for all employees. The Code of Conduct fosters an honourable
business culture in which the rules applicable to employees
are clear. Breaches of the Code of Conduct are not tolerated,
but are investigated and lead to sanctioning;
■■ The organisational set-up, in which line management is primarily
responsible for the identification and management of all risks in
the related area of business. This is in accordance with the Basel II
‘three lines of defence’ model, which establishes the different roles
in risk ownership, control and assurance. Line management, as risk
owner, provides the first line of defence. The second line of defence
is provided by specialist risk stakeholders such as the Risk, Control
and Compliance Functions. The third line of defence is provided
by the (internal) auditor;
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■■
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The Risk Management organisation, headed by the Chief Risk Officer
of Vattenfall, supports Nuon, applying Vattenfall’s risk framework.
The Risk Management organisation monitors market risk on a daily
basis, manages credit risk, oversees compliance with policies and risk
limits, and guides the group-wide reporting of significant business
risks. Together with other specialist risk stakeholders (for example
health and safety, information security), the Risk Management
organisation supports the business units in the identification,
quantification, mitigation, monitoring and reporting of risk;
The Nuon Internal Control department is responsible for reporting
on internal control aspects such as the authorisation matrices,
the key controls (including authorisations for key systems) and
progress of the follow-up on audit findings;
The Compliance department within Nuon is responsible for creating
awareness of compliance issues and internal regulations including
the Code of Conduct, advising the line management on measures
to enhance compliance and monitoring compliance risks, and the
Compliance report, which contains a summary of compliance items
and investigations;
The Nuon Integrity Committee, whose tasks include monitoring
the Code of Conduct and promoting the integrity policy. This includes
the incident and fraud policy, according to which incidents are
reported to and investigated by the Internal Audit Department;
The Nuon Business Control Framework, containing the key controls
for the different business areas;
The planning & control cycle, in which yearly budgets are assigned
for each organisational unit and the outcome is subsequently
discussed between the Management Board and the business units;
The periodic reporting on business units’ financial and operational
performance, partly based on the system of Key Performance
Indicators (KPIs);
The monthly business reviews, executed by the Management Board
in cooperation with Nuon business units’ management;
The Nuon governance reporting cycle, in which all aspects of
governance such as Risk, Compliance, Claims & Litigation, Internal
Control and Tax are reported based on a COSO self-assessment of
risk management and internal control and the Nuon business units’
‘Statements on Business Control’. The Management Board discusses
these statements annually with the responsible management and
the Audit Committee;
The Risk reports, highlighting the risks identified as having a
potentially significant impact on the business. These reports are
challenged by Risk Management and further reviewed in quarterly
sessions with members of the Management Board. These business
unit risk reports are used as the basis for Risk Managements’
formulation of the quarterly Enterprise Risk Report, which
summarises the most significant risks facing the organisation.
This report is reviewed by the Management Board prior to being
presented to the Audit Committee of the Supervisory Board;
The responsible management’s confirmation at the corporate and unit
level of the reliability of the financial reporting through signed Letters
of Representation;
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The execution of audits by the Internal Audit department in
conformity with the annual plan, which is approved by the
Management Board and the Audit Committee. Their reports
and findings are discussed with the Management Board and
the Audit Committee. The Internal Audit department represents
the third line of defence;
The follow-up of findings from internal and external audits
by the business units, which are periodically reported on to
the Management Board.
The Nuon Risk Management Framework is regularly evaluated
and further developed.
Important aspects in the further development and alignment
of the Risk Management Framework in 2011 were:
■■ The further implementation of the Tax Control Framework,
in particular with regard to the bottom-up analysis of tax risks
and controls in the Customer Care Center;
■■ Enhancing design and partial implementation of authorisation
matrices for all key systems, including regular reporting on actual
assigned authorisations;
■■ The further improvement of the processes and organisation within
Nuon’s energy-related services subsidiaries.
In 2012, further alignment of the risk management and control
systems is planned as well as the Governance reporting systems with
those of Vattenfall, based on the approach of applying best practices.
Principal risks – main risks and mitigation
This section describes the most important risks within Nuon.
The defined risk categories according to the ERM model are: Market
& Financial, Technology, Infrastructure, Laws & Regulations, Personnel
& Organisation and Politics & Society. The risks are based on current
insights. While these risk factors have been described as comprehensively
as possible, the summary provided below is not exhaustive.
Note [29] to the financial statements provides further qualitative
and quantitative information on financial instruments and financial risk
management.
Market and financial risks
Electricity and fuel price risk
As is common for all energy companies, and by virtue of the nature of its
business, Nuon has an inherent exposure to the price changes of energy
commodities and related products. Although these risks are actively
managed, price developments in these markets may have a significant
impact on the financial results.
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Nuon is exposed to the impact of market fluctuations in the prices of a
range of energy commodities, including but not limited to: electricity,
coal, gas, oil and emission rights. These risks are a result of ownership
of physical assets (gas and coal power plants and gas storage facilities),
sales positions in electricity and gas to both consumers and business
customers, and the proprietary positions taken in these energy
commodity markets. In general, all the electricity and fuel price risks
arising from these activities are managed by the Business division
Asset Optimisation & Trading, which contains Nuon’s wholly-owned
subsidiary Vattenfall Energy Trading Netherlands N.V. (VET NL).
Nuon’s largest electricity and fuel price risk is the exposure of thermal
generation assets to unfavourable changes in the relative prices of
power and fuel. If power prices decrease relative to the costs of fuel
and emission rights, then the margin from the sale of the power
produced by the operation of the power plants (i.e. spark spread
and dark spread) will be negatively impacted. VET NL uses a range
of physical and financial instruments, in both spot and forward markets,
to manage the exposure related to power sales and purchases of fuel
and CO2. The open price exposures of the assets are managed taking
into account market price developments, the limitations of market
liquidity and the risk appetite of the organisation.
All electricity and fuel price exposures are monitored on a daily basis
by the Risk Management Group, covering positions arising due to
activities associated with the assets, proprietary trading and sourcing
in support of Nuon’s consumer, business, and industrial customers.
Market risk is measured using the Value at Risk (VaR) metric, which
quantifies potential changes in the value of commodity positions as
a result of market price movements.
Credit risk
Credit risk can arise if a counterparty or contractor cannot or is not
willing to fulfil its obligations and exists in Nuon’s commodity trading,
sales activities, treasury activities and investments. Nuon has a strict
framework for governing and reporting credit risks to ensure that they
are monitored, measured and minimised in a suitable manner. The
framework ensures consistent application of credit risk management
within the entire group. As part of this framework, Nuon has a clear
credit risk mandate that reflects the company’s risk appetite. The credit
risk function within Risk Management analyses potential counterparties
before any undertakings are made, and credit limits are set in
accordance with the credit risk framework. A thorough counterparty
analysis and reporting of exposures as well as risk mitigation measures
are central activities in Nuon’s credit risk management. A number of
tools are used to determine existing and potential future exposures.
In addition to the company’s internal assessment, the credit ratings
provided by the major credit rating agencies are used.
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24 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Liquidity risk
Liquidity risk is the risk that the organisation has insufficient cash to
meet its immediate requirements. Liquidity risk is deemed limited.
Nuon uses daily, short-term and 12-month rolling cash forecasts to
ensure that available funds and back-up facilities are sufficient to cover
cash outflows from operating activities, debt service, maintenance
and other capital expenditure. Furthermore, Nuon is in a cash pool with
Vattenfall and has back-up liquidity arrangements in place. Note that,
as a consequence of trade floor operations and the associated bilateral
and exchange margining requirements, commodity price movements
have a significant impact on the company’s cash requirements.
Liquidity risk also pertains to the risk of not being able to pursue the
trading strategy due to insufficient liquidity in the electricity and fuel
markets. This risk is managed through proxy hedging (hedging with
the help of an instrument that correlates with the risk to be hedged)
and collateral agreements as well as by securing an optimal number
of counterparties.
Currency risk
Currency risks arise on purchases, trading activities, cash and cash
equivalents, loans obtained and other balance sheet positions
denominated in a currency other than the euro. The company’s currency
policy is ‘exposure-based’; generally, all significant foreign currency
exposures are hedged and foreign currency proprietary positions are not
allowed. A break-up of or change in the composition of the Euro zone
and its currency could have an impact on business performance among
others, due to the adverse macroeconomic impact such a break-up may
cause. In addition, a break-up or change could result in a devaluation
of assets and profits due to currency devaluations. Also, it could restrict
the free transfer of money and currencies and may adversely affect the
creditworthiness of our counterparts.
Interest rate risk
Interest rate risk is the chance that the market value of a fixed-income
security or a fixed-rate loan will change due to a change in interest rates.
Further, changes in short-term interest rates can impact the rate of
return on short-term cash investments.
Cross-border leases
There is an indirect exposure to a cross-border lease on heat networks,
as the company subleases these assets from Alliander. The company
therefore carries a portion of the strip risks related to this contract,
which amounts to $ 47 million per 31 December 2011.
Competitive pressure
European markets for energy services are continuing to evolve, leading
to increased competition and pressure on margins and market share
in general. While the company’s position as an incumbent supplier
in the Netherlands is vulnerable, opportunities are also arising from
the ongoing liberalisation of the European market.
Technology and infrastructure risks
Operation of assets
The financial results are highly dependent on the availability and
reliability of the operation of the company’s electricity production
and gas storage assets. To safeguard this, strict operational procedures
and stringent maintenance schedules apply. In addition, adequate
insurance cover has been arranged.
Risks related to ICT
Like all energy companies; Nuon is increasingly dependent on sophisticated
ICT systems. In almost all aspects of the business, ICT systems play a key
role. Consequently, disruptions in ICT could have a detrimental impact
on performance. For example, disruption in the invoicing and collection
processes could result in reputational damage, whilst the failure of
trade floor systems could lead to lost opportunities, penalties and
marked-to-market losses. Due to the dependence on ICT systems,
Nuon places a strong focus on status monitoring and on the presence
of back-up arrangements.
Laws & regulations risks
Regulatory requirements
Nuon complies with all current regulations concerning all our activities.
Changes in regulatory requirements may have an impact on future
results. Nuon has an expert team dedicated to monitoring and reviewing
regulatory developments that have a direct or indirect impact on our
operations. The goal is to recognise potential changes in regulations at
an early stage so that appropriate measures can be taken to stay compliant.
Permits
Both the ongoing operation of existing assets and the construction
of new assets require environmental, zoning, and other permits from
national, provincial and municipal entities. Nuon’s current operations
and business plans for the coming years are contingent on the granting
and renewal of the necessary permits. Because a delay in the permitting
process could have a material impact on Nuon’s results, Nuon has
an expert team dedicated to reviewing requirements and securing
the necessary permits.
Personnel & organisation risks
Operational risk
Operational risk is the risk of loss related to the failure of people,
processes or systems. Operational risk is mitigated by striving for
operational excellence in all business activities. Governance is kept
up to date, including the Code of Conduct, and possible exceptions
are monitored. All authorisations are regularly monitored as well.
Back-up facilities are in place for key systems.
Risk of losing unique expertise and key persons
Nuon has unique expertise and key persons in certain areas, where
the impact would be particularly tangible if the individuals in question
were to leave Nuon. To manage this risk, a record is kept of where
persons with these qualities work in the organisation, and the risk is
mitigated through efforts to spread their expertise. Nuon takes a
structured approach to succession and competence planning, as well
as to leadership and management development programmes, especially
in view of the demographic trend and competition for specialists.
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Health and safety risks
Nuon is exposed to safety and environmental risks in the normal course
of our activities. Health, safety and environmental (HSE) risks are
managed by compliance with relevant legislation as well as an internal
HSE control system, which includes internal procedures and policies.
Legislation and related developments are monitored and checked with
respect to the operations. The management and staff’s awareness,
attitude and behaviour regarding HSE policies are continuously
improved through frequent training and education. The Management
Board and Supervisory Board are informed on these topics on a monthly
and quarterly basis, respectively.
Fraud
Nuon strives for good internal governance and control. Preventive
measures ensure that assets and information are protected from
improprieties and fraud. The so-called four eyes-principle is used
within the whole Vattenfall group, which entails that most decisions
must be approved by at least two persons. In addition, various forms
of analyses and follow-ups are performed as an effective means
of discovering any improprieties.
Security risks
Nuon’s security organisation works with loss prevention and mitigating
security measures to protect the assets, IT systems, information, personnel
and thereby the continuing operations. This also includes protecting
the company and its customers against various types of crimes.
Pensions
The pension and pre-pension liabilities for the majority of the employees
have been placed with pension funds, and largely with ABP pension
fund for staff in the Netherlands. The pension contributions that Nuon
pays to the pension funds are based on such aspects as assumptions
relating to inflation, salary increases, ageing, mortality risks and the
returns on the pension fund’s investment portfolio. Actual developments
in relation to the aforementioned assumptions may differ from the
assumptions used.
Furthermore, there may be changes to legislation and regulations on
pensions, pre-pensions and Collective Labour Agreements. As a result,
pension contributions and/or the related commitments charged to
Nuon may be subject to fluctuations from year to year, which are
outside Nuon’s direct sphere of influence. The pension premium policy
is determined by the ABP Pension Board.
Politics & society and other broader risk areas
Political risk
Political risk is defined as the business risk that can arise as a result
of political decisions, such as price regulations in heat distribution,
uncertainty regarding a new political majority, or changes in finance
policies. In connection with acquisitions and other investments, this
type of risk is taken into account by e.g., adjusting the cost of capital
or through scenario analyses. Another type of political risk stems
from changes in legislation and in the rules and regulations that govern
the energy industry. These can be factors such as changes in taxes,
surcharges, environmental legislation and permit requirements, as
well as changes in how natural monopolies are regulated and political
objectives regarding the energy mix. For example, the EU Emissions
25
Trading System will change in 2013. For Nuon this will essentially
result in a discontinuation of the system of free allocation of a fixed
predetermined quantity of CO2 emission allowances, which will affect
the cost of Nuon’s CO2-intensive generation negatively. To protect itself
from political risk, Vattenfall conducts active business intelligence
activities and maintains contacts with decision-makers. For example,
changes in EU regulations could affect commodity trading. We monitor
market developments in order to be prepared to adapt the company’s
instructions and policies when and if this should be necessary. In
addition, Vattenfall participates in various national and international
trade organisations to safeguard the company’s interests.
Investment risk
Nuon is a highly capital-intensive company and has an extensive
investment programme. Before every investment decision, a risk
analysis is performed. By simulating various outcomes resulting from
such factors as price, cost, delays and the cost of capital, risks are
estimated for an investment. Several different types of investment
risk exist in the various risk areas, including procurement risk,
financing risk, market risk, risk in the choice of technology and
the risk of changes regarding environmental permits.
Vattenfall group’s staff function Asset Management ensures that capital
is invested in a manner that maximises long-term economic value.
In addition to the strategic investment roadmap, a detailed plan of
investment projects is updated yearly to provide the Vattenfall Group
Executive Management with guidance in the investment decision
process. Projects are ranked according to a number of criteria as fit
with the group strategy, consequences for the existing generation
portfolio, risk profile and profitability.
Responsibility
Nuon’s Management Board is responsible for the design and operation
of our internal risk management and control system. During 2011,
the design and operation of this system is evaluated, mainly based
on the business control information, the Internal Audit reports and
the management letter from the external auditor.
The Nuon Risk Management Framework does not provide absolute
assurance as to the achievement of the corporate objectives, nor does it
give absolute assurance that material errors, losses, fraud or violations
of laws and regulations will not occur in the operational processes and/
or the financial reporting.
With due regard to the above, the Management Board is of the opinion
that the internal risk management and control systems provide a
reasonable assurance that the financial reporting does not contain
any errors of material importance and that the risk management
and control systems worked properly as regards the financial reporting
risks in the year under review.
Based on the above, Nuon is of the opinion that the company thus
satisfies the best practice provisions II.1.3, II.1.4 and II.1.5 of the
Dutch Corporate Governance Code.
The above was also discussed with the Audit Committee of the
Supervisory Board, in the presence of the internal and external auditors.
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26 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Report of
the Supervisory Board
During 2011, the Supervisory Board (‘the Board’) carried out its tasks in
accordance with the statutory provisions and the articles of association
of N.V. Nuon Energy and supervised and advised the Management Board.
Composition of the Supervisory Board as at 31 December 2011
Composition
Director A or B Committees
First appointment
Reappointment
Current term until
Øystein Løseth, Chairman
B
2010
–
2014
Member of the Remuneration
and Audit Committee
Torbjörn Wahlborg
B
-
2011
–
2015
Tuomo Hatakka
B
-
2009
–
2013
Chairman of
the Remuneration Committee
2010
–
2014
B
Member of
the Remuneration Committee
2009
–
2013
Tom de Waard
Leni Boeren
A
Pieter Bouw
A
Chairman of the Audit Committee
2009
–
2013
Derk Haank
A
Member of the Audit Committee
2009
–
2013
Jacques Schraven
A
-
2009
–
2013
As at 31 January 2011, Torbjörn Wahlborg was appointed as a member
of the Supervisory Board succeeding Dag Andresen, who resigned
with effect per the above date. On the same date, Øystein Løseth was
appointed as a member of the Audit Committee.
The Board has drawn up a profile indicating the desired criteria
and competences for the composition of the Board. This profile can
be found on our corporate website www.nuon.com. Appointments
and reappointments are assessed in the light of the profile. In the case
of reappointments, the performance of the person involved is also taken
into consideration.
In the opinion of the Board, all members of the Board can be considered
to be independent in the sense of best practice provision III.2.2 of the
Dutch Corporate Governance Code (‘the Code’).
The current members of the Board comply with best practice provision
III.3.4 of the Code, which stipulates that the number of supervisory
directorships of Dutch listed companies may not exceed five (per
person), on the understanding that a Chairmanship is equivalent
to two memberships.
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27
Meetings and activities of the Supervisory Board
The Audit Committee reviewed and discussed in particular all
Meetings of the Supervisory Board
financially relevant matters that were presented to the Supervisory
Board. The Audit Committee also monitored the internal risk
framework and risk management systems. Topics discussed included
the quarterly results, the annual report, reports of the internal
and external auditor, appointment of the external auditor, budget
and projections and risk reports.
The Board met eight times in the reporting year. During its meetings,
the Board discussed a broad range of subjects, such as strategic projects
that require the approval of the Board, the business plan and budget,
investments, the quality of service and customer satisfaction, health
and safety organisation, the effects of the revised strategic direction
of Vattenfall from 1 January 2011, litigations and divestments, cost
control and cost-to-serve and other relevant matters that were brought
to its attention. The financial results were discussed extensively in
the meetings of the Board before publication of this report.
Furthermore, the Board evaluated its functioning, the functioning
of its committees and its individual members. The self-evaluation
was based on a questionnaire completed in advance of the evaluation.
The results of the questionnaire were discussed amongst the members
of the Supervisory Board.
Shareholder meetings
All members of the Board attended the Annual General Shareholders
meeting on 13 May 2011. During this meeting, the financial statements
and the profit appropriation for 2010 were approved. The members
of the Board and the Management Board were discharged for their
management activities during the 2010 financial year. Furthermore,
PricewaterhouseCoopers Accountants N.V. was appointed as the external
auditor for 2011. On 31 January 2011 and 7 December 2011, several
members of the Board attended the Extraordinary General Meetings of
Shareholders. During the meeting on 31 January 2011, the proposal to
appoint Torbjörn Wahlborg as a member of the Supervisory Board was
approved. During the meeting on 7 December 2011, the Board approved
a revised remuneration policy for the Management Board of Nuon and
the proposal to publish the annual report of Nuon only in English.
Meetings of the Remuneration Committee
The Remuneration Committee consists of the following three members
of the Supervisory Board: Tom de Waard (Chairman), Øystein Løseth
and Leni Boeren.
In 2011, the Remuneration Committee met six times. The committee
reviewed and approved the target realisation for 2010 and reviewed
the criteria for short-term incentives for 2011 for the members of
the Management Board. Furthermore, the Remuneration Committee
evaluated the performance of the members of the Management Board,
discussed the amended remuneration policy for the members of the
Management Board and decided on the amended remuneration package
of Peter Smink.
Corporate governance
The Board endorses virtually all the principles and best practice
provisions of the Corporate Governance Code. Nuon departs from
the Code in a very limited number of cases. The manner in which
Nuon applies the Code remained unchanged in the reporting year.
A separate chapter of this annual report describes the corporate
governance structure in general terms and indicates how Nuon has
applied the principles and best practice provisions of the Code. This
chapter also explains the cases where Nuon departs from the Code.
Contacts with the Central Works Council
General terms of the remuneration policy
In accordance with the covenant agreed with the Central Works
Council, consultations were held prior to meetings of the Board between
the members of the Board appointed following recommendation
of the Central Works Council, namely Pieter Bouw, and Leni Boeren
and the Executive Committee of the Central Works Council.
The remuneration policy is designed to enable Nuon to recruit, motivate
and retain qualified and expert directors in order to achieve its strategic
objectives. The total remuneration package of the members of the
Management Board consists of an annual gross base salary, pension
benefits and other emoluments. In addition, the CFO is entitled to a
short-term variable salary.
Meetings of the Audit Committee
The Audit Committee consists of the following three members of
the Supervisory Board: Pieter Bouw (Chairman), Derk Haank and
Øystein Løseth. The composition of the Audit Committee meets the
requirement of best practice provision III.5.7 of the Code. The Audit
Committee of Nuon met six times in 2011. Five of these meetings
were scheduled meetings and one was an extra meeting (by telephone)
about a specific topic.
The Remuneration Report in this annual report (page 30) provides a full
and detailed overview of the remuneration policy for the Management
Board, as well as a description of the execution of the remuneration
policy for the Management Board in 2011. An overview of the
remuneration of the Supervisory Board members is also provided.
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Annual Report and Dividend Proposal
This annual report contains, among other things, the financial
statements for the 2011 financial year as signed by the Management
Board and the Supervisory Board. The financial statements for 2011,
as prepared by the Management Board, were audited by the external
auditor PricewaterhouseCoopers Accountants N.V., who issued an
unqualified audit opinion on these financial statements. The independent
auditor’s report on the consolidated and company financial statements
is included in the section Other on page 120.
The 2011 financial statements were discussed by the Audit Committee
and the external auditor, in the presence of the Chief Executive Officer
and the Chief Financial Officer. In addition, the Supervisory Board
also discussed the 2011 financial statements with the Management
Board in the presence of the external auditor. On the basis of these
discussions, the Supervisory Board is of the opinion that these 2011
financial statements meet the requirements and also provide a good
basis of accountability for the conducted supervision.
It is recommended that the General Meeting of Shareholders:
■■ Adopts the financial statements 2011;
■■ Adopts the dividend proposal as included in the section Other
in this annual report for the financial year 2011;
■■ Endorses the conduct of the company’s affairs by the members of the
Management Board during the financial year 2011 and the supervision
by the members of the Board during the 2011 financial year.
Details of the Supervisory Board
(As at 31 December 2011)
Øystein Løseth
(1958)
Torbjörn Wahlborg
(1962)
Tuomo Hatakka
(1956)
Leni Boeren
(1963)
Chairman of the Supervisory Board and member of the Remuneration Committee and the Audit Committee.
Øystein Løseth (Norwegian nationality) was appointed as a member of the Supervisory Board on 8 April 2010. On 1 April 2010,
Løseth resigned as member and Chief Executive Officer of the Management Board of N.V. Nuon Energy and was appointed
as the president and CEO of Vattenfall AB as per 12 April 2010. Løseth graduated in 1983 for his Master Engineering from
the Technical University of Trondheim and he studied Economics in the period 1985-1986, Bedriftsøkonomisk Institutt,
­Bergen. In the period 2003 until April 2010, Løseth fulfilled several management positions at n.v. Nuon and after 1 July 2009
at N.V. Nuon Energy. He was a member of the Management Board from January 2006 and was appointed as Chief Executive
Officer as per April 2008. Before joining Nuon in 2003, Løseth fulfilled several management positions at Statkraft in Norway.
Prior to his career at Statkraft, he worked at Naturkraft, Alliance Gas and Statoil.
Torbjörn Wahlborg (Swedish nationality) was appointed as member of the Supervisory Board on 31 January 2011.
­Wahlborg studied Computer Science and Technology at Chalmers, the Technical University of Gothenburg, and has
been with Vattenfall for more than sixteen years. From 1997 to 2010 Wahlborg worked in Poland in different executive
roles and from 2010 as Head of Business Group Vattenfall Nordic and Executive Vice President of Vattenfall AB.
In January 2011, he became Head of the Business division Distribution and Sales and a member of the Vattenfall
­Executive Group Management.
Tuomo Hatakka (Finnish nationality) was appointed as a member of the Supervisory Board on 17 June 2009. Hatakka
has been serving as Senior Executive Vice President of Vattenfall AB since 2005 and as Head of Business division Production
since 1 January 2011. He was Head of Business Group Central Europe from January 2008 to December 2010 and previously
the head of Vattenfall’s Polish activity. He studied Economics at the Helsinki School of Economics and Business Administration and has an MBA from the Instituto de Estudios Superiores de la Empresa, in Barcelona, Spain. His professional
experience includes work as a consultant at Bain & Company, London, Executive Vice President and partner at Enterprise
Investors in Warsaw, Poland, and President and CEO of Elektrim Kable SA, Warsaw, Poland.
Member of the Remuneration Committee
Leni Boeren (Dutch nationality) was appointed as a member of the Supervisory Board on 17 June 2009. Boeren has been
a member of the Board of Management of Robeco Groep N.V. since 2005. She is a former member of the Executive
­Committee of Euronext N.V. (2000–2005) where one of the positions she held was that of Managing Director of Information
Services. She was a member of the board of the Amsterdam Exchanges N.V. (1997–2000), and previously worked for
Robeco Groep, Rabobank and BNP Paribas. Other supervisory directorships and advisory functions of Boeren include
that of Vice Chairman of the Supervisory Board and Chairman of the Audit Committee of the Tergooiziekenhuizen
­(hospitals in Blaricum and Hilversum) and member of the board of the Stichting Kunsthal Rotterdam (museum of art),
member of the board of the Stichting Kunsthal Rotterdam (museum of art) and member of the board of Amsterdam
­Sinfonietta (String Orchestra).
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Developments in 2012
During 2012 the Act on Management and Supervision (Wet Bestuur
en Toezicht) will take effect. This legislation will introduce a limitation
on the number of supervisory positions as well as management board
positions held by an individual and target figures for a more even
distribution of board seats between men and women.
During 2011, the Supervisory Board discussed this new legislation and
the possible implications. It concluded that, at this time, no alterations
regarding the Supervisory Board are required based on the Act on
Management and Supervision. A possible implication for the Supervisory
Board of N.V. Nuon Energy is that the profile of the Supervisory Board
may have to be changed to bring it in line with the target figures for a
more even distribution of board seats under the new act. These figures
Pieter Bouw
(1941)
Derk Haank
(1953)
Jacques Schraven
(1942)
Tom de Waard
(1946)
29
will be one of the factors taken into account when looking for new
candidates for Supervisory Board members, therefore appointments
and reappointments will be considered carefully.
A word of thanks
The Board would like to take this opportunity to thank the members
of the Management Board and all Nuon employees for their contribution
to the results in 2011.
Amsterdam, 17 April 2012
The Supervisory Board
Chairman of the Audit Committee
Pieter Bouw (Dutch nationality) was appointed as a member of the Supervisory Board on 17 June 2009. Bouw is a
­former CEO and President of KLM Royal Dutch Airlines N.V. and a former member of the Supervisory Board of n.v. Nuon.
Currently Bouw is Chairman of the Supervisory Board VU Amsterdam – VU University Medical Centre – Windesheim;
­Chairman of the Bank Council and board member of the trust office of a number of Dutch companies.
Member of the Audit Committee
Derk Haank (Dutch nationality) was appointed as a member of the Supervisory Board on 17 June 2009. Haank is
­Chairman of the Corporate Executive Board of Springer Science + Business Media. He is a former member of the
Reed Elsevier N.V. Management Board and the Supervisory Board of n.v. Nuon. Other supervisory and advisory positions
of Haank include that of member of the Supervisory Board of MSD Nederland, KPN and member of the Supervisory Council
of the Dutch broadcasting association TROS.
Jacques Schraven (Dutch nationality) was appointed as a member of the Supervisory Board on 17 June 2009. Schraven
used to be Chairman of the Confederation of Netherlands Industry and Employers VNO-NCW, and before that he was
president-director of Shell Nederland B.V. Schraven was also a member of the Supervisory Board of n.v. Nuon. He is
­currently Chairman of the Supervisory Board of Tata Steel Nederland B.V. and a non-executive director of Tata Steel Ltd
(India). He is also a member of the Supervisory Board of Stork B.V. and BNP OBAM N.V. In addition, he is the Chairman
of the Foundation Trust Office Unilever N.V. Outside the business sector, Schraven serves as Chairman of the Supervisory
Board of the Netherlands Blood Institute Sanquin. His other directorships include the Netherlands Normalization
­Institute (NEN), the Carnegie Foundation and the Rotterdam Philharmonic Orchestra.
Chairman of the Remuneration Committee
Tom de Waard (Dutch nationality) was appointed as member of the Supervisory Board on 8 April 2010.
De Waard graduated from Leiden University in 1971 and joined Stibbe in Amsterdam as a lawyer in the same year, where
he became a partner in 1979. He was the resident partner of Stibbe in New York (1985-1990). In 2000 he joined Clifford
Chance, where he was Managing Partner of the Amsterdam office (2002-2005) and a Member of the Global Management
Committee representing Continental Europe (2005-2007). His expertise includes privatisations, especially in the energy
sector. De Waard is currently Partner at Reuling Schutte DeWaard, which specialises in mediation, arbitration and other
forms of alternative dispute resolution. De Waard is a member of the Supervisory Board of STMicroelectronics N.V. (STM).
In that capacity he is Chairman of the Audit Committee and of the Nominating and Corporate Governance Committee
and a member of the Remuneration Committee. De Waard is Chairman of the Supervisory Board of BE Semiconductor
Industries N.V. (BESI) and member of the Audit Committee and of the Remuneration Committee of BESI.
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Remuneration Report 2011
This remuneration report has been drawn up on behalf of the Remuneration Committee.
The composition and activities of this committee in 2011 are described in the Report of
the Supervisory Board.
Introduction
Remuneration policy
Pursuant to the articles of association of Nuon, the Supervisory Board,
acting on the advice of the Remuneration Committee, formulates
the remuneration policy for the members of the Management Board
of Nuon. The General Meeting of Shareholders of Nuon adopts the
remuneration policy. Within that remuneration policy, the Supervisory
Board, again acting on the advice of the Remuneration Committee,
adopts the remuneration and other employment conditions of the
individual members of the Management Board.
Remuneration
On 7 December 2011, a revised remuneration policy for N.V. Nuon Energy
was adopted by the General Meeting of Shareholders, with retrospective
effect as of 1 January 2011. This policy was put to the General Meeting
of Shareholders by the Supervisory Board while being simultaneously
submitted for information purposes to the Central Works Council.
Compared to the former remuneration policy, this policy does not
include a long-term variable salary. Furthermore the policy includes
a mandate for the Supervisory Board to amend or increase the total
remuneration package temporarily to reflect additional responsibilities
and workload.
The policy facilitates compliance with the Dutch Corporate Governance
Code as well as with the guidelines of the Swedish State. These guidelines
of the Swedish State state that the remuneration package for leading
employees should follow a specific design. Members of the Executive
Group Management (EGM) of Vattenfall AB are considered to be leading
employees in the context of the Swedish State guidelines.
Nuon’s remuneration policy and remuneration report comply with
the Dutch Corporate Governance Code. Where this is not the case,
the departures are highlighted and explained.
Nuon’s remuneration policy is aimed at creating conditions conducive to
recruiting, motivating and retaining qualified and talented management
in order to enable the company to achieve its strategic and operational
objectives. Nuon’s specific remuneration policy is geared to the median
of the relevant remuneration market and includes the fixed and to the
extent applicable variable components associated with that market.
The relevant remuneration market is defined as the Dutch employment
market for the Management Boards of companies with comparable
turnover, staff levels and complexity.
The total remuneration shall be reasonable and well considered.
Overall, the remuneration principles shall be characterised by moderation.
The following will apply:
■■ Salaries shall be competitive but not market-leading in the relevant
employment market;
■■ Variable pay is not applicable for a member of the Management Board
who is simultaneously a member of the EGM of Vattenfall AB;
■■ Pension is defined as contribution capped at 30% of fixed salary
unless a group pension scheme or equivalent exists.
The total remuneration package for the members of the Management Board
might consist of the following components:
(a) Annual base salary;
(b) Short-term variable salary;
(c) Pension benefits;
(d) Other emoluments.
(a) Annual base salary
The objective for the annual base salary is based on the median level
of the aforementioned reference group of comparable companies.
(b) Short-term variable salary
The short-term variable salary might be applicable for individual
members of the Management Board. The maximum of this variable
salary is 50% of the annual base salary.
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Employment
The short-term variable part of the salary is aimed at achieving
challenging objectives which are set in advance by the Supervisory
Board for every accounting year.
Every member of the Management Board has an employment contract
with Nuon. As a matter of company policy, employment contracts with
members of the Management Board are entered into for a fixed term
(generally four years), after which they can be renewed. It is company
policy that members of the Management Board receive a severance
payment equal to his or her annual base salary in the case of termination
or non-renewal of the employment contract by the company. Conditions
per individual member of the Management Board may differ.
The specific objectives are laid down annually in a scorecard. The targets
for short-term variable salary shall be objectively measurable, i.e.
verifiable by audit procedures as clearly defined and the objectives
shall be set at a level that is sufficiently ambitious and simultaneously
sufficiently realistic.
However, given the Swedish guidelines ‘Terms of Employment for
Senior Executives in State-owned Companies’, the short-term variable
salary is not applicable for a board member who is simultaneously
a member of the EGM of Vattenfall AB.
Execution of the remuneration policy
This remuneration report has been drawn up on the basis of the IFRS
principles, and Title 9 Book 2 of the Dutch Civil Code, as is also used
for the preparation of the financial statements. This means that the
report on the variable elements of the remuneration relate to the year
in which the elements were earned, regardless of the time of payment.
(c) Pension benefits
Members of the Management Board participate in the pension scheme
that applies to Nuon’s staff. This mandatory scheme, which is arranged
through the ABP pension fund, consists entirely of an average pay
scheme, with a retirement age of 65. An early retirement option is
included in the ABP pension fund. In accordance with current industry
practice, pension entitlement is built up on the basis of the annual base
salary, and the members of the Management Board pay an individual
contribution for membership in the pension scheme.
The following overview summarises the remuneration elements of the
members of the Management Board of Nuon based on the employment
contract with Nuon. On 28 October 2011, Peter Smink was appointed
as acting CFO of Vattenfall. He is fulfilling this role in addition to his
role as CFO of Nuon. In the period during which Peter Smink is fulfilling
the role of acting CFO Vattenfall, he is also part of Vattenfall’s Executive
Group Management, and is considered to be a leading employee.
Consequently, his remuneration package may not include a flexible
salary component during this period. The activities and the duties
associated with the role of acting CFO are governed in a separate
contract between Peter Smink and Vattenfall AB. The remuneration
in respect of this contract amounts to a fixed amount of € 23,583
per month.
(d) Other emoluments
Besides the emoluments described above, members of the Management
Board are also entitled to an allowance as well as the use of a company car.
In cases where a Management Board member takes on temporary
additional responsibilities, the Supervisory Board will have the
possibility to amend or increase the total remuneration package
temporarily to reflect additional responsibilities and workload.
Overview of total remuneration of the Management Board
€ thousand
Øystein Løseth5
Huib Morelisse
Peter Smink
Total
Base salary1
2010
2011
–
110
750
375
317
300
1,067
785
Short-term
variable salary2
2011
2010
–
39
–
–
118
90
118
129
Accrued
long-term
incentive3
2011
2010
–
42
–
–
50
73
50
115
Termination
benefit
2011
2010
–
–
–
–
–
–
–
–
Incidental
remuneration4
2011
2010
–
–
169
578
–
–
169
578
Total income
2011
2010
–
191
919
953
485
463
1,404
1,607
Huib Morelisse was appointed CEO as per 1 July 2010. The base salary for Peter Smink as included is for his role as CFO of N.V. Nuon Energy.
Peter Smink has been appointed acting CFO Vattenfall as per 28 October 2011. Given the Swedish Guidelines, Peter Smink is not entitled to any variable payment during the period he is
fulfilling the role of acting CFO of Vattenfall, as in this position he is considered to be leading personnel. The STI 2011 is therefore based on 50% of the annual base salary over the period
1/1/11 up to and including 27/10/11. The short term incentive increased from 30% to 50% per 1 January 2011 due to termination of the long-term incentive as per 2011. The base salary of
Peter Smink increased as partial compensation for the termination of the long-term incentive.
3
The amount for the accrued long-term incentive for Peter Smink comprises pro-rata accrued amounts, including interest, for the LTIs of 2009-2011, 2010-2012. Please note that the LTI for
the period 2009-2011 is based on his former position with N.V. Nuon Energy. The LTI 2010-2012 is based on his position as CFO of N.V. Nuon Energy. As per 2011 Peter Smink is no longer
entitled to a long-term incentive.
4
The incidental remuneration for Huib Morelisse includes a compensation for missed option schemes with his former employer payable in 2010, 2011 and 2012.
5
Øystein Løseth was CEO of N.V. Nuon Energy until 1 April 2010.
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2
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Annual base salary
Long-term variable salary
The employment contract with Huib Morelisse was entered into
from 1 July 2010 for a period of four years. The annual base salary
of Huib Morelisse is € 750,000.
Following the amended remuneration policy no long-term variable salary
is applicable as per 1 January 2011 for Huib Morelisse and Peter Smink.
The amount for the long-term variable salary (LTI) of Peter Smink
amounting to € 50,491 comprises of the pro rata accrued amounts
including interest for the earlier awarded LTI’s of 2009-2011 and
2010-2012. The LTI 2009-2011 relates to former positions of
Peter Smink within Nuon. Following the amended remuneration policy
no LTI 2011-2013 is applicable.
The employment contract with Peter Smink was entered into from
1 January 2010 for a period of four years. The annual base salary
of Peter Smink increased as partial compensation for the termination
of the long-term incentive as per 1 January 2011, and amounts
to € 317,000.
Incidental remuneration
Short-term variable salary
The remuneration package of Huib Morelisse does not include a shortterm variable component. Following the termination of the long-term
variable salary per 1 January 2011 for Peter Smink, the short-term
variable salary increased from a maximum of 30% to a maximum
of 50% of the annual base salary. The realisation of the short-term
variable salary under the performance contract for 2011 for Peter Smink
has been determined at 90.2% of the 50% of the annual base salary.
This considers the period from 1 January 2011 until 27 October 2011.
This is based on the goals achieved in relation to the scorecard as
determined by the Supervisory Board.
During 2011, incidental remuneration for Huib Morelisse consists
of paid and accrued compensation for missed option schemes with
his former employer amounting to € 169,000.
Pension benefits, social security contributions and
other emoluments
The members of the Management Board participate in the ABP pension
scheme that is applicable to the company.
Nuon has not provided any loans, advances or guarantees to members
of the Management Board or Supervisory Board.
Employment
As a deviation from the policy Huib Morelisse is not entitled to
any severance payment after his four year contract term has ended.
Overview pensions, social charges and other
€ thousand
Øystein Løseth1
Huib Morelisse2
Peter Smink
Øystein Løseth was CEO of N.V. Nuon Energy until 1 April 2010.
Huib Morelisse was appointed CEO as per 1 July 2010.
1
2
Pensions
2010
2011
95
125
62
50
49
Social charges
and other
2011
2010
15
14
11
9
13
Total
2011
139
59
2010
110
73
62
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Remuneration of the Supervisory Board 2011
The remuneration of the Supervisory Board is determined by the
General Meeting of Shareholders. With effect from 1 July 2009,
the members of the Supervisory Board receive € 35,000 per annum.
The Chairman of the Supervisory Board receives a remuneration
of € 45,000 per annum. Members of the Supervisory Board, who are
33
also a member of the Audit Committee or Remuneration Committee
receive an extra payment of € 10,000 based on full year membership.
Remuneration is only paid to those members of the Supervisory Board
who are not employed by Vattenfall AB. The remuneration is in line
with remuneration packages of companies comparable to Nuon
and Vattenfall.
Remuneration of the Supervisory Board
€ thousand
1 January 2011 31 December 2011
Director A/B
Øystein Løseth, Chairman1
Lars G. Josefsson, Chairman2
Dag Andresen3
Torbjörn Wahlborg4
Leni Boeren
Pieter Bouw
Derk Haank
Tuomo Hatakka
Jacques Schraven
Tom de Waard1
Total
As per 8 April 2010.
Until 1 April 2010.
Until 31 January 2011.
As per 31 January 2011.
1
2
3
4
Amsterdam, 17 April 2012
The Remuneration Committee
B
B
B
B
A
A
A
B
A
B
1 January 2010 31 December 2010
45
45
45
35
45
33.75
215
203.75
45
45
45
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Corporate Social
Responsibility
Balancing the care of all stakeholders: the environment, our customers, employees, societal
stakeholders and shareholders is vital to the execution of the company’s overall business
strategy. At the core of this vision are three themes and the dilemma of what we refer to as
the energy triangle: the need to strike a balance between keeping energy affordable, while
reducing environmental impact and ensuring that energy supplies remain reliable at all times.
This is a translation of the main interests of stakeholders in the energy market.
Affordability
of energy
The cost of generating
electricity varies among
energy sources
The energy triangle
Security
of supply
Sustainability
Primary energy supplies
should be reliable, and
converted energy should be
available to meet demand
Any conversion of energy
to electricity impacts
the environment and
the climate
We believe that we are uniquely positioned to respond to the expectations
of our stakeholders by adopting the energy triangle approach. We build
on the trust and long-established relationship we maintain with our
­customers, as well as on our skill and expertise in energy production,
sourcing and sales. But most importantly, we rely on a committed and
talented workforce that is committed to the societal themes associated
with energy.
of energy
Our relationship with our employees, customers and other stakeholders is
based on a principled approach supported by an open dialogue. Embracing
social themes leads to new market opportunities, as evidenced by the growth
of our insulation activities in recent years. This, in turn, contributes to
value creation for our shareholders. Business continuity and prosperity
can therefore go hand in hand with value creation for our other stakeholders. First and foremost, all actions must be safe and responsible.
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Health
and safety
At the heart of its business operations, Nuon has set itself an unconditional objective:
the company stands for absolute safety for all Nuon employees. To Vattenfall and Nuon,
Affordability
of energy
Energy costs consume a significant share of customers’ disposable income while energy
remains a basic necessity. Customers therefore rightly expect their energy to remain
­affordable. On the one hand, Nuon aims to achieve this by keeping its costs low and adhering
to an international trading and sourcing strategy. On the other hand, Nuon works with its
­customers to help them save energy.
Security
of supply
In our industry, security of supply entails both the secure sourcing of fuels and the reliable
production of electricity and heat, to meet demand essentially 100% of the time. Energy ­supply
to customers should be totally reliable, now and in the future. Nuon seeks to do this by ­managing
a diverse portfolio of assets.
Sustainability
of energy
Reducing CO2 exposure is core for both Vattenfall and Nuon, with the clear objective
of ­lowering overall CO2 emissions of the group from the 89 million tonnes per year in 2011
to 65 million tonnes per year by 2020 (according to rate of ownership). Nuon is currently
­
conducting an efficiency improvement programme aimed at lowering the CO2 footprint
of its existing power production assets. Meanwhile, as part of Vattenfall, Nuon aims to realise
its sustainability commitment by expanding its renewable production portfolio.
Together
As an energy producer and supplier, the company needs to create solutions to continue
to secure the balance within the energy triangle. Nuon’s view is that we should attempt to
­create this balance in our activities and our strategy together with the society we operate in.
Our aim is for our employees, customers, business partners, policymakers and interest groups
to participate actively in creating solutions together. We do so in a context which best matches
the type of interaction and depth required for the dialogue.
safety means that the company takes responsibility for the health and safety of its operations.
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Health and safety
Development, production and installation activities present an inherent
level of risk with respect to both health and safety. Together with Vattenfall,
Nuon takes full responsibility for the absolute safety of its employees in all
its operations.
Promoting a safe and healthy
working environment
Lost Time Injury Frequency (LTIF)1
Number of incidents/million worked hours
12.5
For this purpose, an open and fair safety culture has been created in
which each of us takes responsibility for our own health and safety as
well as that of our colleagues. This is achieved by focusing on prevention
and dialogue, enabling us to learn from each other and our mistakes
to ensure that the working environment is continuously improving.
11.4
10.0
7.6
7.5
5.0
As an employer, the focus on safety remains undiminished. In fact,
in the context of Vattenfall’s new strategic direction, ‘safety’ has been
established as the first core value for employees. We fully recognise and
accept the responsibility we have to ensure the safety of our employees.
Operations containing a high level of risk also call for safety management
of contracted staff. The registration of near safety incidents for employees,
contractors and other parties is integrated into one registration system.
Near-incident information provides a solid basis for continuous control
and improvement. We monitor and register these indicators as a means
to decrease the key-indicator LTIF.
The LTIF gives a perspective on the number of injuries among Nuon
employees – and is defined as the number of lost-time injuries per million
worked hours. The LTIF was 1.6 in 2011 compared to 4.5 in 2010 and
5.8 in 2009, which is a significant decrease. The main improvement
relates to our Business unit Energy Related Services (insulation, boiler
installation and servicing), where extra attention is paid to safety prior to
the work being carried out. As an example, our advisors are now required
to ­perform a safety assessment during a survey visit to the customer
to obtain ­additional technical information and issue a price estimate.
The internal safety culture has evolved from reactive to pro-active.
In total, the LTIF of our Business unit Energy Related Services decreased
sharply from 11.4 in 2010 to 4.0 in 2011. Our goal is to reduce that number
­further to 2.4 in 2014. We were successful in reducing the LTIF of Nuon
employees in our ­Business division Production to a level of 0.8 in 2011.
Despite efforts to achieve absolute safety in 2011 for all operations, we
recorded a total of 1,572 safety and near safety incidents. As shown in the
graph on the next page, this includes near safety and safety incidents (with
and without lost time) for all employees, third parties and contractors
of Nuon operations. The number of registered safety incidents increased
sharply compared to the 818 safety incidents reported in 2010. This partly
results from the simplification of the registration process and focus on
near safety incidents. Each registration now contains more information
about the circumstances of a near-or actual ­incident, as well as the speed,
4.5
4.4
4.0
Safety first
2.5
0.8
0.0
BU Energy
Related
Services
2011
1
BD
Production
1.6
0
BU Heat
00
0.2 0.2
BD Asset
Development
Nuon
other
Nuon
total
2010
LTIF = Lost Time Injury Frequency; relates to the number of accidents leading to absenteeism
divided by the number of worked man hours x 1 million. LTIF relates to Nuon employees
excluding contracted staff. Business Unit (BU) Energy Related Services relates to the activities
of Feenstra, Nuon Beveiliging, Nuon Isolatie and Helianthos. Business Division (BD) Production
relates in 2010 to Thermal Operations and Heat (including Industry Parks). In 2011, BU Heat
(including industry parks) is reported separately. Nuon Other relates in 2010 to corporate
departments and Asset Development. In 2011, BD Asset Development is reported separately.
Nuon Total is the LTIF of all Nuon employees’ activities.
nature and efficiency of the intervention. Important safety milestones
were reached in 2011 despite a highly ­challenging environment at the
building sites of the new electricity ­production plants:
■■ With construction activities on the site every day and with over 2,200
employees of 38 different nationalities working together, employees
and contractors at the site of Nuon Magnum achieved one million
working hours without Lost Time Injury by mid-2011. Unfortunately,
incidents did occur later that year, including three serious accidents
involving subcontracted workers at the construction site;
■■ Since the start of the execution phase of Hemweg 9 in Diemen
in March 2010, the project has experienced no occupational injury
or illness involving days away from work;
■■ Together with its partners of the offshore wind farm Egmond aan Zee,
Nuon has an excellent Health and Safety record during five years of
operations: 270,000 hours worked with no Lost Time Incidents.
Although Nuon is proud of its safety milestones, the occurrence of serious
incidents demonstrates the need for a relentless focus on controlling all
safety aspects, as well as working together with contractors to improve
safety in all operations. We have the ambition for all parties hired by
Nuon to observe the same level of safety standards as we do internally.
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Hea lth a n d sa fety
Total registered safety incidents and near incidents1
Moving average absenteeism1/2
Number
Number
5%
1,500
1,381
4%
900
3%
648
600
2008
2
3
4
4.2%
4.0%
1%
269
99 71
62 83
0
Near-incidents2
3.9%
2%
549
28 93
1
4.4%
1,200
300
37
2009
2010
Incidents without lost time3
158
33
0%
20 11
Lost time incidents4
Total near-incidents, incidents without lost time and lost time incidents for all Nuon
employees, including contractors and third parties of Nuon in the Netherlands and Germany.
Definition of near-incident: dangerous probability of risk of injury, damage or loss resulting
in negative consequences, which can lead to an incident.
Definition of incidents without lost time: an unintended and sudden event affecting an
employee in connection with the performance of work and causing an interruption of activities.
Definition of lost time incident: every occupational incident involving injury which
temporarily prevents the person involved from carrying out his or her work.
2 008
1
2
2 009
2 010
201 1
Value for the Netherlands, excluding the subsidiaries Feenstra, Nuon Beveiling
and Nuon Isolatie, which are excluded as not all comparable figures are available.
Due to a correction of the scope of the moving average absenteeism data, the data
of 2008 and 2009 differs with those data reported in the 2010 Nuon CSR report.
principle that ‘every employee matters’. In 2011, this policy resulted in
renovation activities at several office locations. For example, employees
were provided physiotherapy services and improvements were made
to individual work stations by adding a second screen to desktops.
The safety policy includes the implementation of relevant management
systems and a staff and leadership improvement programme. As part
of the Health, Safety and Environment management system, we are
in the process of having our locations OHSAS 18001 accredited. A total
of three production locations were certified in 2011 (Velsen, Buggenum
and Epe). OHSAS 18001 is the international assessment specification
for occupational health and safety management systems. Engineering
subsidiary Ebatech also received certification in 2011 and the installation
and remaining production locations are expected to follow in the course
of 2012.
In addition to this process, and to ensure that safety is even further
embedded in our company and culture, Nuon and Vattenfall launched
the Hearts and Minds Programme aimed at improving the safety culture
of our organisation. Initiated in 2010, the programme has now been
implemented throughout the organisation with a series of workshops
conducted by our operational teams and their management. As a core
value, safety is included in the performance management process.
This helps managers set safety goals at an individual level and enables
employees to keep track of and improve their safety awareness,
­performance and results.
Health management
The moving average absenteeism rate of Nuon in the Netherlands
decreased from 4.2% in 2010 to 4.0% in 2011. This compares to
the national average rate of 4.2%. The decline was mainly driven
by a lower long-term absenteeism rate, in part due to a more proactive
dialogue with our employees.
In terms of health policy, Nuon focuses on each individual, paying close
attention to feedback from our employees about their health and working
environment. A range of employee surveys, such as the Nuon barometer,
were used to gather this information. Similar to the ‘every customer
matters’ policy, the Customer Service Center bases its activities on the
Following the announcement in 2010 that preventive medical checks
would be carried out, we conducted an initial round of checks at our
Heat business unit in 2011. This examination takes into account our
employees’ physical health in addition to such elements as work-related
stress. While participation was voluntary, 72% of the unit employees
took part in the health check. In 2012, we will continue to perform such
checks in other areas of the organisation.
Furthermore, we are making efforts to ensure that our line managers
adequately understand and address health issues, and we are providing
them with the tools to do so. We are currently developing an online
‘health management platform’ to actively help managers engage in
a continuous dialogue with their team members in the event of longterm or frequent absenteeism. The platform will allow all files and
­communication to be managed from one central point.
Safety also includes promoting a working environment in which our
employees feel comfortable. To this end, we have established a code
of conduct to address undesirable and inappropriate behaviour at work.
In addition, we have contracted external ‘confidential counsellors’
whom our employees can contact if in need.
New way of working
A healthy work-life balance requires both cultural and practical
­adaptation to changes in the lives of our employees. In response to a
greater identified need among our employees for more flexibility in
working locations and working hours, we launched a project, which
will be realised in three stages. Firstly, the meaning of the ‘new way
of working’ for our organisation will be examined. Secondly, the tools
and services needed for successful implementation will be identified
(workspace ­concept, services to enable remote working). Finally,
­attention focused on developing a working culture can be developed
in which individual responsibility plays a central role.
­
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Affordability of energy
Nuon is committed to helping its customers control the cost of their energy, in line with
the first pillar of the energy triangle. We do this by strategically sourcing the energy we
supply, carefully managing the portfolio of assets as well as by directly helping customers
reduce their energy usage. In cooperation with its Dutch shareholders, Nuon also
provides assistance to vulnerable customers facing payment arrears.
Managing fluctuating energy prices
Creating awareness and providing insights
In light of the challenging economic climate, and given that energy
­markets are increasingly interlinked, international macro-economic
events have a direct impact on the pricing of electricity and gas for our
customers. In many respects, 2011 was a difficult year on the global
energy markets, which saw an increase in oil, gas and electricity prices.
Nuon, as part of Vattenfall, buys, sells and trades energy, fuels and
­carbon exposure on international markets. To some extent, this allows
Nuon to mitigate wholesale market price fluctuations for its customers.
Despite these efforts, international market developments led to a
­significant increase in energy tariffs from July 2011. This was mainly
driven by a renewed growth in demand for raw materials as well
as macro-events such as political instability in the Middle East, the
Fukushima disaster and the German government’s announcement
that it would accelerate the phase-out of nuclear energy.
The Nuon E-Manager, which was introduced in November 2011,
allows household customers to gain a real-time insight into their energy
­consumption and that of their appliances. This product was developed
by Nuon and builds on the successful pilots with the energy display
­conducted in Amsterdam in previous years. Following its market
­introduction in the Netherlands, Vattenfall will roll out the Nuon
E-Manager in Germany and Sweden.
To mitigate the effect of these increases for business customers Nuon
provides an analysis of anticipated market developments via a weekly
market report, advising them on the optimum sourcing strategy for their
energy needs. In 2011, Nuon also made significant progress in the area
of customised billing, helping its business customers understand the
drivers and patterns of their energy consumption and associated costs.
Saving energy matters
Saving energy serves two key purposes: it contributes to the reduction
of greenhouse gas emissions and helps households, business customers
and industries minimise their energy costs. Energy saving was at
the heart of the political debate in 2011, with the proposal of a new
European Directive promoting energy efficiency. The proposal for
this new directive contains a set of measures aimed at stepping up
EU Member States’ efforts to use energy more efficiently at all stages
of the energy chain.
Nuon uses its portfolio of products and services for energy management
to create solutions for its customers. Our approach is two-fold:
■■ We provide our customers with an insight into their energy
­consumption, which helps them better understand how they use
­energy. This is a necessary step to achieve behavioural change;
■■ We offer tools to achieve energy efficiency via a portfolio of energy
management products and services.
For corporate clients, the online service ‘NuonMijnVerbruik’ (Nuon
my consumption) provides a platform to monitor both electricity and
gas consumption. Nuon further developed the tool in 2011, adding the
option for multi-sites customers to access location-specific information,
thereby tailoring their approach to energy savings more accurately.
The number of users decreased slightly to a total of 476 compared
to the 509 registered users in 2010.
Smart meters are gradually being introduced, offering customers an
opportunity to keep track of and understand the internal drivers and
patterns of their energy consumption. For the business market, metering
services are offered by Ebatech, Nuon’s in-house energy management
expertise centre. We also installed smart meters in the course of 2011
at the request of a number of our multi-sites customers, offering them
real-time insight into consumption data per location. On the household
market, a number of our customers received new smart meters from
their regional network operator, in line with the relevant laws and
­regulations. No data from these meters was collected in 2011.
Creating solutions with our business customers
Following the successful partnership with property investment company
Corio, Nuon has signed contracts with Ymere, Parteon and Woonzorg,
among others, to partner up with the objective of reducing energy
costs for individual tenants. In 2011, Nuon used this partnership
model to focus the company’s efforts on the real estate sector as well
as on housing corporations. Projects and partnerships included:
■■ A five-year partnership was agreed with housing corporation Ymere,
thereby formalising our longstanding cooperation in the area of energy
management and savings. The aim of the collaboration is to help
the tenants of Ymere save energy and improve their carbon footprint.
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Affo rda b i l i ty o f en erg y
■■
■■
■■
■■
■■
■■
The agreement, which was signed in March 2011, includes two main
elements. Nuon has agreed to a price reduction over the coming
years, which will directly translate into lower service costs for tenants.
Secondly, Nuon will work with Ymere on maximising existing solutions
such as home insulation but also jointly seek innovative ways to
­influence tenants’ energy consumption behaviour. As an initial step,
Nuon E-Managers have been installed in a number of dwellings,
­providing a baseline for the project as well as information for tenants
on their actual energy consumption;
Ymere and Feenstra, Nuon’s boiler installer and servicer subsidiary,
conducted a pilot in 2011 in Almere setting targets for sustainability,
customer satisfaction and installation safety. It yielded significant
improvements in terms of the number of boiler breakdowns
(-29% in comparison to 2010) as well as the number of repeat visits
for maintenance and repairs (-45%). Upon successful completion
of the pilot in January 2012, Feenstra was awarded the servicing
­contract for all Ymere boilers in Almere;
In August 2011, Nuon and Amsterdam Arena agreed to work together
to help Arena realise its objective of becoming the first CO2-neutral
stadium by 2015. Among other things, this will be achieved by
­delivering sustainable cooling and district heating to the stadium;
A lighting plan was developed for Corio Vastgoed’s Alexandrium
shopping centre in Rotterdam. If implemented fully, this plan could
lead to on-site energy savings of 40-50% from lighting. This is a
­follow-up on the partnership between Nuon’s Ebatech and Corio,
established in 2010, under which Nuon advises Corio on how to
achieve its target of saving 15% on energy and water;
Nuon developed a set of energy and sustainability scenarios for
the redevelopment of 7,000 m2 of retail space by Redevco in Gouda.
The Dutch Shopping Centres Council (NRW) has designated the
­project a ‘sustainable building’ pilot, which will be certified according
to the sustainable building assessment method BREEAM-NL;
A large-scale renovation project was carried out in the neighbourhood
of ‘De Kroeven’ in Roosendaal. This project was unique in its scope as
it involved a total of 246 houses which were renovated and upgraded
to CO2 neutrality. The renovation included thorough insulation, which
not only improved the energy balance but led to noticeable reductions
in noise and overall improvements in comfort. This project also had the
special feature of not being invasive for tenants as it focused on the
outside of the dwellings. This opens a new perspective on renovation;
A new Step2Save programme was launched in the Province of ­Groningen.
This version of the programme is being conducted in cooperation
with Energie Convenant Groningen, ISD Noorden­kwartier, the
­municipalities of Leek, Grootegast, Marum and Zuidhorn, as well
as Housing Corporation Wold and Waard. Over the course of 2011,
Step2Save advisors visited a total of 7,500 homeowners and tenants,
who were given free energy advice and an energy-saving box.
Helping our household customers realise their savings
Nuon aims to provide the tools consumers need to reduce their energy
costs. In 2011, this led to the following results:
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■■
■■
■■
■■
39
19,935 high-efficiency boilers were sold and installed in households,
a significant increase compared to 2010. However, the corporate
­market suffered a setback due to the economic situation and associated
levels of investments in the construction market;
1,679,868 m2 of insulation was installed: 1,255,939 m2 of
cavity-wall insulation, 400,381 m2 of floor insulation and 23,548 m2
of loft insulation;
419 households received a home visit from an energy advisor,
­compared to 6,984 in 2010. Due to the withdrawal of the national
subsidy for energy advice, there was significantly less interest
from the market in requesting such a service;
A total of 3,157 energy labels were issued;
To complement the products and services portfolio, Nuon has added
ventilation to the services it offers. The approach to lowering the
­concentrations of indoor air pollutants involves increasing the amount
of outdoor air coming in, via ventilation. Nuon offers service contracts
to ensure ventilation remains optimal. The service was introduced
at the end of the summer and a total of 2,700 service contracts were
sold in 2011.
Payment assistance to vulnerable customers
Part of the company’s commitment to working together with its stakeholders is to create solutions for its more vulnerable customers. Nuon
aims to intervene at an early stage in cases of payment arrears to ­prevent
deterioration in a customer’s debt situation. Nuon offers three possible
solutions: payment deferral, a tailored payment plan or debt assistance.
In all cases, Nuon seeks direct contact with the customer.
Introduced in December 2006, the so-called Wijn Law initiated a
­mandatory referral system whereby energy suppliers notify municipal
agencies of customers with payment difficulties. Via a number of cooperative ventures with partners such as the Communal Health Services
(GGDs), municipal social services and specialised instances, Nuon aims
to help its customers who require debt assistance. This is to ensure that
financial assistance is offered early enough to help those with payment
arrears. Nuon is in discussion with various municipalities how this
­assistance can be further improved, especially when it comes to shortening
the delays in processing customer cases.
Furthermore, there is regulation in place to protect household customers
from supply interruptions during periods of extremely cold weather.
Since the unbundling of the energy sector, the final decision on terminating
the supply of gas and/or electricity is in the hands of the network operator.
For heating, the decision is currently made by the energy supplier.
In 2011, the number of customers who requested use of the ‘help
with outstanding debts’ programme (via city councils) increased by
approximately 25%. However, most of these customers did not meet
the eligibility criteria, mainly due to the level of their monthly/yearly
income. The inflow of cases in the last dunning phase remained
­relatively stable.
Together with the municipality of Almere, Nuon organised a pilot to
­provide households with a monthly overview of their energy costs.
­Lessons learned will be used when, as part of regulatory requirements,
Nuon rolls out bi-monthly cost overviews for all customers with a smart
meter in 2012.
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Security of supply
Security of supply means enabling a steady supply of energy to customers
by preventing and mitigating any fluctuations in our energy production.
Using different energy sources for our production portfolio allows us to supply
electricity and heating as securely, affordably and sustainably as possible.
This is why Nuon is aiming for a diversified asset and fuels portfolio.
Sources of energy and supply
chain responsibility
A balanced mix of energy sources implies the purchase of a variety of
raw materials, goods and services. As a supplier of energy and purchaser
of these raw materials, Nuon has both a direct and indirect social,
­environmental and economic impact on its surroundings at different
­levels of the value chain.
In the current energy mix, we still need coal-fired capacity to guarantee
a reliable and affordable energy supply. In this context, coal supply
chain responsibility remains an important agenda item. The following
table provides an overview of the countries from which Vattenfall
sources hard coal for use in our own power plants. Vattenfall and
Nuon contribute to improving best practices in the coal supply chain
by working together with mining companies, stakeholders and our
­market peers in various stakeholder dialogues and initiatives.
Physical coal purchased for Vattenfall Power stations in 2011
Poland
Colombia
Russia
South Africa
USA
Venezuela
c­ ircumstances of communities, workforce and environment in places
where coal for Dutch markets originates, respecting human rights,
labour rights, environment and conflict sensitive business practices.
The dialogue also aims to improve transparency in the coal supply chain
towards the Dutch end consumers. Efforts made in the Netherlands have
contributed to the establishment of an international initiative aimed at
continuous improvement of the coal supply chain: Bettercoal. Vattenfall
is a founding member of Bettercoal. In this business led initiative started
by a group of major European energy companies, members aim to improve
coal mining practices by putting forward a shared set of standards that
will encourage and support mining companies and operators to adopt
and improve good practices to protect workers, the environment and
local communities from the impact of coal mining and to conduct joint
assessments. Efforts in 2011 focused on the set-up of Better Coal and,
together with mining companies and civil society stakeholders, on drafting
a shared standard: the ‘Better Coal Code of Practice’. After global
­consultation, this Code will serve as the basis for joint assessments
focused on human rights, safety and business ethics as well as the
­environmental impact of coal sourcing.
37.9%
24.9%
More information is available from www.bettercoal.org
20.7%
9.8%
6.2%
Social and environmental aspects are taken into account in the area of
biomass procurement. Nuon sources biomass from countries such as
France, Portugal, the US and Canada. As in recent years, wood chips and
forest residues from Staatsbosbeheer (the Dutch Forestry Commission)
were the main source of biomass for the Lelystad plant in 2011.
­Biomass used at the Buggenum plant consisted exclusively of wood,
­predominantly supplied in the form of industrial wood pellets.
We occasionally use smaller volumes of enhanced wood pellets and char.
0.5%
In 2011, the Dutch coal dialogue entered its second phase. Nuon
­ articipates in this multi-stakeholder dialogue, which aims to strengthen
p
assurance processes with a view to improve, where applicable, local
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Energy production in a changing landscape
As in many countries in Europe, the energy landscape in the Netherlands
is in transition. The combination of rising electricity demand and an
ageing production park requires investments in new production capacity.
Location and technology choices are made in the context of expected
market developments, regulatory frameworks and with the objective
of reducing the negative impact on our environment.
Total net production of electricity and heat
TWh/PJ
20
Total electricity production was relatively low this year, as shown in
the graph on this page. Combined heat and power plants operated
for a considerably lower number of production hours in 2011 due to
market circumstances and the warmer weather. Furthermore, ­production
was impacted by planned maintenance, including the maintenance at
the ­Willem Alexander plant in Buggenum. The Hemweg 8 plant was
unable to deliver to the grid for a number of weeks due to a boiler leak,
followed later in the year by a fire in a grid connection cable.
Electricity from our renewable energy portfolio
2011 was a very good year for our wind energy activities. Total wind
production in the Netherlands, including direct purchasing from third
parties increased by 17% compared to the previous year: from 1,163 GWh
in 2010 to 1,357 GWh in 2011. Our offshore wind farm Egmond aan Zee
reached an all-time high production level of 383 GWh, as a result of
high availability and favourable weather conditions. The sharp increase
in wind energy production was therefore a combination of good weather
conditions and more focus on preventative maintenance.
Nuon’s biomass activities continued to grow in 2011. This included
the further development of co-firing biomass and the development
of dedicated biomass production capacity. The Buggenum plant has
­continuously co-fired a higher percentage biomass (energy-based) since
September 2011. Tests with higher percentages of refined pellets have
also been successful. Meanwhile at the Hemweg 8 plant we successfully
tested co-firing in 2011. Production at Nuon’s hydropower plants was
low in 2011 due to the low inflow of water.
16.8
16
14.4
13.5
14.8
13.7
14.7
13.2
11.9
12
Electricity
Nuon’s total installed electricity production capacity in 2011 was
3,722 MW. Development activities focused on three new and ­efficient
gas-fired power plants in Eemshaven, Amsterdam and Diemen.
The ­construction of the 1,311 MW Nuon Magnum power plant in
­Eemshaven, in the north-east of the Netherlands, reached its highest
point in July 2011 and is expected to be completed in 2012.
The two 435 MW gas plants in Amsterdam and Diemen are expected
to be ­operationally ready by the end of 2012. Total installed capacity
of the Nuon renewable portfolio in 2011 amounted to 366 MW,
of which 333 MW is wind energy capacity. 320 MW of this capacity
is based in the Netherlands and 13 MW abroad.
41
8
4
1.4
1.4
1.3
1.5
0
2 008
Renewable electricity1
Fossil-based electricity
1
2 009
2 010
201 1
Heat
Renewable electricity comprises all renewable electricity that Nuon, acting as producer,
and beneficial owner, feeds into the electricity grid via grid connection points. In the
annual report, wind energy production from minority interests and third parties which
we, as beneficial owner, feed into the electricity grid, is included, while foreign wind
energy production (which we do not feed into the electricity grid) is excluded.
Gas
As part of Vattenfall’s new strategic direction of focusing operations
on core markets and products, the gas exploration and production
­activities were divested. These activities were sold to Tullow Oil plc.
on 30 June 2011.
To ensure a flexible response to fluctuations in gas supply and demand,
gas storage activities were continued. This enables the company to
­provide customers with greater security of supply and some degree
of mitigation for fluctuations in wholesale prices. In April 2011, the
final part of the gas storage facility in the German town of Epe became
operational. The total natural gas storage capacity in these disused
salt mines is now approximately 280 million m³. In July 2011, Nuon
obtained the irrevocable permit to expand the gas storage facility
in the Dutch town of Zuidwending, in the province of Groningen.
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Installed capacity and production of energy production plants | RA-verified
Installed capacity1
2011
Electric
Heat
MWe
Buggenum
Diemen
IJmond
Velsen
Hemweg (Amsterdam)
Lage Weide & Merwedekanaal (Utrecht)
BMC Lelystad
AHP Purmerend
AHP Kanaleneiland (Utrecht)
AHP Nic. Beetsstraat (Utrecht)
AHP Nieuwegein
AHP Overvecht (Utrecht)
AHP Almere
CHP Purmerend
CHP Almere3
CHP Industry park Emmtec
CHP Industry park De Kleef
CHP Industry park Sittard4
CHP Industry park Heerlen5
CHP Industry park Düren
CHP Industry park Heinsberg
Small-scale CHPs (various locations)
Total
Production2
2011
MWth
2010
Electricity
Heat
Electricity
Heat
GWh
TJ
GWh
TJ
253
249
144
834
1,209
567
–
–
–
–
–
–
–
–
354
105
–
–
575
7
90
81
58
128
145
116
1,153
1,232
832
2,900
3,421
2,163
–
–
–
–
–
–
–
–
1,494
292
–
–
3,859
140
136
2
8
26
4
65
69
118
67
45
–
–
7
37
122
99
259
392
100
–
–
43
288
548
196
500
239
238
–
–
13
–
359
723
2,505
1,696
535
–
–
481
134
2,588
3,722
3,388
13,245
14,688
1,215
–
1,630
1,624
1,035
486
2,695
–
2,990
–
2,413
4,378
–
143
–
394
–
16
–
91
–
39
–
27
–
102
216
768
632
2,819
238
1,639
254
582
–
–
–
27
15
451
–
157
416
3,023
13,749
16,765
1With
a higher heat supply capacity, the electrical capacity decreases, depending on, for instance, the temperature of the outside air, cooling water and heating pipelines.
of electricity means all electricity that Nuon, as producer and benificial owner, feeds into the electricity grid via grid connection points.
to a correction of the electricity production data of CHP Almere, the data of 2010 differs with the data reported in the 2010 Nuon CSR report.
4CHP Industry Park Sittard was not operational in 2010 and 2011.
5CHP Industry Park Heerlen was sold in 2011, for comparative reasons the data of 2010 is displayed.
2Production
3Due
Heat
In addition to the dedicated production of power, Nuon aims to develop
gas-fired production units that allow for the use of residual heat.
In ­Almere, two older units will be replaced by the new gas-fired plant in
Diemen. In addition, residual heat produced in Diemen will be supplied
to approximately 11,000 homes in Almere. The new pipeline to supply
heating to Almere is due for completion in the first half of 2012.
For more information on the heat project to Almere, please refer to
Report of the Management Board.
District heating and cooling distribution and supply activities continued
to grow steadily. In 2011, 3,002 new district heating and cooling
­connections were realised. The total number of connections decreased
slightly compared to last year following the sale of three of our smaller
district heating projects to public energy and waste company HVC.
The sale of these smaller units is in line with the strategy to focus on
large-scale district heating projects. Taking into account this reduction
of 4,342 connections, the total number of connections at year-end 2011
was 105,312.
Nuon responded to the economic recession in the ­construction market
by intensifying efforts in the renovation market. With this new focus,
the company’s ambition to realise 3% to 5% annual growth in connections
still stands. New connections were added in Amsterdam Nieuw-West,
Duiven, Rotterdam, Leiden and Almere. An example of the renovation
projects is the Presikhaaf, Arnhem project, where we connected
­approximately 500 houses and 90 shops to a ­district heating system
in October 2011. The heat supplied to these ­customers is residual heat
from our CHP plant in Kleefse Waard, ­Arnhem. The project was realised
in close cooperation with various partners, including property investment
­company, Corio, and contractor, Kroon. The new heat supply system
replaces the customers’ central ­gas-fired boilers, thereby reducing
the corresponding CO2 emissions by up to 70%.
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Renewable production capacity and production by source | RA-verified
Production capacity
Production1
2011
2011 pro rata of
Nuon ownership
2010
2011
2010
MW
MW
MW
GWh
GWh
Wind2
The Netherlands
Abroad
Subtotal
320
13
333
210
13
223
330
24
24
24
24
24
8
8
8
8
8
2
2
2
2
-
366
257
317
13
1,357
–
1,357
1,163
42
42
73
5
5
4
1,163
–
Hydro
Small scale the Netherlands
Subtotal
24
73
Solar
Photovoltaic
Subtotal
8
4
Biomass
Stand-alone
Co-/auxiliary firing Buggenum station
Subtotal
Total
2
8
97
104
28
364
1,508
1,267
2
7
20
1Renewable
production comprises all renewable electricity that Nuon, acting as producer and benificial owner, feeds into the electricity grid via grid connection points.
In the annual report wind energy production from minority interests and third parties which we, as benificial owner, feed into the electricity grid, is included while the foreign
wind energy production (which we do not feed into the electricity grid) is excluded.
2Relates to the total wind energy production capacity from both majority and minority interests.
Capacity expansion for Westpoort Warmte was achieved by signing
an agreement with Orgaworld in July 2011 for the off-take of 3.5 MW.
The waste heat from the Orgaworld organic waste treatment plant is
CO2-free and will be fed into the Westpoort Warmte district heating
­network, thereby increasing the renewability of heat.
Nuon’s 7,000 m2 solar island in Almere exceeded expectations in its
first full year of operation. In 2011, a total of 9,224 GJ was supplied
to our customers.
In our sustainable cooling business, we completed the pilot project for
the delivery of Comfort Cooling to Kadoelerbreek in North Amsterdam
in August 2011. This project involved the use of cold storage to supply
180 dwellings for senior citizens in Amsterdam with sustainable cooling.
It was conducted in collaboration with social housing corporation,
Ymere, in Amsterdam.
Cooperation involving our industry parks
Nuon owns and operates industry parks in the Netherlands and Germany.
These parks not only offer on-site facilities, energy and infrastructure,
but present an opportunity for partnerships with our clients. In 2011,
the Emmtec Park opened a knowledge centre for polymore research &
education, together with Stenden University and API Institute. The same
park celebrated five years of Sunoil biodiesel operations. The service
vehicles fleet of the Nuon Emmtec Park was proud to be the launching
customer. In August 2011, the sale of our Heerlen industry park to Dalkia
was completed.
Both the industry parks in Emmen and Heinsberg realised an
­expansion of their energy services in 2011, following the opening of
new innovative production facilities on site. Such modern production
facilities align with the development strategy of Nuon’s industry parks.
In November 2011, the industry park operator (IPKW) in Arnhem
opened a new building (incubator) for hosting start-up companies.
This is the start of re-development activities at the park and involves
an expansion of 40 hectares.
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Sources of heat for supply to customers
Supply of district heating to customers
PJ
TJ
10
10,000
8
8,000
7.6
6.6
6
0.6
0.7
6.6
0.5
0.6
0.5
0.6
3.5
3.5
6.7
1.1
0.5
0.6
0.9
2.0
2008
Power plants Nuon
Power plants other
2009
2010
162
170
160
6,452
5,353
5,332
120
80
2,000
40
0
20 11
Wls1
CHPs
169
4,000
4.7
5.2
2.0
156
5,241
2
0
200
6,000
4
1
Customers x 1,000 (HE)1
0
2 008
1
2 009
2 010
201 1
HE = Housing Equivalent (see list of definitions).
WI = Waste Incinerator.
Investments in district heating and cooling networks1
Supply of district cooling to customers
¤ million
TJ
60
48
250
58.1
44.5
Customers x 1,000 (HE)1
4.1
3.6
200
44.1
4.0
3.4
3.1
3.2
164.7
36
150
23.3
24
100
12
106.3
1.6
50
0.8
0
0
2008
1
2.4
142.1
118.2
2009
2010
Relates to gross investments and also includes cooling projects.
20 11
0
2 008
1
2 009
HE = Housing Equivalent (see List of definitions).
2 010
201 1
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45
Sustainability of energy
Europe’s long-term ambition is to achieve a competitive low-carbon economy
in which electricity production is carbon-neutral by 2050. Political guidance
on achieving these ambitions was presented in March 2011 in the EU roadmap
2050. The Dutch government fully adopted these ambitions in its climate letter
(‘Klimaatbrief 2050’), published in November 2011.
As a European energy company, our strategy and ambitions are aligned
with Europe’s sustainability objectives, which are illustrated by the
vision to achieve climate neutrality by mid-century and the reshaping
of Vattenfall’s production portfolio. The main environmental impact of
Nuon related businesses comes from the electricity and heat production
portfolio. Efforts to reduce the environmental impact of our operations
therefore focus on increasing energy efficiency and reducing emissions
of the energy production assets, as well as increasing the scale of the
renewable asset portfolio.
More information about energy production can be found in the CSR chapter
Security of supply. The chart representing the fuel mix of Nuon’s production
can be found in the Report of the Management Board.
Balancing our energy generation fuel mix
In the current market, renewable energy cannot yet compete with
­fossil-fuelled production. Therefore, the key to achieving our ambitions
in renewable energy is a consistent regulatory framework and support
system. In 2011, the Dutch government implemented changes to the
renewable energy production support scheme: now called SDE+
­(Sustainable Energy Production Incentive Programme plus). Compared
to previous years, the main changes are the lower tariffs and competition
among technologies. The government also announced that the scheme
will probably be changed to a supplier obligation system by 2015.
Details of this scheme are still being discussed. The extent to which
Nuon’s new renewable projects will be realised in the Netherlands
will largely depend on the availability of appropriate support as well
as economic circumstances and spatial planning developments.
Energy companies use a broad mix of fuel and technology sources to
generate electricity. The combination of energy sources used is referred
to as the generation mix. Part of this mix comes from renewable energy,
which forms a solid basis for a sustainable production portfolio.
­However, in the transition towards fully sustainable supply, the current
generation mix also relies on fossil fuels, which result in environmental
emissions. Our challenge in the energy triangle is to optimally balance
the need for a secure and affordable energy supply with the goal of
­further improving the sustainability of this supply.
Nuon’s renewable energy comes from wind, small-scale hydropower,
solar and biomass. The company’s fossil-fuelled production comes from
coal, natural gas and blast furnace gas. The latter are process gases from
steel production at Tata Steel, which Nuon reuses to produce electricity.
The balance of the annual generation fuel mix is influenced by several
factors, such as market circumstances, portfolio optimisation and maintenance of the asset portfolio. In 2011, Nuon’s electricity production
consisted of 11% of renewable sources, of which 9.6% comes from wind
energy. Most of our fossil-fuelled electricity is produced using natural
gas. Total production in 2011 amounted to 14.7 TWh.
The share of biomass co-firing in our coal-fired plant in Buggenum
increased from nearly 2% in 2010 to 8% in 2011. Wind power production
increased by 17%, due to favourable weather conditions and greater
availability of our wind energy assets. Compared to 2010 levels, Nuon
processed more blast furnace gas, due to higher production at Tata Steel.
Total production remained stable.
Expansion of renewables
Together with Vattenfall, Nuon has defined the expansion of its
renewable production portfolio as a main pillar to achieve the target
of reducing CO2 emissions by 50% by 2030, from 1990 levels.
This is based on a European strategy, identifying which locations
and regulatory circumstances yield the best results for investments.
Achieving more by joining forces
Nuon’s ambition to increase the share of renewable energy requires
large investments, as shown in the chart on page 46. Nuon needs to
work together with its shareholders and stakeholders to further expand
these investments. This is illustrated, for instance, by the development
of the Zuidlob wind farm, where a group of 63 farmers joined forces to
establish a wind farm, and asked Nuon to develop it. In October 2011, all
parties were pleased to announce that Nuon, as part of Vattenfall, would
acquire full ownership of the farm. Thanks to a successful cooperation
with many local stakeholders, the project planning phase has developed
rapidly. The wind farm will consist of 36 turbines, with a total capacity
of around 122 MW, enough power to supply 88,000 households.
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Opportunities to expand onshore wind power production activities are
affected in the Netherlands by a limited availability of new production
sites. Nuon is therefore looking to invest in the repowering of existing
projects. This means older wind energy sites are being redeveloped
using new turbines, which increases the level of production on the site.
At the Reynderweg in Velsen, for instance, five 225 kW wind turbines
were replaced by 3 MW turbines. Nuon and its partner Wind Groep
­Holland each own 50% of the shares. The new turbines started supplying
electricity in December 2011. Together with its partners in the
­‘Windkracht Wieringermeer’, Nuon aims to replace 106 MW of single
wind energy turbines in the region by developing one wind farm with
a total capacity of over 300 MW. This corresponds with the structural
plan of the Wieringermeer municipality. Other repowering projects
include sites in Slufterdam (21 MW) and Hiddum Houw (7 MW).
impact of offshore wind on fauna, carried out at the location of our offshore
wind farm Egmond aan Zee. They concluded that the net impact of the
wind farm on fauna is positive. In short, the farm provides a new natural
habitat for organisms living on the sea bed such as mussels, anemones and
crabs, thereby contributing to increased biodiversity. For fish and marine
mammals, it provides an oasis of calm in a relatively busy coastal area.
More information is available from www.noordzeewind.nl.
Investments in renewable energy capacity 1
60
56.0 0.3
0.2
1.6
48
Permit applications for various other farms are at an advanced stage,
and Nuon is aiming for a significant increase in operating capacity
by 2015.
36
32.0
0.8
24
22.0
19.1
The dismantling of the wind farm Harry van den Kroonenberg
was ­finalised in July 2011. Because of local regulations concerning
dike management, repowering was not possible. Almost all materials
from the 18 turbines, the foundations and the roads could be recycled,
re-used or used as waste-to-energy. The concrete, for example, was
crushed and re-used for new roads. The small metal parts were recycled
and cables were re-used by the copper industry. Finally, steel from
­components such as the turbine and mast were melted down at Tata Steel,
where the blast furnace gas emitted during the melting process is used
as fuel at Nuon’s Velsen power plant.
Together with Vattenfall, Nuon aims to strengthen its position in offshore
wind energy. Our expertise dates back to 2007, when we started
­operating the first Dutch offshore wind farm at Egmond aan Zee.
­Unfortunately, Nuon was unable to further pursue its ambitions to rapidly
expand the offshore portfolio in 2011 because the planned 340 MW
Beaufort park was not granted subsidies. In an attempt to secure offshore
wind development in the Netherlands in the near future, Vattenfall and
Nuon considered cooperating with Eneco to jointly develop the permitted
location Q10. In the end, Vattenfall and Nuon decided against investing
in this specific project in view of the European offshore wind portfolio
and level of ambition. Beaufort continues to be our preferred project.
In close cooperation with Havenbedrijf Rotterdam and Rijkswaterstaat,
the permit for the location of Beaufort was extended in 2011.
Nuon and Vattenfall continue to explore other opportunities, whether
in the Netherlands or elsewhere in Europe.
Evaluating the environmental impact of offshore wind
As part of the sustainable development strategy, Vattenfall and Nuon
foresee a strong growth in their European wind power development
activities, both onshore and offshore. In the process of developing new
wind farms, great care is taken to limit the potential negative impact
of locating and operating wind farms. When planning new developments,
many potential negative impacts, such as noise or visual intrusion,
are considered in advance and either avoided or significantly reduced.
In August 2011, a team of researchers led by Wageningen University’s
Imares Institute published the results of their study on the potential
| RA-verified
€ million
20.6
12
6.7
12.1
1.4
0
2 008
Wind
Solar
1
2
2 009
2 010
0.4
0.1
5.8
0.4
53.9
201 1
Hydro
Biomass2
Relates to gross investments.
Biomass investments data has been added, including 2010 data.
Increasing biomass opportunities
Nuon is exploring various ways of using refined pellets as a means
of ­co-firing biomass in coal plants. For example by planning tests for
2012/2013 at the Hemweg plant and exploring opportunities with
­various technology developers. In order to secure the company’s
­biomass ambitions Vattenfall also increased its activities in the biomass
supply chain. Various initiatives are ongoing to secure feedstock supply
from Canada.
Milestones in other renewable activities
In September 2011, Nuon had to discontinue development of the
­Helianthos thin film solar technology. This decision followed an
18-month international search for a strategic investment partner
to bring this highly advanced technology to the market.
Further information on Helianthos can be found in the Report of
the ­Management Board.
The renovation of Nuon’s 240 kWp photovoltaic (PV) installation in
Nieuw Sloten in Amsterdam is on schedule, with 80% of the project
complete in November 2011. It will be finalised in 2012, after which
the installation will once again reach its full production level.
Since November 2011, a fish-friendly turbine management system
has been in operation at the Maurik and Alphen hydro-power plants.
The plant in Roermond already has a fish passage in place, an option
that is also being studied for other plants. Together with Rijkswaterstaat,
the ­University of Wageningen and Essent, among others, a test installation
has been built in Linne, Limburg to determine the effect of a proposed
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fish passage solution on our hydro power plants. Options to expand the
company’s hydropower capacity are being explored. One option involves
the use of standard caissons to realise reliable and affordable small-scale
hydropower units.
Environmental subsidies
Nuon’s renewable energy production facilities and our innovations may
qualify for environmental subsidies. The subsidies received in 2011 are
shown in the chart below. New renewable (SDE) subsidies were granted
for the Zuidlob and Reyndersweg wind projects, with maximum subsidy
amounts of € 229 million and € 17 million, respectively, over a period
of 15 years. The decrease of exploitation subsidies for renewable energy
production in the table Subsidies reflects the end of subsidy terms
for several renewable production assets of Nuon. The former subsidy
regulation ‘MEP’ included a cap on the total subsidy pay-out per
­installation. Several projects reached this cap in 2011, such as the wind
farms Slufterdam and Waterkaaptocht and several solar-PV installations.
Furthermore, lower production volumes due to planned maintenance
of the Buggenum plant led to a substantial decrease in subsidies for
­biomass production at that plant.
In August, the refurbishment of the industry park in Heinsberg received
a subsidy from the German state of North Rhine-Westphalia for a joint
venture with the municipality of Heinsberg.
The Amsterdam Harbour sustainability and innovation fund awarded
a subsidy of € 178,000 to connect the Orgaworld project to the district
heating network of Westpoort Warmte.
In the first semester of 2011, Nuon also received a WBSO innovation
subsidy of € 238,000. This subsidy was granted to accommodate
part of the labour costs for R&D activities in that period at Helianthos.
Subsidies1
40
33
1
33
2
26
24
4
24
11
16
8
0
2008
Education/Employment
Innovation/R&D
1
26
26
20
11
3
3
3
2
2
1
1
2009
Reducing environmental impact
Energy generation from fossil fuels results in emissions of carbon
­dioxide (CO2), nitrogen oxides (NOx) and sulphur dioxide (SO2),
among other pollutants. The environmental impact of electricity and
heat production is therefore closely monitored and Nuon continuously
works on improving the environmental performance of these fossil-fuelled
production plants to lower carbon emissions.
CO2 emissions from energy production
CO2 reductions are at the core of Vattenfall’s vision to achieve climate
neutrality by mid-century. Meeting the target of reduced emissions will
require investments in new generation, primarily in wind and natural
gas. In the Netherlands, investments in new gas-fired power will result
in more efficient generation capacity scheduled to come online in 2012
and 2013.
CO2 emissions per unit of electricity (kWh) of Nuon’s electricity production
increased slightly from 462.5 g/kWh in 2010 to 462.8 g/kWh in 2011.
This was the result of a relative increase in production from the coal-fired
plants compared to 2010, due to the major overhaul of Hemweg 8 in
that year. Furthermore, the gas-fired power plants produced less due
to market circumstances.
Nuon continued the efficiency improvement programme. This programme
identifies all activities that can potentially lower the CO2 footprint of
its power production assets. For example, by decreasing the temperature
of gasification and by repairing pipe leakages at the Buggenum plant,
energy efficiency was increased and pressed air consumption was lowered
further. At the IJmond plant, Nuon started operating the steam turbine
in ‘sliding pressure’ mode, which results in lower fuel consumption.
And at the Lage Weide 6 plant, the steam injection pipeline was cut off,
which reduced hot water drainage.
Nuon’s absolute CO2 emissions from electricity and heat production
in energy production plants decreased from 8,199 ktonnes in 2010
to 8,124 ktonnes in 2011. This reduction is largely explained by lower
electricity production. Details on emissions per production site are
included in the table on the following page.
| RA-verified
¤ million
32
47
2010
20 11
Exploitation Renewable Energy
EIA
Relates to the granted subsidies and fiscal facilities: the subsidies under the MEP
(Environmental Quality of Electricity Production) scheme were actually received and
the conditions of the subsidy have been met. Subsidies under the other schemes
have been granted but the conditions of the subsidy have not yet all been (fully) met.
The EIA amounts are gross numbers and are eligible for Energy Investment Allowance.
Along with the implementation of the subsidised project, the actual receipts depend
on the prescribed allocation table. For 2011, the maximum amount of subsidy received
was approximately 11% of the total invested amount.
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CO2, NOx and SO2 emission ratios per unit of electricity production1
G/kWh
503
499
Annual CO2 emission1/2
Ktonnes
463
463
12,500
1.00
10,000
8,969
0.75
0.329
0.344
0.25
0.090
0.082
0.094
0.302
2 010
201 1
2,500
0.089
0
0
2008
NOx
2 009
2010
20 11
2 008
SO2
1
2
2
8,124
5,000
0.328
1
8,199
7,500
0.50
CO2 2
9,202
The electricty production comprises the total production from renewable sources and
fossil fuels of energy production plants.
Relates to the CO2 emissions factor on the basis of the production fuel mix. At our power
plants in Velsen the residual gas released during the steel production of Tata Steel is
used as a fuel to produce electricity. In this way this blast furnace gas is put to good use
by Nuon. The gas contains a high percentage of CO2. With effect from 2006, it has been
agreed with the Office of Energy Regulation of the Netherlands Competition Authority
that Nuon is to adjust the CO2 emissions in the production fuel mix to avoid double
counting. The CO2 emission factor of blast furnace gas is calculated in this mix on the
basis of the use of natural gas.
2 009
From energy production.
At our power plants in Velsen, the residual gas released during the steel production of
Tata Steel is used as a fuel to produce electricity. In this way this blast furnace gas is put
to good use by Nuon. The gas contains a high percentage of CO2. With effect from 2006,
it has been agreed with the Office of Energy Regulation of the Netherlands Competition
Authority that Nuon is to adjust the CO2 emissions in the production fuel mix to avoid
double counting. The CO2 emission factor of blast furnace gas is calculated in this mix
on the basis of the use of natural gas.
CO2, NOx and SO2 emission per production site | RA-verified1
Buggenum
Diemen
IJmond2
Velsen2
Hemweg (Amsterdam)
Lage Weide & Merwedekanaal (Utrecht)
BMC Lelystad
AHP Purmerend
AHP Kanaleneiland (Utrecht)
AHP Nic. Beetsstraat (Utrecht)
AHP Nieuwegein
AHP Overvecht (Utrecht)
AHP Almere
CHP Purmerend
CHP Almere
CHP Industry park Emmtec
CHP Industry park De Kleef
CHP Industry park Sittard3
CHP Industry park Heerlen4
CHP Industry park Düren
CHP Industry park Heinsberg
Small-scale CHPs (various locations)
1The
CO2 emission (ktonnes)
2011
2010
896
1,007
521
668
419
520
1,517
1,367
2,792
2,367
951
1,084
–
–
8
24
–
1
1
6
2
3
–
2
4
6
NOx emission (tonnes)
2011
2010
182
416
334
1,088
496
803
24
4
–
–
1
–
1
122
294
179
133
–
–
31
9
246
288
96
299
204
131
–
–
12
3
355
8,124
8,199
4,449
128
364
178
141
–
3
31
10
173
500
414
997
588
1,055
25
15
1
6
2
2
2
SO2 emission (tonnes)
2011
2010
285
216
–
–
111
292
386
440
534
467
–
–
–
–
–
–
–
1
–
–
–
1
–
–
–
–
–
407
–
–
–
–
–
–
1
–
–
5,169
1,318
1,417
145
505
177
130
–
2
20
4
–
–
–
–
–
1
–
–
RA-verified relates to the data on CO2 emission.
our power plants Velsen and IJmond, the residual gas released during the steel production of Tata Steel is used as a fuel to produce electricity. In this way this blast furnace gas is put
to good use by Nuon. The gas contains a high percentage of CO2. With effect from 2006, it has been agreed with the Office of Energy Regulation of the Netherlands Competition Authority
that Nuon is to adjust the CO2 emissions in the production fuel mix to avoid double counting. The CO2 emission factor of blast furnace gas is calculated in this mix on the basis of the use
of natural gas.
3 CHP Industry Park Sittard was not operational in 2010 and 2011.
4CHP Industry Heerlen was sold in 2011. For comparative reasons the data of 2010 is displayed.
2At
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Annual NOx emission
49
Annual SO2 emission
Ktonnes
Ktonnes
7,500
2.0
6,000
1.6
5.19
5.34
1.42
5.17
4.45
4,500
1.42
1.32
1.2
3,000
0.8
1,500
0.4
0
1.33
0
2008
2009
2010
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Improved efficiency to lower NOx emissions
Emissions of nitrogen oxides (NOx), together with sulphur dioxide (SO2),
are the main causes of acidification, which results in damage to vegetation
in forests and lakes. Nitrogen oxides also cause eutrophication in forest
soils and on sea beds. Therefore, these emissions need to be reduced
and are subject to stringent regulations.
In 2011, Nuon again stayed within the permitted limits in grams per
GJ of fuel used. The company’s total NOx emissions decreased from
5.17 ktonnes in 2010 to 4.45 ktonnes in 2011. Levels were again lower
than the previous year, despite the fact that technical problems in the
IJmond plant meant part of its planned production had to be taken up
by the Velsen 24 plant. As this plant operates at a lower efficiency
than the IJmond plant, local NOx emissions consequently increased.
NOx emissions in the Buggenum plant increased, which is predominantly
caused by the increased share of biomass co-firing. Total average
NOx emissions per kWh in this plant were still well below the permitted
level. Nuon’s average level of NOx per kWh produced decreased from
0.344 g/kWh in 2010 to 0.302 g/kWh in 2011. Details on NOx emissions
per production site are included in the table on the previous page.
Lowering SO2 emissions by replacing coal with biomass
Combustion of coal and blast furnace gas causes sulphur dioxide (SO2)
emissions. Nuon emits SO2 in the Hemweg 8 and Buggenum coal-fired
power plants, and in the plants in Velsen and IJmond where blast
­furnace gases from Tata Steel are re-used as fuel. SO2 emissions can be
lowered in several ways, including using coal with low sulphur content,
replacing coal with biomass, cleaning flue gases and using more efficient
technologies for electricity production with coal. In line with the overall
strategy, Vattenfall has decided not to invest in new coal-fired production
units without the application of carbon capture and storage (CCS).
In 2011, Nuon made further progress in replacing part of the coal
inputs in the Hemweg and Buggenum plants with biomass.
Further details on co-firing with biomass are provided in the CSR chapter
­Security of Supply.
2 008
2 009
2 010
201 1
The Willem-Alexander plant in Buggenum uses coal gasification technology, which has much lower SO2 emissions than a regular coal combustion plant. All Nuon’s SO2-emitting plants are also equipped with catalysts and scrubbers to clean flue gases and lower the amount of SO2
emissions. The remaining SO2 emissions in the Buggenum and Hemweg
plant are re-used as much as possible by ­producing raw materials for
other industries. Details are included in the section Re-using waste from
energy production below.
Total SO2 emissions in 2011 decreased by 7% compared to the levels
of 2010, as can be seen in the chart above. The main reason for this
is the lower production levels. Details on SO2 emissions per production
site are included in the table on the previous page.
Emissions to water
Nuon’s power production plants require cooling water to absorb the
heat produced in generation processes. Most plants use surface water
for cooling purposes. The development of cooling water intake from
Nuon’s power production plants is shown in the graph on the next page.
The heated water is discharged into a nearby canal, river or lake. As this
water has a higher temperature than the surface water, this does have
an impact on the aquatic environment. Nuon aims to reduce this impact
by using the heat for industrial processes or district heating. In addition
to reducing water discharge, this can also generate an overall fuel saving
of up to 40%.
Further details on heat supply are included in the CSR chapter
Security of Supply.
The chart on the next page shows that the relative emissions of heat in
cooling water were again lower than the previous year, a decrease of
14%. The decrease is mainly due to lower electricity production levels.
The largest decrease in emissions of heat in cooling water occurred at
the plants in Buggenum and Diemen.
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50 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Discharge of heat with cooling water1
Cooling water intake energy production plants
Absolute emissions in PJ
TJ/GWh
100
3.5
3.5
3.1
80
Million m3/year
4
3,500
3
2,800
3.2
2,592
2,356
60
45.4
40
2
2,100
1
1,400
0
700
2,036
2,065
2 010
201 1
48.7
37.1
37.7
20
0
0
2008
2009
2010 2
20 11
2 008
2 009
2,354
1,202
479
1,017
2011
15,784
2,201
2,833
2,220
17,985
Relative per unit of production2
1
2
Exclusively relates to production of energy production plants that discharge heat.
Due to a correction, the data concerning relative per unit of production for 2010
differ from those reported in the 2010 Nuon CSR Report.
Waste flow
tonnes
Energy production locations1
Non-Hazardous waste
Hazardous waste2
2011
8,846
60
Total
1At
2In
2010
8,906
Other locations
2009
2010
2009
4,093
4,341
61
82
4,154
4,423
power plants, office waste is processed with industrial waste.
2011 the number of items of equipment containing PCB was zero.
Industrial and office waste
Residues from power stations for re-use
The construction of new production plants has had a strong impact on
the amount of hazardous and non-hazardous waste, as is shown in the
table above. The main reason for the increase in hazardous waste in this
case is waste water from the sceptic tanks used for toilets and showers
on the construction sites. The amount of hazardous waste at our existing
energy production locations reduced sharply.
Ktonnes
Re-using waste from energy production
Capturing SO2 for raw material production is an important way of
­lowering SO2 emissions in our coal-fired power plants. The main change
in the production of residual substances compared to 2010 occurred
at the Hemweg 8 location, where the production of gypsum and fly ash
increased by 34% and 30% respectively. Longer operating hours and a
higher sulphur content of coal were the main reasons for this increase.
300
240
221
3
230
59
180
3
183
61
153
43
120
38
2
45
2
45
35
26
60
116
128
101
80
0
2 008
Fly ash
Plaster
Bottom ash/slag
Sulphur
2 009
2 010
201 1
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Learning from complaints and incidents
Complaints
This section reports on complaints and incidents in the direct vicinity
of our energy production units. Customer complaints relating to energy
sales or other activities are reported on in CSR chapters Affordability of
energy and Together.
A total of 17 complaints from residents in the vicinity of company sites
were registered in 2011. This is much lower than the peak observed
in 2010, which was mainly caused by a discharge of rust in Velsen.
­Following this incident, technical cleaning measures were taken during
maintenance at both the Velsen 24 and Velsen 25 plants. The measures
were successful and no discharge of rust occurred in 2011.
Complaints received from local residents of company sites
Number
2,346 1
5
51
In February 2011, Nuon paid three fines of € 2,500 each, following
an underestimation in 2010 of the CO2 and NOX emissions in three
­production units. No further fines were issued for environmental
­incidents in 2011.
More information about incidents and safety management is reported
in CSR chapter Health and Safety.
Reducing the carbon footprint of our company
and our clients
As a supplier and producer of the basic necessity that is energy,
Nuon believes that the reduction of carbon emissions should not limit
itself to a cleaner production portfolio. Nuon also takes steps to reduce
the carbon footprint of its own activities and helps its clients to reduce
theirs. More information on how Nuon works together to create
­sustainable solutions for its customers can be found in the CSR chapters
Affordability of energy and Together.
100
75
2,338
50
47
28
25
1
1
2
7
11
0
2008
Noise
Rust
Odour
Light
17
10
9
2009
2
2010
20 11
1
6
4
6
Other
Incidents
At the Hemweg 8 power plant, a high-voltage electricity cable
­spontaneously ignited. The fire that followed destroyed a total of
six cables and caused the plant to be disconnected from the grid.
In close cooperation with Tennet, Liander and material suppliers,
the company was able to reconnect the plant one month later.
In June 2011, lightning struck one of the blades of Nuon’s offshore
wind park in Egmond aan Zee. The blade was replaced and experts
are discussing with the supplier about whether the lightning discharge
from the blades can be further improved.
In 2011, Nuon recorded a total of 93 environmental incidents. This
sharp increase is a result of a further strengthening of the registration
policy at the Emmtec Industry Park where each incident, no matter how
small, is registered. This led to an increase from two incidents reported
in 2010 to 67 incidents in 2011. All incidents are registered in Nuon’s
internal incident registration system and, where required, also reported
to the competent authorities.
In 2011, Nuon significantly expanded the use of videoconferencing,
which is an important way of limiting travel at an international
­company. In 2011, a total of 10 videoconferencing systems were added
in the Netherlands, in addition to the 14 systems previously installed
and the video-conferencing systems installed on individual computers.
The systems were used for a total of 7,208 hours in 2011 (compared to
a total of 568 hours in November and December 2010).
To offset the CO2 emissions resulting from the company’s travel activities,
Nuon voluntarily retires certified emission reduction units. In 2011, this
was carried out for all Vattenfall business units. As a result, a total of
40,400 certified emission reduction units were retired originating from
a biomass-based power project in India, mainly fired with crop residues.
In December 2011, this received some press attention as the Dutch
­Environment Ministry and the Dutch emission authority made a public
statement labelling this voluntary retiring as ‘best practice’.
On a local scale, Nuon also initiates and participates in business-led
­initiatives aimed at improving the sustainability of a city or a region.
For instance, Nuon is one of the founding partners of the Green Business
Club, which promotes and initiates projects aimed at enhancing
the ­sustainability of Amsterdam’s Zuidas business district. Nuon has
­pioneered the extraction and distribution of sustainable district cooling
in this district.
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52 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
CO2 footprint Nuon1
ktonnes CO2
CO2-equivalent emission
2011
2010
8,199
Travel and transportation3
8,124
11
21
Total
8,156
8,228
Electricity and heat production
Office buildings Nuon sites2
8
21
1Composition
2Energy
based on the Greenhouse Gas Protocol (a Corporate Accounting and Reporting Standard (2004)); excluding emissions as a result of supply to end users.
consumptions as far as can be determined are based on meter readings, invoices, annual statement of landlords and service charges.
commuter travel by private car.
3Excluding
Our energy supply fuel mix
sourced from natural gas, as is the case in the Netherlands. The share
In line with European legislation, all electricity suppliers in the EU are
required to publish the fuel mix of their electricity supply. Policymakers
regard this fuel mix disclosure as a means for customers to compare
the supply portfolio of different electricity suppliers and the associated
environmental impact. Nuon is a net supplier, which means that the
company supplies more electricity to its customers than it produces.
Therefore, the Nuon supply mix is predominantly the representation
of the average electricity mix in the Netherlands. The figure below
shows Nuon’s supply mix. This illustrates that the majority of supply is
of renewable electricity represents the number of Guarantees of origin
purchased for green electricity supplies to end customers. This share
showed a small increase to 28.3% for Nuon household and business
­customers in the Netherlands. The share of green electricity purchased
by our household customers remained at the same level, the share for
business customers decreased slightly.
Share of customers with green electricity of total consumer/small
business customers the Netherlands
Fuel mix supply Retail | RA-verified
More information on green power sales to customers and Nuon’s fuel mix
of energy production can be found in the Report of the Management Board.
%
%
85.4%
Fossil-based electricity
14.6%
Nuon NatuurStroom,
Nuon GroenStroom
and Nuon CO2 OK
55.8%
Natural gas
21.5%
Coal
7.3%
Wind
5.5%
Miscellaneous
5.3%
Nuclear
4.6%
Hydro
0.0%
Biomass
0.0%
Solar
88.1%
Fossil-based energy
11.9%
Renewable energy
395.1 g/kWh
CO2 emission rate
0.00016 g/kWh
Radioactive waste rate
Fuel mix supply Nuon Group1
Fuel mix supply Business | RA-verified
| RA-verified
%
%
49.6%
Natural gas
53.0%
Natural gas
19.1%
Coal
20.4%
Coal
15.1%
Hydro
14.7%
Hydro
4.9%
Miscellaneous
5.2%
Miscellaneous
4.7%
Nuclear
5.0%
Nuclear
4.0%
Wind
1.2%
Wind
2.6%
Biomass
0.5%
Biomass
0.0%
Solar
0.0%
Solar
Fossil-based energy
78.2%
Fossil-based energy
Renewable energy
21.8%
Renewable energy
CO2 emission rate
Radioactive waste rate
1
350.6 g/kWh
0.00014 g/kWh
These data include Belgium, whose fuel mix is based for more than 50% on renewables.
CO2 emission rate
Radioactive waste rate
83.6%
16.4%
375.1 g/kWh
0.00015 g/kWh
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Together
53
Together
Nuon aims to create solutions in active collaboration and dialogue with its stakeholders.
To enable an open dialogue, Nuon strives to be as transparent as possible in its reports
and interactions with the society it operates in. CSR reporting is one of various instruments
used to inform and interact with our stakeholders. Our main activities relating to interactions
with our stakeholders are summarised on the next pages.
Together with our shareholders
Step2Save
Nuon, part of Vattenfall
Step2Save is a Nuon initiative through which young unemployed
­individuals are trained and qualified as energy advisors. They offer free
energy-saving advice to tenants of participating housing corporations
and municipalities. Participants are offered a one-year contract as
­door-to-door energy advisors, as well as vocational training once a week,
which leads to a certificate to help them find work in the future. Following
a number of successful series in Amsterdam (in 2007, 2008 and 2010),
the programme was conducted in Groningen over the course of 2011.
A total of 7,383 homeowners and tenants received a visit from a
­Step2Save advisor and were given an energy-saving box. In March 2011,
the Labour Party on the Amsterdam City Council submitted a proposal
to the city’s administrators asking for the project to be continued in
Amsterdam. In their proposal, they referred to Step2Save as the kind
of ‘social coalition that brings parties together and strengthens the city’.
Nuon has also been exploring a further roll-out of the programme
with the municipalities of Schagen Zijpe and Harenkarspel in the
north-west of the Netherlands. This started in March 2012 and aims
to ­provide energy advice to 8,000 households.
Being part of Vattenfall also broadens the scope for this dialogue, allowing
Nuon to reflect on experiences gained in other core countries and markets.
As part of Vattenfall, Nuon has been able to introduce several new
­activities and services to its operations in the Netherlands. Examples are
the Sustainable Cities programme, new features in the Nuon E-mobility
activities, new sponsoring opportunities and access to large scale R&D
programmes. Similarly, Nuon best practices are used in Vattenfall’s other
core countries. These include the Nuon E-Manager and the stakeholder
engagement programme for project development.
Working with our Dutch shareholders
The developments in the governance structure have brought about a
shift in our relationship with our public Dutch shareholders to one
based on a partnership. Now, with crucial issues such as climate change,
security of supply, employment and the cost of energy intrinsically linked,
Nuon and its Dutch shareholders can work together to bring about the
necessary changes. To maintain a strong relationship, in addition to
the official shareholders meetings, we have frequent discussions with
representatives from the shareholders in the Sounding Board Group
(‘Klankbordgroep’). ­During these discussions, we exchange information
and ideas on strategic choices and policy developments. We also organise
working visits to ­several parts of our operations to create a better under­
standing of the dilemmas related to energy production and supply.
Our ultimate shareholders
%
64%
Vattenfall AB
16%
Gelderland
5%
Friesland
3%
Noord-Holland
3%
Amsterdam
9%
Other
Nuon works with its Dutch shareholders in several areas. This is illustrated
by the number of cooperative ventures Nuon has in place with municipal
social services to provide assistance to its customers with payment
­problems. Furthermore, the development of new services such as electric
transport, the energy-saving programme Step2Save, Step2­Work and
the Vattenfall ‘sustainable cities’ initiatives are excellent examples
of how our activities depend on cooperation with our shareholders.
E-mobility
Vattenfall is working on the development of electric transportation
­solutions in Berlin and Hamburg and Nuon does the same in Amsterdam.
In March 2011, Nuon and Amsterdam launched the 100th public
charging station for electric transport, making the Amsterdam network
of charging stations one of the largest in Europe. Nuon expects other
large municipalities to follow, matching the demand from the growing
population of electric car drivers in the Netherlands. The market for
electric vehicles requires thorough preparation, not only in terms of
infrastructure, but also legislation. Nuon maintains an active dialogue
with the relevant regulatory authorities, providing them with feedback
on our company’s experiences in the field.
In 2011, Nuon developed additional services for electric drivers such
as the creation of an online platform www.nuon.nl/ev. This platform
allows users to create and manage their account as well as submit a
request for a new charging station in their area. The platform also helps
electric vehicle drivers to find the closest charging station in Amsterdam.
Nuon plans to launch individual electric transportation solutions for
our household and business customers. This development will include
the installation and servicing of a safe and easy-to-use charge box,
accompanied by an underlying supply contract for green electricity.
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Nuon in interaction with stakeholders 2011
Stakeholder
Form
Highlights 2011
General
Annual Stakeholder Round Table event
See CSR – Together
New Year’s Concert
Nuon hosted an event for approximately 1,500 business
relations and stakeholders of the company
Issue and reputation survey among parliamentarians, civil servants
and NGOs
For the first time, Nuon took part in Vattenfall's annual
Reputation Monitor amongst opinion leaders and came in
at a very strong position, both absolute and relative to the
other Vattenfall countries. These surveys help us focus on
what's needed to improve our relations with our stakeholders
Stakeholder engagement approach
Nuon has implemented a structured stakeholder engagement
approach to support employees in proactive stakeholder
dialogue. See CSR – Together
Customers
Business partners
■■
Customer satisfaction surveys
■■
Klantenman
■■
Customer panels
■■
Continuous monitoring of service experiences via, for example, service calls
■■
Seasonal customer magazine
■■
Energy Masterclass at Nyenrode Business University
■■
■■
Employees
Shareholders
Linked-in Energy in debate group and internet site
www.nuon.nl/grootzakelijk/acties/energie-in-debat
E-Book ‘The Future of Energy’
Nuon hosted the conference ‘Energy in debate’ in
cooperation with RTL Z and Nyenrode in September 2011.
Key opinion influencers and topmanagement were invited
to debate the question about the Energy Transition.
Parallel to the event, online platforms were launched
to discuss current energy issues with interested parties,
business partners and opinion influencers
Green Business Club
See CSR – Together
Stichting Spaar Het Klimaat (Save the energy foundation)
Nuon is founding partner of the foundation to stimulate
energy savings among customers
Market reports
See CSR – Affordability of Energy
Consultative meeting with Central Works Council
See Corporate Governance
Employees networks: MegaWatt (Young People’s Network), Winergy
(Women’s Network), Nuon employees association and the Trainee
Network (KNEC)
Nuon supports these networks with the aim of encouraging
active participation of employees in the company
Nuon Foundation
See: CSR – Together
Intranet
In 2011 the Vattenfall intranet was introduced into the Nuon
organisation. The Vattenfall intranet has several features
whereby employees can voice their opinion about internal
announcements and news
General Meeting of Shareholders (1x a year)
See Corporate Governance
Major shareholders meetings (2x a year)
Politicians &
civil servants
The launch of ‘Every Customer Matters’ in 2011 stands for a
customer-focused organisation, where customers consistently
experience excellent service. See CSR – Together
■■
Sounding board group
■■
Operational experiences
■■
Digital newsletter (Nuon Issues)
See Corporate Governance
Nuon consults and updates representatives of our major
shareholders year-round on issues and decisions in the form
of a focus group, newsletters and meetings. As we do each
year, in 2011 we organised visits and operational workshops
to engage our shareholders in our operations. This year
our shareholders could choose between visiting the district
cooling plant in Amsterdam, several Step2Work programmes
and a wind farm
Working visits
In 2011, several Members of Parliament were, for instance,
invited to be present during an energy savings advice session
at a customer’s home
Regular contact and (bilateral) meetings
The energy markets are heavily regulated. Regular contact
with national, regional and local organisations are part of our
day-to-day operations
NGOs
Regular meetings
Nuon has regular contact with NGOs active in
the energy market to discuss current developments
and energy transition measures
Local community
Complaints handling
See CSR – Together
Newsletters and community meetings
See CSR – Together
Step2Save & Step2Work
See CSR – Together
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Sustainable cities
Customer satisfaction the Netherlands
It is expected that within ten years, 75% of the world’s population will
live in or around a city, thus rapidly making urban areas the new main
consumers of energy. Cities strive to minimise their impact on the climate,
but energy systems can be a complex puzzle to solve, and planning takes
years. Vattenfall developed the Sustainable Cities programme, contributing
a unique system integration perspective, connecting existing products
and providing energy demand monitoring. There are currently three
­cities participating in the programme: Uppsala (Sweden), Berlin and
­Hamburg (Germany). Nuon is currently in discussions with Amsterdam
to establish the first sustainable city partnership in the Netherlands.
%
100
89
93.5
88
91.5
89
94.5
55
95
88
80
60
40
20
0
2 008
Every customer matters
Creating excellent service together
To strengthen the further integration with Vattenfall and strive for the
same level of customer service, the management team of Vattenfall’s
Customer Service business unit has developed a joint vision encompassing
all three countries of customer operations (Sweden, Germany and
the Netherlands). This vision, referred to as ‘Every Customer Matters’,
stands for a customer-focused organisation, with customers consistently
experiencing excellent service.
The joint mission of Nuon and Vattenfall for the coming years is to make
sure that everyone in the Customer Service business unit is able to deliver
on this overall objective, whether involving technological or management
support. This vision will guide our companies in the implementation of
their largest programme for 2012/2013: WOW (way of working), in which
each of the Vattenfall core countries will implement the best practices
from the other two countries. In the Netherlands, it means that Nuon
will take the extra step towards a multi-skilled Customer Service Center,
including implementing the IT improvements that will enable this step.
In 2011, Nuon was certified according to the standards of the COPC, the
leading international organisation that defines standards for Customer
Services according to a benchmark of the best 200 performing contact
centres in the world. The COPC certificate was officially granted to
Nuon on 10 March 2011 for three areas of our customer service. These
areas applied for this annual certificate to be renewed in the first quarter
of 2012. At the same time, the Customer Service Center has also applied
for certification for the rest of its processes, including all activities for both
business customers as consumers. On 10 March 2012, this has resulted
in the COPC certificate for the entire Customer Service organisation.
Customer service satisfaction is a key indicator for Nuon’s sales operations.
Overall customer satisfaction remains high at 88% in 2011. Customer
service satisfaction, showing the average satisfaction amongst customers
with the services provided by Nuon increased slightly to 95%. Customer
satisfaction among business customers increased from 64% in December
2010 to 65% in 2011. Despite the economic climate, Nuon is proud of
the further professionalisation of the services it delivers to its business
customers. In both the household and business segments, a sharp
decrease has been identified in the number of customers ­dissatisfied
(from 4.4% to 3.2% and from 4.6% to 2.6%, respectively).
Customer satisfaction in general1
1
2
2 009
201 1
2 010
Customer service satisfaction2
Customer satisfaction in general is defined as the percentage of surveyed customers
who indicated that they are satisfied/very satisfied with Nuon.
Customer service satisfaction is defined as the percentage of surveyed customers
who indicated that they are satisfied/very satisfied with Nuon's services.
The company’s improvements in customer service were confirmed by an
external customer satisfaction survey conducted by the Dutch Ministry
of Economic Affairs, Agriculture and Innovation in 2011, in which
Nuon scored significantly better in two key areas at 92% (listening to our
­customers and providing the right answers/solutions). Nuon received
a total score of 7.5 out of 10, which corresponds with the average score
within the energy sector. This survey was conducted among 100,000
panel participants who took part in a mystery calling research project.
The energy sector as a whole received positive reviews from consumers
in this survey. Moving forward, Nuon will integrate the areas for
improvement into its overall plans and become an even better service
company for its customers.
Complaints
Complaints received from consumer/small business customers
the Netherlands
Number
100
83
80
60
58
40
20
2
0
Received
by
Klantenman1
1
2
Brought
before the
‘Geschillencommissie’2
Customers been
put in the right by
the ‘Geschillencommissie’2
The Klantenman is a person appointed by Nuon to deal with complaints and operates
independently of Nuon, but Nuon pays this salary and other expenses.
The Energy and Water Disputes Committee is an independent national committee.
Cases are only put to the Committee if both the customer and Nuon agree to this.
The Disputes Committee is an alternative to court proceedings.
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When customers feel that their complaint has not been adequately
addressed, they have the option of either taking it up with the appointed
Ombudsman or referring their complaint to the Dispute Committee.
The Ombudsman assesses the responses to complaints independent of
the Customer Service Center. The Dispute Committee is an independent
organisation that is not affiliated with Nuon. Contrary to the verdict
of the Ombudsman, the verdict of the Dispute Committee is binding
for both Nuon and the customer. In 2011, 126 complaints were handled
by the ombudsman and 83 dealt with by the Dispute Committee,
two of which were ruled in favour of the customer. Where applicable,
Nuon uses this feedback to structurally improve its processes. Customer
satisfaction with the company’s approach to resolving their complaints
continued to improve and the number of complaints decreased by more
than 30% between 2010 and 2011.
Continuous attention to sales channels
In early 2011, the Dutch competition authority NMa launched an
­investigation at Nuon and grid company Liander N.V. into Nuon’s
access to competition-sensitive customer data held by the grid company.
In September, Nuon received a report from the NMa stating that both
Customer Service Centre and Nuon had violated the law. The outcome
of the hearing was still pending at the time of writing. Given that Liander
and Nuon Customer Services need to access a portion of each other’s
data in preparation for the new market model, there are measures
and procedures in place to safeguard the confidentiality of such data.
The regulator for the communication markets (OPTA) imposed a fine
of € 70,000 on Nuon for violating the rules on telemarketing, as
Nuon had contacted 15,000 customers at the end of 2009 who were
on the ‘don’t call me’ list for telesales. We have accepted the ruling
and associated penalty and will not be appealing against the verdict.
Selling energy and energy-related services forms the core of Nuon’s
business and is also the company’s first contact with its customers.
It is crucial that the company gets this contact right. Unfortunately,
there continue to be isolated incidents when this initial contact does
not go as planned. Nuon continuously controls the quality of its sales
channels, ending contractual relationships with employees or third
­parties involved in malpractice.
At the end of 2011, Nuon was informed by Dutch Consumer Association
‘Consumentenbond’ that the contract Nuon outsourced for door-to-door
sales did not follow the legal procedures. In light of their request, the
company therefore amended the wording of its contracts as of 1 December.
Together with our stakeholders
Vattenfall is building a corporate culture which promotes an open
and constructive relationship with all parties within our markets and
community. Nuon believes in an active dialogue with interest groups and
environmental organisations, as well as with its customers, employees
and shareholders. Nuon is also in active dialogue with local and central
governments, providing feedback to policymakers about the company’s
experiences and sharing its new initiatives and ideas. By doing so, Nuon
strives to provide transparency to its stakeholders and to nurture strong
community involvement among employees. Nuon is convinced that
involving stakeholders in the company’s activities leads to practical
­solutions that enjoy a broad base of support and are more sustainable.
Stakeholder engagement as a prerequisite
for project development
Nuon maintains relationships on various levels with our clients, employees,
shareholders, as well as politicians, non-governmental organisations
(NGOs) and the local environment. This is a continuous process, which
is structured around three axes: stakeholder involvement in project
management, improved communication and transparency, and dialogue
with policymakers. An example of how Nuon works with its stakeholders
was the announcement in 2011 of the company’s decision to postpone
its plans for the gasification of biomass and coal at the Nuon Magnum
power plant in the Eemshaven. Aside from economic considerations,
this decision was the result of a long-running constructive dialogue with
nature and environmental organisations, as well as other local interest
groups. Nuon had been in discussion with these parties for some time,
which resulted in an agreement ratified by all involved, making this a
unique document.
Vattenfall and Nuon strive to make this type of stakeholder dialogue
a systematic practice in their development activities. The Stakeholder
Engagement manual and toolbox for project managers has been rolled
out throughout the organisation in the Netherlands. Vattenfall aims
to introduce this approach throughout its European organisation.
In June 2011, Nuon organised another roundtable session for high-level
stakeholders following the positive feedback received in 2010. These
roundtable events give the company the opportunity to listen to its
stakeholders and hear what they think of the company’s activities as well
as how they view the different topics of the so-called energy triangle.
Other topics discussed included the need for a skilled workforce to ensure
the continuity of the energy sector.
As part of stakeholder dialogue, the Nuon e-magazine ‘Nuon and Society’
(www.nuonemagazine.com) was launched on 1 May 2011. This electronic magazine is a new way of presenting the company’s involvement
with society at large. Nuon also publishes newsletters for residents and
businesses located in the vicinity of its production plants. Furthermore,
Nuon’s striving for transparency led to its annual report coming seventh
in the Dutch government’s Transparency Benchmark for 2010. Nuon’s
annual report won first place in the category Energy, Oil and Gas.
­Following suggestions from the Benchmark committee, this year Nuon
has increased the amount of information provided on the coal supply
chain, incidents and the dialogue with its stakeholders in its report.
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Workforce by employment contract1
Change in personnel in the Netherlands1
Number
%
100%
30%
1,621
1,066
80%
937
1,069
973
932
565
415
20%
60%
5,541
7%
5,447
5,640
-10%
20%
-11%
-12%
2 008
2 009
-8%
-10%
-20%
0%
2008
2009
Nuon staff permanent contract
Nuon staff temporary contract
20 11
2010
Contracted staff
Inflow
1
201 1
2 010
Outflow
Relates to employees, excluding contracted staff.
Relates to total number of employees in the Netherlands and Germany.
Workforce broken down by employment type1/2
Diversity by age¹
Number
% employees
100
100%
1,845
80%
1,959
1,727
1,832
13
15
18
23
23
24
24
26
26
26
27
31
32
30
28
60
5,135
40%
5,585
5,067
5,346
40
20
20%
0%
7
0
2008
Full-time
13
80
60%
2
8%
0%
5,498
1
13%
12%
10%
40%
1
57
2009
2010
2 008
2011
<25 year
26-35 year
Part-time
Relates to the total number of employees, including contracted staff.
Due to disinvestment of Belgium, workforce in 2011 does not include Belgium.
1
36-45 year
46-55 year
6
2 009
3
5
2 010
201 1
>56 year
Relates to total number of employees excluding contracted staff.
Working together
Positioning Nuon as an employer
A workforce with an array of backgrounds and experiences is more
­creative and willing to adapt to new input, different views, and ways of
working, providing the business with a number of tangible advantages.
The company’s workforce should reflect the societies in which it operates
with regard to gender, age and ethnic/cultural background. Vattenfall
aims to increase the number of female managers to achieve a more
­balanced ratio within the organisation. To ensure continuity of our
­operations going forward, the company also encourages young potentials
to develop technical and leadership expertise.
In order to attract new talent to the company, Nuon dedicated time
and effort in 2011 to branding Nuon as an attractive employer. This was
done through a number of campaigns on university campuses as well
as advertisements on Dutch radio. In all radio commercials for Nuon’s
products and services, the company has also taken the opportunity to
reflect on how it communicates as a potential employer. This has led
to a significant increase in the number of applicants for jobs with Nuon.
The majority of Nuon’s workforce are located in the Netherlands (98%),
the remaining 2% of the Nuon workforce is located at the industry parks
in Germany (Heinsberg and Düren).
In the graphs on this page the number of Nuon employees and of
­contracted staff at year-end 2011 are shown. The corresponding FTE
numbers are 5,490 for Nuon employees and 843 for contracted staff.
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Traineeship
Nuon welcomed 28 new trainees in 2011. They followed a one-year
­programme either as management trainees or as participants in one of
the specialist traineeship programmes Nuon offers in the area of energy
markets, engineering, finance and IT. While the number of trainees
hired remained constant, Nuon is pleasantly surprised to see that
the number of candidates had increased significantly, to over 1,000
­candidates in 2011. In addition, three Nuon employees were put forward
to participate in the Vattenfall international traineeship. And in 2012,
Nuon and Vattenfall will work together to create business programmes
in each business division. In 2011, Nuon offered a record number of
internships to college and university students.
Budding technicians
Nuon continued its cooperation agreements with foundations such as
Stichting Leer werken in de Techniek, in cooperation with the NOVA
­college in Noord-Holland. Alongside other industrial partners, Nuon
offers students internships in mechanical engineering, electrical
­engineering and general operating technology. At the end of the
­programme, which is financed by the foundation, students receive
an employment guarantee with one of the participating companies.
The same principle applies in the Groningen region, where Nuon works
together with the Noorderpoort College in Delfzijl, Groningen and
­Stadskanaal to meet the expected recruitment needs for its Nuon Magnum
power plant. In 2011, the first graduate from this programme successfully
applied for a job with Nuon. A total of 145 students completed a technical
internship at Nuon, compared to 123 in the previous year.
structural partnership. The number of participants and the monetary
contribution made by Nuon via the Noun Foundation was approximately
the same as that for 2010. In 2012, Nuon expects, alongside its existing
partnerships, to seek more interaction with its large business customers
in organising joint events.
In addition to encouraging its employees, Nuon is engaged in several
social initiatives. This is illustrated by the following examples.
Children’s Advisory Board
This innovative initiative was introduced by the Missing Chapter
­Foundation (MCF). The concept of the Children’s Advisory Board
involves a series of dialogue sessions between children and board
­members from ten Dutch companies. The Children’s Advisory Board
inspires, advises and confronts top management and the rest of
the organisation with a variety of topics which are relevant in the
­inter­action between the company in question and society at large.
Nuon is a founding partner of the Missing Chapter Foundation.
Plantronics awards
For the third year in a row, Nuon Customer Services won the Plantronics
Telesales Team award by collecting a record amount in donations
together with call centre Cendris for the Ronald McDonald Children’s
Charity (Kinderfonds). The Ronald McDonald Children’s Charity is a
foundation that offers local housing to families of terminally ill children
hospitalised away from home. The total amount collected by the Nuon/
Cendris team was € 119,389.
Work experience programmes
FRES
With 37 placements in 2011, the number of participants in Nuon’s work
experience programme increased compared to 32 in 2010. Twenty of
the new Step2Work participants had learning or physical disabilities
(and were therefore receiving the so-called Wajong welfare benefits).
In 2011, 60% of participants in the programme who completed their
­training found jobs afterwards. For the Step2Work programme, Nuon has
reached agreements with its municipality partners: Amsterdam, Arnhem,
Leiden and Leeuwarden. The terms and form of these partnerships could
serve as a basis for the roll-out of the work experience programme in other
municipalities. In October, Nuon received a visit from a delegation of some
30 Swedish municipalities, who were shown the approach and programme
aimed at attracting individuals back to the employment market.
A study conducted by the municipality of Amsterdam in 2011
­concluded that 70% of Step2Work participants were still employed
two years after the programme ended. This is considered a very high
and encouraging ­percentage.
FRES, a non-profit organisation was set up by Nuon in 2004. FRES
(Foundation Rural Energy Services) increases rural electrification in
developing countries by setting up small-scale utilities in areas not
­connected to the national electricity grid. Currently there are five FRES
companies in Africa. In 2011 FRES served over 16,000 households
and SMEs with light and electricity in rural areas in South Africa, Mali,
Burkina Faso, and Uganda. In Guinea-Bissau, the first customers will
be welcomed in 2012. FRES Netherlands provides the expertise and
investments needed for the FRES businesses to start up and grow.
Socially engaged
Nuon fosters social engagement among its employees and the employees
are supported in their social initiatives and volunteer work, either as part
of a team activity or individually. The Nuon Foundation was initiated by
the company as a platform for employees to appeal to their colleagues
for assistance with their social projects as well as to Nuon for financial
sponsoring of their activities. In 2011, Nuon moved towards supporting
more team-oriented activities. For example, 100 employees participated
in one of the activity days organised by the Opkikker Foundation for sick
children and their families. The Foundation and Nuon have entered a
Promoting cultural diversity
Nuon further supports a number of initiatives such as the Giving Back
Foundation, a professional organisation which encourages and enables
talented scholars and students from different cultural backgrounds to
fully exploit their talents. Coaches from Nuon and other companies help
them to develop their leadership skills. In the longer term, participants
in the programme can apply to join our workforce. In 2011, eight Nuon
coaches started their ‘giving back’ activities. The intention for 2011
was to increase the company’s participation to 15 coaches. Nuon also
supports the activities of the Moroccan Dutch Leadership Institute
(MDLI), an organisation which believes in the power of the MoroccanDutch community and is geared towards creating and mobilising an
independent Moroccan-Dutch spearhead. Through its partnership
with the MDLI, Nuon contributes to the development of such talent.
More information on the company’s sponsoring activities can be found
in Report of the Management Board.
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Assurance report
To: the Management Board of N.V. Nuon Energy
Report on the
Corporate Social Responsibility Report
Engagement and responsibilities
We have examined the Corporate Social Responsibility Reporting Activities
for the year 2011 (hereafter: ‘the CSR Report’) of N.V. Nuon Energy,
Amsterdam, as presented in Nuon at a glance, Profile, page 1 to 11,
(up to Financial overview and analysis), page 16, 17 and the section
­‘Corporate Social Responsibility’, in which the company renders account
of its performance related to sustainability in 2011.
Combination of audit and review procedures
Our examination consisted of the following combination of audit and
review procedures:
■■ Audit of data and graphs as included in the CSR Report and labelled
as ‘RA-verified’:
■■ The fuel mix of electricity supplied/produced;
■■ The renewable production capacity and production by source;
■■ The CO2 emission per production site;
■■ The installed capacity and production of energy production plants;
■■ The investments in renewable energy capacity;
■■ The subsidies.
■■ Review of all the other elements included in the CSR Report.
Audit procedures focus on obtaining reasonable assurance, substantiated
by sufficient and appropriate supporting audit evidence. Review
­procedures focus on obtaining limited assurance which does not require
exhaustive gathering of evidence, therefore providing less assurance
than audit procedures. Consequently, we report our conclusions with
respect to the audit and review procedures separately. We believe these
combined procedures fulfill a rational objective.
We do not provide any assurance on the assumptions and feasibility
of prospective information, such as targets, expectations and ambitions,
included in the CSR Report.
The Management Board of N.V. Nuon Energy is responsible for the
­preparation of the CSR Report. Our responsibility is to provide an
­assurance report on the CSR Report.
Audit procedures
With regard to the audited data, among other things, we have gathered
audit evidence as follows:
■■ Testing the design, existence and the effectiveness of the relevant
internal control measures during the reporting period;
■■ Analytical review, relation checks and detailed checks.
Review procedures
Our most important review procedures were:
■■ Performing an external environment analysis and obtaining insight
into the industry, relevant social issues, relevant laws and regulations
and the characteristics of the organisation;
■■ Assessing the acceptability of the reporting policies and consistent
application of this, such as assessment of the outcomes of the
­stakeholder dialogue and the reasonableness of estimates made
by management, as well as evaluating the overall presentation
of the CSR Report;
■■ Reviewing the systems and processes for data gathering, internal
­controls and processing of other information, such as the aggregation
process of data to the information as presented in the CSR Report;
■■ Reviewing internal and external documentation to determine whether
the information in the CSR Report is substantiated adequately;
■■ Assessing the application level according to the G3 Guidelines of GRI.
We believe that the evidence obtained from our examination is
­sufficient and appropriate to provide a basis for our conclusion.
Conclusion
Based on our audit procedures
In our opinion the data and graphs, as included in the CSR Report
and labelled ‘RA-verified’, as set out in our audit procedures, are in
all material respects presented reliably and adequately, in accordance
with the N.V. Nuon Energy reporting criteria.
Based on our review procedures
With respect to the other elements of the CSR Report, based on our
review procedures performed, nothing has come to our attention that
would cause us to conclude that the CSR Report, in all material respects,
does not provide a reliable and adequate presentation of the policy
of N.V. Nuon Energy on sustainability, or of the activities, events and
performance of the organisation relating to sustainability during the
reporting year, in accordance with the N.V. Nuon Energy reporting criteria.
Reporting criteria
N.V. Nuon Energy developed its reporting criteria on the basis of the
G3 Guidelines of the Global Reporting Initiative (GRI) as published
in October 2006, as set out in About this report. We consider the
reporting criteria to be relevant and sufficient for our examination.
Scope and work performed
We planned and performed our work in accordance with Dutch law,
including Standard 3410N ‘Assurance engagements relating to
­sustainability reports’.
Amsterdam, 17 April 2012
PricewaterhouseCoopers Accountants N.V.
Original has been signed by
Drs. J. van Hoof RA
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60 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
GRI statement
Nuon’s corporate social responsibility reporting for 2011 has the
GRI A+ status. The ‘GRI Standard Disclosure and Indicators Table’
­references ­disclosures by report sections and also provides additional
­information on specific GRI indicators.
For further information on GRI G3 guidelines and indicators please
refer to the GRI website (www.globalreporting.org).
The Nuon GRI table of contents 2011 is ­provided as an independent
download to the Annual Report 2011 on the corporate website:
www.nuon.com/reporting.
Co rp o ra te S ocial
Res p on s ib ility
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Financial statements 2011
Consolidated financial statements Consolidated statement of financial position
Consolidated statement of comprehensive income
Consolidated cash flow statement
Consolidated statement of changes in shareholders’ equity
62
64
65
66
Notes to the
consolidated financial statements
General information
Summary of significant accounting policies
1 Property, plant and equipment
2 Intangible assets
3 Investments in associates and joint ventures
4 Other financial assets
5 Derivatives
6 Inventories
7 Trade and other receivables
8 Cash and cash equivalents
9 Shareholders’ equity
10
Interest-bearing debt
11 Deferred income
12 Provisions for employee benefits
13 Other provisions
14 Deferred taxation
15 Trade and other payables
16 Leases
17 Contingent assets and liabilities
18 Net turnover from sales of goods and delivery of services
19 Other operating income
67
67
78
80
81
82
82
83
83
84
84
85
86
86
88
89
90
90
92
92
93
20
21
22
23
24
25
26
27
28
29
Cost of energy, raw materials and supplies
Cost of sub-contracted work Employee compensation and benefit expenses Other operating expenses
Financial income
Financial expenses
Taxation
Licences
Related parties
Information on risks and financial instruments
93
93
93
94
94
95
95
95
96
97
Company financial statements
Company balance sheet
Company income statement
112
113
Notes to the
company financial statements
Summary of significant accounting policies 30 Property, plant and equipment
31 Investments in subsidiaries 32 Deferred tax assets and other ­financial assets
33 Derivatives
34 Cash and cash equivalents
35 Shareholders’ equity 36 Provisions
37 Interest-bearing debt 38 Contingent assets and liabilities
39 Other income less expenses after taxation 114
115
116
117
117
117
117
118
118
119
119
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62 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Consolidated financial statements
Consolidated statement of financial position
As at 31 December
€ million
Assets
2011
Note
2010
Non-current assets
Property, plant and equipment
Intangible assets
Investments in associates and joint ventures
Other financial assets
Derivatives
Deferred tax assets
3,840
158
111
37
262
-
3,407
1
295
2
111
3
37
4
625
5
8
14
4,408
4,483
Current assets
Inventories
Trade and other receivables
Derivatives
Current tax assets
Cash and cash equivalents
Total assets
186
1,350
583
22
299
6
219
1,837
7
925
5
17
7
1,204
8
2,440
4,202
6,848
8,685
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63
Consolidated statement of financial position
As at 31 December
€ million
Shareholders’ equity and liabilities
2011
Note
2010
Shareholders' equity
Share capital
Share premium
Hedge reserve
Currency translation reserve
Other reserves
Unappropriated profit for the year
684
2,797
-67
1
246
438
Total shareholders' equity attributable to Nuon shareholders
Non-controlling interests
Total shareholders' equity
684
2,797
233
1
-146
563
4,099
4,132
2
4,101
4,134
2
9
Liabilities
Long-term liabilities
Interest-bearing debt
Derivatives
Finance lease payables
Deferred income
Deferred tax liabilities
Provisions for employee benefits
Other provisions
257
265
11
170
79
22
60
10
392
428
5
19
16
166
11
281
14
28
12
135
13
864
1,449
Short-term liabilities
Trade and other payables
Interest-bearing debt
Derivatives
Provisions for employee benefits
Total liabilities
Total shareholders' equity and liabilities
1,267
98
496
22
2,033
15
344
10
708
5
17
12
1,883
3,102
2,747
4,551
6,848
8,685
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64 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Consolidated statement of comprehensive income
For the year ended 31 December
€ million
2011
Net turnover from sales of goods and delivery of services
Other operating income
Cost of energy, raw materials and supplies
Cost of sub-contracted work
Employee compensation and benefit expenses
Depreciation and impairments of property, plant and equipment
Amortisation and impairments of intangible assets
Other operating expenses
3,010
92
425
227
2
356
Gross operating expenses
Note
2010
4,450
169
5,458
18
64
19
20
3,589
90
21
425
22
376
1
7
2
23
355
4,112
4,842
-47
4,065
4,801
Operating profit
554
721
Financial income
Profit before taxation
13
-14
-5
21
569
Taxation
-131
-169
Profit after taxation
438
563
Own work capitalised
Operating expenses
Financial expenses
Share in result after taxation of associates
Share in result after taxation of joint ventures
-41
15
24
-20
25
2
3
14
3
732
26
Other comprehensive income
Changes in fair value of cash flow hedges
Release to income of cash flow hedges
Income tax relating to components of other comprehensive income
Total other comprehensive income
Total comprehensive income for the year
-250
-151
101
414
29
-52
29
14
-91
-300
271
138
834
138
–
834
Of which:
- Total comprehensive income attributable to Nuon shareholders
- Total comprehensive income attributable to non-controlling interests
–
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65
Consolidated cash flow statement
For the year ended 31 December
€ million
2011
Cash flow from operating activities
Profit after taxation
Note
2010
438
563
Adjustments for:
1
131
-16
-115
229
-73
Financial income and expenses
Income tax expenses
Profit after taxation from associates and joint ventures
Result after tax from entities sold
Depreciation, amortisation and impairments
Changes in provisions, unrealised fair value movements and other
5
24 25
169
26
-16
3
–
383
1
2
-378
Changes in working capital
Inventories
Trade receivables and other receivables
Trade payables and other short-term liabilities
33
-56
-213
Total changes in working capital
Changes in deferred tax balances and settled derivative balances
Cash flow from operations
Financial expenses paid
Financial income received
Dividends received from associates and joint ventures
Income tax paid
Cash flow from operating activities
7
534
15
-236
21
75
434
1,010
-14
13
20
-5
Total
6
-109
-404
263
-20
15
3
24
-119
14
-100
448
910
Cash flow used in investing activities
Acquisitions, excluding acquired cash and cash equivalents
Capital expenditures on property, plant and equipment
Construction contributions received
Investments in intangible assets
Proceeds from sales of subsidiaries
Disposals of non-current assets (associates and joint ventures)
-34
-1,053
4
-11
298
–
Cash flow used in investing activities
-9
1
-948
23
2
-2
–
2
-796
-934
Cash flow from financing activities
New interest-bearing debt
Repaid interest-bearing debt
Repayment of share premium Nuon Germany GmbH
Dividends paid to class A shareholders
Dividends paid to class B shareholders
9
-25
13
-101
-100
Cash flow used in financing activities
-375
-204
Net cash flow
-723
-228
Cash and cash equivalents as at 1 January
1,022
-723
1,250
299
1,022 1
Net cash flow
Cash and cash equivalents as at 31 December
Consists of € 1,204 million cash and cash equivalents and € 182 million debt to credit institutions.
1
49
-138
–
-115
-171
-228
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66 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Consolidated statement of changes in shareholders’ equity
€ million
Equity attributable to shareholders1
Share
capital
As at 1 January 2010
Share
premium
Currency
translation
reserve
Hedge
reserve²
Unappropriated
profit for
the year³
Other
reserves
Subtotal
Noncontrolling
interest
Total
684
2,797
-38
1
-246
200
3,398
2
3,400
Profit after taxation 2010
–
–
–
–
–
563
563
–
563
Other comprehensive income
–
–
271
–
–
–
271
–
271
Comprehensive income 2010
–
–
271
–
–
563
834
–
834
Profit appropriation 2009:
dividend
–
–
–
–
–
-100
-100
–
-100
Profit appropriation 2009:
added to other reserves
–
–
–
–
100
-100
–
–
–
684
2,797
233
1
-146
563
4,132
2
4,134
Comprehensive income 2011
–
–
–
–
–
–
–
-300
-300
–
–
–
–
–
–
438
–
438
438
-300
138
–
–
–
438
-300
138
Profit appropriation 2010:
dividend
–
–
–
–
–
-171
-171
–
-171
Profit appropriation 2010:
added to other reserves
–
–
–
–
392
-392
–
–
–
684
2,797
-67
1
246
438
4,099
2
4,101
Shareholders' equity
as at 31 December 2010
Profit after taxation 2011
Other comprehensive income
Shareholders' equity
as at 31 December 2011
1For
2The
further information in regard to shareholders’ equity attributable to shareholders, please refer to note 9.
negative hedge reserve lowers the distributable reserves accordingly.
the year, dividends amounting to € 171 million were distributed to class B shareholders. The dividends per share amounted to € 2.55.
3During
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67
Notes to the consolidated financial statements
General information
The significant accounting policies and principles that were used in
N.V. Nuon Energy is a public limited liability company, registered in
Amsterdam, the Netherlands. The most significant activities of Nuon
and its subsidiaries comprise the production and supply of gas, electricity,
heat and cooling to customers in the Netherlands, as well as a broad
portfolio of energy-saving products and services.
the preparation of the consolidated financial statements are discussed
below. The historical cost convention has been applied, except for
certain assets and liabilities. Inventories held for trading, derivatives
and energy commodity contracts in particular, are valued at fair value.
Furthermore, inventories that are not held for trading purposes are
valued at the lower of cost and net realisable value. Unless stated
otherwise, these accounting policies have been applied consistently
over the financial years covered in these financial statements.
‘We’, ‘Nuon’, ‘Nuon Energy’, ‘the company’, ‘Nuon Energy group’,
‘the Nuon group’, ‘the group’ or similar expressions are used in these
financial statements as a synonym for N.V. Nuon Energy and its
subsidiaries. N.V. Nuon Energy originated in 2009 from the unbundling
of former parent company N.V. Nuon into a production and supply
company, N.V. Nuon Energy, and a network company, Alliander N.V.
The former holding company n.v. Nuon remained in charge of the
network company and was renamed Alliander N.V. after the unbundling.
In order to avoid misunderstanding, the names ‘former shareholder’,
‘former parent company’, ‘Alliander’ or ‘the Alliander Group’ used
throughout these financial statements all refer to n.v. Nuon, Alliander N.V.,
and/or Liander N.V. and their respective subsidiaries, which jointly form
the network company.
On 1 July 2009 Vattenfall AB acquired 49% of the shares of
N.V. Nuon Energy and on 1 July 2011 a tranche of 15% was acquired by
Vattenfall in accordance with the ‘share sale and purchase agreement’.
The remaining 36% of the shares will be acquired by Vattenfall AB in
tranches in the coming period. The last tranche will be acquired as
per 1 July 2015. As Vattenfall effectively gained operational control over
Nuon on 1 July 2009, the financial data of Nuon have been consolidated
in the financial statements of Vattenfall since then.
These financial statements for the financial year 2011 are authorised
for publication by the Management Board and Supervisory Board on
17 April 2012. Subsequently, these financial statements are scheduled
to be adopted by the General Meeting of Shareholders on 15 May 2012.
Since the company income statement for 2011 of N.V. Nuon Energy is
included in the consolidated financial statements, a condensed income
statement has been disclosed in the company financial statements in
accordance with Section 402, Book 2, of the Dutch Civil Code.
Summary of significant accounting policies
Unless stated otherwise, all amounts reported in these financial
statements are in millions of euros.
Judgements, estimates and assumptions used in
the financial statements (critical accounting policies)
The preparation of financial statements and the measurement of items
in the financial statements require the use of judgements, estimates
and assumptions. These are mainly based on past experience and on an
assessment made by Nuon’s management of the specific circumstances
that are, in the opinion of management, applicable in the given
situation. These judgements, estimates and assumptions have an impact
on the valuation and presentation of the reported assets and liabilities,
on the assets and liabilities that are not held on the statement of financial
position and on the reported gains and losses during the financial year.
The judgements, estimates and assumptions used in the financial
statements often relate to future developments. Actual developments may
differ from the judgements, estimates and assumptions used. As a result,
the actual outcome may differ significantly from the current valuation
of a number of items in the financial statements. Consequently, the
judgements, estimates and assumptions used may have a significant impact
on shareholders’ equity and the results. In this section, an analysis
is provided of the main areas where the measurement of assets,
liabilities and the results are affected by the judgements, estimates
and assumptions used.
Energy commodity contracts
Nuon uses energy commodity contracts for the physical sales and purchases
of oil, gas, coal, electricity and emission allowances for the generation
of electricity and the supply of energy to its customers. The majority
of these contracts, to which IAS 39 can be applied, are accounted
for as derivatives and measured at fair value through profit and loss.
Hedge accounting is applied for these contracts where possible.
Basis of preparation
The financial statements of Nuon have been prepared in accordance
with the International Financial Reporting Standards (IFRS) as
applicable as at 31 December 2011, and adopted by the European
Commission. IFRS consists of the IFRS standards and the International
Accounting Standards (IAS) issued by the International Accounting
Standards Board (IASB), as well as the interpretations of IFRS
and IAS standards issued by the International Financial Reporting
Interpretations Committee (IFRIC) and the Standing Interpretations
Committee (SIC) respectively.
Hedge effectiveness is tested periodically, using predefined methods,
models and assumptions.
Fair values
The fair value of financial instruments or inventories that are not traded
in an active market is determined by using valuation techniques. Nuon
uses its judgement to select a variety of methods and makes assumptions
that are mainly based on market conditions existing at the end of each
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68 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
reporting period. The main uncertainty in calculating cash flows relates
to the effect on cash flows of underlying assumptions with regard
to future commodity prices, interest rates and foreign exchange rates.
For an extensive disclosure on methods used, reference is made to
note [29] Information on risks and financial instruments.
Useful lives, residual values of and impairments on property,
plant and equipment
In determining the carrying amount of property, plant and equipment,
use is made of estimates regarding depreciation rates, which are derived
from the expected technological and economic lives of the assets concerned
and estimates of the residual value. Technological developments,
developments in market circumstances and changes in the actual usage of
the items of property, plant and equipment involved may lead to changes
in the expected technological and economic lives and the estimated
residual value of the assets. These factors may trigger impairments.
In determining the extent of the impairment, estimates and calculations
are made of the fair value less costs-to-sell and the value in use. The fair
value less costs-to-sell is derived from assumptions with regard to the
probable selling price of a particular item of property, plant and equipment.
The actual fair value in the case of a disposal may deviate from the
estimates used. The value in use is based upon the discounted value
of the expected future cash flows, which are derived from the business
plans for the coming years regarding the assets involved. The amount
and timing of these cash flows are uncertain. Adverse developments
with customers that may trigger impairment, such as suspension of
payments and bankruptcy, are also taken into account. It is possible
that Nuon may have to recognise additional impairments in the future
as a result of changes in market or other circumstances. For an extensive
disclosure on methods used, reference is made to note [1] Property,
plant and equipment.
Impairments on goodwill
Goodwill is tested annually for impairment and whenever there is an
indication that the intangible assets might need impairment. Previously
recognised impairments on goodwill cannot be reversed in future years
when the impairment has ceased to exist. The impairment tests make
use of estimates and assumptions with regard to both the fair value less
costs-to-sell and the value in use. The estimate of fair value less costs-tosell is derived from available information on stock and market prices,
recent transactions of comparable companies and bids and offers received.
The actual proceeds and costs-to-sell in the case of a disposal may deviate
from the estimates used. The value in use is based upon the discounted
value of the expected future cash flows of the cash-generating units.
The amount and timing of these cash flows are uncertain. Actual cash
flows may deviate from the estimated cash flows. The discount rate used
also affect the ultimate value in use. It is possible that Nuon may have
to recognise additional impairment charges in the future as a result of
changes in market or other circumstances. Impairment charges (being
the difference between the carrying amount and the recoverable amount)
are recognised in the statement of comprehensive income. For an
extensive disclosure on methods used, reference is made to note [2]
Intangible assets.
Impairments on exploration and evaluation assets
Nuon applied the successful efforts method to exploration and evaluation
expenditures. Capitalised costs were impaired when an asset well
was not considered to be technically feasible and economically viable.
Estimates and assumptions made by management on the technical
feasibility and economical viability were potentially subject to, amongst
others, more recent discoveries from the exploration and evaluation
activities and changes in market conditions. For an extensive disclosure
on methods used, reference is made to note [2] Intangible assets.
Other provisions
Nuon has a number of other provisions, including environmental
restoration provisions and provisions for onerous contracts. One
characteristic of provisions is that management has to make estimates
and assumptions at the reporting date with regard to the probability
that an obligation will arise, the time at which an obligation will arise
and the amount that will have to be paid. Certain developments, such
as changes in market circumstances, changes in legislation, judicial
decisions, and assumptions used, may cause the actual obligation to
deviate from the provision. In addition, Nuon is involved in a number
of legal proceedings. Management assesses each individual case and
decides, based on the factual circumstances, whether or not a provision
is considered necessary. This assessment encompasses the probability
that the claim will be successful and the amount that is likely to be paid.
Revenue recognition
The allocation process, being part of the electricity balance, serves to
determine the daily produced and delivered quantities of electricity
and gas by using an estimation process. In particular, standard annual
consumption patterns are used in the allocation process in the consumer
and business markets. These estimates are reviewed regularly and
quantities allocated to customers are adjusted for actual quantities
ascertained through meter readings as part of this process (‘reconciliation’).
The legal requirements on reconciliation prescribe settlement within
17 months after the end of the month of delivery. The expected
settlements from these processes have been estimated and recognised
in the financial statements as accurately as possible, but the final
settlement may affect future results.
Taxation
When preparing the financial statements, Nuon pays close attention to
assessing that all significant tax risks and the current tax position have
been reflected in the financial statements to the best of our knowledge.
Changing insights, as a result of e.g. final tax assessments for previous
years, may lead to additional tax charges or income. In addition, new tax
risks may arise. In the measurement of deferred tax assets, assumptions
are made regarding the extent to, and the term within which these
receivables can be realised. This takes place on the basis of business
plans, among other things. In addition, the financial statements are
prepared using assumptions regarding the temporary and permanent
differences between valuations for financial reporting purposes and
for tax purposes. The actual situation may differ from the assumptions
used in determining deferred tax positions, partly due to differences
of opinion and changes in tax legislation.
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69
Contingencies
When determining contingent assets and liabilities, management uses
judgements, estimates and assumptions. These factors are subject to
changes due to, amongst others, a changing market environment and
specific events.
New and/or amended IFRS standards that are
applicable in 2011
■■
■■
The IASB and the IFRIC have issued new and amended standards
and interpretations which are applicable to Nuon for the financial
years 2011 and onwards. These standards and interpretations can
only be applied after adoption by the European Commission.
The following amendments, interpretations or revisions have been
adopted by the European Commission, but have no or no significant
impact on Nuon’s financial statements:
■■ Amendments to IFRS 7: ‘Disclosures – Offsetting Financial Assets
and Financial Liabilities’;
■■ Amendment to IAS 24: ‘Related Party Disclosures’;
■■ Amendment to IAS 32: ‘Financial Instruments: Presentation’;
■■ Amendment to IFRIC 14: ‘Prepayment of a Minimum
Funding Requirement’;
■■ IFRIC 19: ‘Extinguishing financial liabilities with equity instruments’;
■■ Improvements to IFRS (May 2010).
■■
Changes in accounting policies not yet applicable
and not early adopted
In addition to the above-mentioned new and amended standards,
the IASB and the IFRIC have issued new and amended standards and
interpretations up to and including 2011 that will become applicable
after the financial year 2011. These standards and interpretations
will only be applicable after adoption by the European Commission.
The following new and/or amended standards and interpretations
have been issued:
■■ Amendments to IAS 1: ‘Presentation of Financial Statements’.
The amendments to IAS 1 change the grouping of items presented
in other comprehensive income. Items that could be reclassified
(or ‘recycled’) to profit or loss at a future point in time (for example,
upon derecognition or settlement) would be presented separately
from items that will never be reclassified. The amendment affects
presentation only and has therefore no impact on the Group’s
financial position or performance;
■■ Amendments to IAS 12: ‘Income Taxes’. The amendment clarifies
the determination of deferred tax on investment property measured
at fair value. The Group does not have any investment property and
therefore this amendment has no impact;
■■ Amendments to IAS 19: ‘Employee Benefits’. The IASB has issued
numerous amendments to IAS 19. These range from fundamental
changes such as removing the corridor mechanism and the concept
of expected returns on plan assets to simple clarifications and
re-wording. The impact on the financial performance and operation
of the group will be limited as the group has no significant pension
schemes that are accounted for as a defined benefit scheme;
■■ Revised IAS 27: ‘Separate Financial Statements’. As a consequence
of the new IFRS 10 and IFRS 12, what remains of IAS 27 is limited
to accounting for subsidiaries, jointly controlled entities
■■
■■
■■
and associates in separate financial statements. The Group
does not present separate financial statements under IFRS;
Revised IAS 28: ‘Investments in Associates and Joint Ventures’.
As a consequence of the new IFRS 11 and IFRS 12, see below,
IAS 28 has been renamed IAS 28 ‘Investments in Associates and
Joint Ventures’ and describes the application of the equity method
to investments in joint ventures in addition to associates;
IFRS 9: ‘Financial instruments: recognition and measurement’. This
standard is part of a complete revision of the present standard IAS 39
‘Financial instruments: recognition and measurement’. The standard
involves a reduction in the number of measurement categories of
financial assets, and the main categories for measurement are
amortised cost and fair value through profit or loss, respectively.
For certain investments in equity instruments, it is allowed to
recognise them at fair value with the value changes recognised in
other comprehensive income for the year and with no recycling to
profit for the period when they are disposed. The Group is currently
assessing the impact that this standard will have on the financial
position and performance. It is expected that rules on impairment
and hedge accounting will be added to the standard by the European
Commission during 2012;
IFRS 10: ‘Consolidated Financial Statements’. IFRS 10 establishes a
single control model that applies to all entities including special
purpose entities. The changes introduced by IFRS 10 will require
management to exercise significant judgement to determine which
entities are controlled, and therefore, are required to be consolidated
by a parent, compared with the requirements that were stated in
IAS 27. The standard might have impact on the financial position
and performance of some relatively small group entities. The group
is currently assessing the impact in detail that this standard will have
on the financial position and performance;
IFRS 11: ‘Joint Arrangements’. IFRS 11 makes a distinction between
the accounting for joint arrangement classified as joint venture and
joint operation. The accounting for joint ventures is comparable
with the current accounting for joint arrangements. Interests in
joint operations are however no longer recognised at equity value,
instead the proportional interests in the assets and liabilities of
the joint operations are recognised in the consolidated accounts.
The standard might have impact on the financial position and
performance from some relatively small group entities. The Nuon
group is currently assessing the impact in detail that this standard
will have on the financial position and performance;
IFRS 12: ‘Disclosures of interests in other entities’ includes the
disclosure requirements for all forms of interests in other entities,
including joint arrangements, associates, special purpose vehicles
and other off-balance sheet vehicles. The group is yet to assess
IFRS 12’s full impact, however since it affects disclosures only it
therefore has no impact on the group’s financial position or performance;
IFRS 13: ‘Fair value measurement’ establishes a single source of
guidance under IFRS for all fair value measurements. IFRS 13 does
not change when an entity is required to use fair value, but rather
provides guidance on how to measure fair value under IFRS when
fair value is required or permitted. The group is currently assessing
in detail the impact that this standard will have on the financial
position and performance, however the impact from this standard
is expected to be limited.
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The following new and amended standards and interpretations
have been adopted by the European Commission, but have no
significant impact:
■■ Amendments to IFRS 7: ‘Financial instruments: Disclosures’. The
amendment requires additional disclosure about financial assets
that have been transferred but not derecognised, to enable the user
of the group’s financial statements to understand the relationship
with those assets that have not been derecognised and their associated
liabilities. In addition, the amendment requires disclosures about
continuing involvement in derecognised assets to enable the user
to evaluate the nature of, and risks associated with the entity’s
continuing involvement in those derecognised assets. The amendment
affects disclosure only and has no impact on the group’s financial
position or performance;
■■ IFRIC 20: ‘Stripping Costs in the Production Phase of a Surface Mine’.
The group does not have any activities in surface mines and therefore
this interpretation has no impact.
Accounting policies for consolidation
Subsidiaries
The consolidated financial statements comprise the financial data of
Nuon and its subsidiaries. Subsidiaries are companies over which Nuon,
either directly or indirectly, has the power to control both operational
and financial policies in order to benefit from them. In order to ascertain
whether or not Nuon has control, actual and potential voting rights
that are currently exercisable or convertible are taken into account,
as well as the existence of other agreements enabling Nuon to control
the operations and financial policies.
The assets, liabilities and results from subsidiaries are fully consolidated.
The results of consolidated subsidiaries that have been acquired during
the year are consolidated as of the date Nuon effectively acquired
control over these subsidiaries. Consolidation of these subsidiaries
ceases as of the moment Nuon no longer controls the subsidiary.
The interests of third parties in Shareholders’ equity and the Total
comprehensive income are presented separately under the items ­
Non-controlling interests and Total comprehensive income attributable
to non-controlling interests. The item Non-controlling interests on the
statement of financial position consists of the share of non-controlling
interests in the fair value of the identified assets and liabilities of
subsidiaries on the date of acquisition and the share of non-controlling
interests in the movements in Shareholders’ equity as of that date.
The acquisition method is applied in the case of an acquisition of a
subsidiary by the group. The purchase price of an acquisition consists
of the fair value of the assets transferred, the equity instruments that
were issued and the assumed or acquired liabilities. The identifiable
assets and liabilities and contingent liabilities that are acquired are
initially recognised at fair value at the date of acquisition, irrespective
of the amount that is attributable to non-controlling interests (see also
the accounting policies for goodwill).
Intercompany transactions, statement of financial position items and
unrealised gains on transactions with and between subsidiaries are
eliminated. Unrealised losses are also eliminated, unless the transaction
gives rise to the recognition of impairment charges.
Where applicable, the accounting policies of subsidiaries have been
adjusted in order to assure the consistent application of accounting
policies across the group.
Associates and joint ventures
Associates are entities over which Nuon, directly or indirectly, exercises
significant influence on the financial and operational policies, but over
which Nuon has no control. Significant influence is assumed when Nuon
can exercise between 20% and 50% of the voting rights.
Joint ventures are agreements by which Nuon, together with one
or more parties, conducts activities that are controlled jointly by
all parties involved.
Investments in associates and interests in joint ventures are measured in
accordance with the equity method. Initial measurement is at historical
cost. The carrying amount of the associate or the joint venture includes
the goodwill (adjusted for the accumulated impairments that may have
been recognised) paid at the date of acquisition of the associate or
conclusion of the joint venture and Nuon’s share in the movements in
the equity of the associate or joint venture after the date of the transaction.
In the case that the (accumulated) losses exceed the carrying amount,
these losses are no longer recognised, unless Nuon has the obligation
or has made payments to make up these losses. In this case, a provision
is recognised as a charge against income.
Unrealised gains on transactions between the group and its associates
or joint ventures are eliminated on a pro rata share of the interest
of the Group in the associate or joint venture. Unrealised losses are
also eliminated, unless the transaction gives rise to the recognition
of impairment charges. If appropriate, the accounting policies of
associates and joint ventures are adjusted in order to assure a consistent
application of accounting policies.
Scope of consolidation
The significant subsidiaries, associates and joint ventures are listed
separately in these financial statements. The information on the equity
interests as referred to in sections 379 and 414, Book 2, Part 9 of the
Netherlands Civil Code has been filed separately with the Amsterdam
Trade Register. The following changes in consolidation are applicable
for these financial statements:
■■ In December 2011 the sale of N.V. Nuon Belgium, including
Nuon Power Generation Walloon N.V. and Nuon Wind Belgium N.V.,
was completed. The results of Nuon Belgium are consolidated until
31 December 2011. The assets, and liabilities are not included in
the consolidated balance sheet as per 31 December 2011. The shares
were transferred on 10 January 2012;
■■ In October 2011 Nuon increased its share in Zuidlob Wind B.V. from
5% to 100%. The assets, liabilities and results are included in these
consolidated financial statements as from 3 October 2011;
■■ In June 2011 the sale of Nuon E&P to Tullow Oil plc was completed.
The results of Nuon E&P are not longer included as from 30 June 2011.
The shares were transferred on 30 June 2011;
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■■
■■
I n March 2010 the sale of Nuon Deutschland GmbH to ENERVIE AG
(formerly known as SEWAG) was completed. The assets, liabilities
and results of Nuon Deutschland GmbH are no longer included
in these consolidated financial statements as from 1 January 2010.
The shares were transferred on 18 March 2010;
In March 2010 the sale of Nuon’s 50% share in the Vleemo wind farm
to Electrawinds and Aspiravi was completed. This share was
exchanged for full ownership of Nuon Wind Belgium N.V., which
was sold in December 2011 as a part of the sale of Nuon Belgium.
The 50% equity share and operational results of Vleemo are no longer
included in these consolidated financial statements as of 1 January 2010.
The shares were transferred on 16 March 2010.
Foreign currency translation
Functional currency and presentation currency
The items in the financial statements of the entities forming part of
the Nuon group are recorded in the currency of the primary economic
environment in which the entity operates (the functional currency).
The consolidated and company financial statements are prepared
in euros, Nuon’s functional and presentation currency.
Translation of transactions and statement of financial position
items denominated in foreign currency
Transactions denominated in foreign currency are translated into
the functional currency at the exchange rates prevailing at that time.
Monetary assets and liabilities in foreign currency are translated at
the exchange rates as at the reporting date. Foreign currency exchange
differences resulting from the settlement of transactions denominated
in foreign currency or the translation at the reporting date are recognised
in the income statement unless these exchange gains or losses are
accounted for as cash flow hedges or net investment hedges in a foreign
entity. Foreign currency exchange differences on non-monetary items,
such as investments that are valued at fair value through the profit or
loss, are accounted for as part of the movement in the fair value of the
item involved.
Translation differences regarding the statement of financial
positions and results of foreign subsidiaries
The assets and liabilities of subsidiaries of which the functional currency
differs from the euro are translated at the exchange rate at the reporting
date, whereas the results are translated at the average exchange rate
for the period. The resulting exchange rate differences are recognised
in Other comprehensive income and included in the Currency translation
reserve within Shareholders’ equity.
Foreign currency exchange differences resulting from the translation
of net investments in foreign entities, loans and other currency
instruments that are used as hedges of net investments are recognised
in Other comprehensive income and included in Shareholders’ equity.
If a foreign entity is sold, the corresponding exchange rate differences
are recognised through the profit or loss as part of the result on the sale.
Goodwill resulting from the acquisition of a foreign entity is regarded
as an asset of the foreign entity and is translated at the exchange rate
at the reporting date.
Impairments
Whenever certain events or changes in circumstances trigger this, an
impairment test is performed in order to determine whether or not the
value of property, plant and equipment, intangible assets or other assets
not valued at fair value has to be impaired. Goodwill is tested annually
for impairment. Assets are allocated to the lowest possible level at which
they generate separately identifiable cash flows (cash-generating units).
Goodwill is allocated to a level that is consistent with the manner in
which goodwill is internally reviewed by management, but not at a
higher level than the segments used for management reporting.
Impairments of cash-generating units are initially allocated to the
goodwill of these cash-generating units (or group of cash-generating
units) and are subsequently allocated on a pro rata basis to the carrying
amount of the other assets of the cash-generating unit.
The recoverable amount is the higher of the fair value less costs-to-sell and
the value in use. In the determination of the value in use, the estimated
future cash flows are discounted at a pre-tax discount rate. The discount
rate reflects the time value of money and the specific risks that are
associated with the assets involved. If an asset does not generate cash flows
independently, the value in use is determined for the cash-generating
unit to which the asset involved belongs.
If a previously recognised impairment ceases to exist, it is only reversed to
the original carrying amount less regular depreciation and amortisation
until the date of reversal. Impairments on goodwill are not reversed.
Property, plant and equipment
The item Property, plant and equipment is subdivided into the
following categories:
■■ Land and buildings;
■■ Power generation facilities;
■■ Networks;
■■ Gas fields and platforms;
■■ Other plant and equipment;
■■ Assets under construction.
Property, plant and equipment are measured at historical cost less
accumulated depreciation and impairments. Historical cost includes all
expenditure directly attributable to the purchase of property, plant and
equipment or the production of property, plant and equipment for own
use. The cost of assets produced for the company’s own use includes
the direct costs of materials used, labour and other direct production
costs attributable to the production of the item of property, plant and
equipment and the costs required to bring the assets into their current
operational condition. The costs of loans associated with the purchase
and/or construction of property, plant and equipment or assets in
progress are capitalised if the asset is identified as a qualifying asset
in accordance with IAS 23.
Costs incurred after the date on which the asset has been taken into use
are only capitalised as property, plant and equipment if it can be assumed
that these costs will generate future economic benefits and when these
costs can be measured reliably. Depending on the circumstances, these
costs form part of the carrying amount of the asset involved or are
capitalised separately. Maintenance expenditure is charged directly
to the income statement in the year these costs are incurred.
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Historical cost also contains the net present value of the estimated
costs of dismantling and site restoration and, if applicable, the costs
of returning land to its original condition as far as there is a legal
or constructive obligation to do so. These costs are capitalised at
the moment of acquisition or at a later date when the obligation arises.
In both cases, the capitalised costs are depreciated over the expected
remaining useful life of the asset involved.
Property, plant and equipment are depreciated over the expected useful
lives of the various components of the asset involved, taking account
of the expected residual value, using the straight-line method with
the exception of gas fields and platforms. Gas fields and platforms were
depreciated on the basis of the ‘unit of production’ method. The basis
for depreciation was the expected remaining production volume
(i.e. gas reserve estimates) and was determined annually on the basis
of recognised industrial practice. New discoveries during extraction
activities could also cause interim changes in the expected remaining
production volume. The depreciation amount per unit was thus adjusted
for the coming period to the new expected remaining production volume.
The useful lives of the asset categories are as follows:
■■ Land is not depreciated;
■■ Buildings: 20-50 years;
■■ Power generation facilities: 20-35 years;
■■ Networks: 5-60 years;
■■ Gas fields and platforms: determined annually on the basis
of the expected remaining production volume;
■■ Other plant and equipment: 3-60 years;
■■ Assets under construction are not depreciated.
The expected useful lives, residual values and depreciation methods
are reviewed annually and adjusted when deemed necessary. Gains
or losses on disposals are determined based on the sales proceeds
and the carrying amount on the date of the disposal.
Intangible assets
Goodwill
Goodwill is the amount by which the purchase price exceeds the fair
value of the identifiable assets and liabilities and contingent liabilities
of the subsidiaries, joint ventures or associates acquired. Goodwill paid
on the acquisition of subsidiaries is classified under intangible assets.
Goodwill paid on the acquisition of joint ventures and associates is part
of the value of the joint venture or associate involved. If the purchase
price is lower than the fair value of the identifiable assets and liabilities
and contingent liabilities (negative goodwill), this difference is included
in the income statement.
Exploration and evaluation assets
Exploration and evaluation assets concerned the capitalised costs
relating to the exploration for and evaluation of gas reserves. Examples
of costs eligible for capitalisation include exploration rights, geological
and other studies, and exploration drillings in relation to either
prospective or possible reserves under evaluation, or prospective deposit
sites. Costs that were not eligible for capitalisation were costs incurred
before the acquisition of exploration rights and other general costs that
were not related to a specific exploration well. Exploration and
evaluation assets were valued at cost less accumulated impairments.
Exploration and evaluation assets were not amortised.
Nuon applied the successful efforts method to exploration and
evaluation expenditures. This entailed that when a specific well was
designated as technically feasible and economically viable, and a
management decision to develop the site had been taken or would be
taken within a year in conformity with the most recent business plan,
the capitalised costs were reclassified to property, plant and equipment
– assets under construction. A well that did not satisfy these criteria
was designated as not successful and any costs already capitalised were
charged as impairment to the income statement.
Concessions, permits and licences
Concessions, permits and licences are valued at historical cost less
accumulated amortisation and accumulated impairments. These assets
are amortised over their estimated useful life, using the straight-line
method. The term of the concessions, permits and licences is used as
the useful life.
Capital expenditure and research and development
Expenditure on research activities, undertaken with the prospect of
gaining new scientific or technical knowledge and understanding, is
recognised in profit or loss as incurred. Development activities involve
a plan or design for the production of new or substantially improved
products and processes. Development expenditure is capitalised only
if these costs can be measured reliably, the product or process is
technically and economically feasible, future economic benefits are
probable and Nuon intends to, and has sufficient resources to, complete
development and to use or sell the asset. Capitalised development
expenditure is measured at cost less accumulated amortisation and
accumulated impairment losses. Cost includes the cost of materials,
direct labour, overhead costs that are directly attributable to the
preparation of the asset for its intended use and, if applicable,
borrowing costs. Other development expenditure is recognised
in the income statement as incurred.
Financial instruments
The carrying amount of goodwill consists of historical cost less
accumulated impairments. Impairment tests are performed annually
in order to determine whether the value of the goodwill has to be
impaired. The goodwill is taken into account in the determination
of the results on the disposal of entities or cash-generating units.
General
IFRS requires that financial assets, which include derivative commodity
contracts for trading purposes, are classified in one of the following
categories: at fair value through profit or loss, held-to-maturity, loans
and receivables and available-for-sale. Nuon only has financial assets
at fair value through profit or loss, and loans and receivables. Financial
liabilities, which include derivative commodity contracts for trading
purposes, have to be classified in one of the following categories:
at fair value through profit or loss, and other financial liabilities.
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The classification depends on the purpose for which the financial assets
and liabilities were acquired. Management determines the classification
of financial assets and liabilities at initial recognition.
Financial assets are derecognised when the rights to receive cash flows
from the asset have expired or have been transferred and Nuon has
transferred substantially all risks and rewards of ownership. Financial
assets and liabilities are offset and the net amount is reported in the
statement of financial position when there is a legally enforceable right
to offset the recognised amounts and there is an intention to settle on
a net basis, or realise the asset and settle the liability simultaneously.
Previously recognised impairments may be reversed following changed
conditions and/or changed estimates.
Financial assets
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets
held for trading and are recognised on the trade date. A financial asset
is classified in this category if acquired principally for the purpose of
selling in the short term. Derivatives are categorised as held for trading
unless they are designated as effective hedging instruments as defined
by IAS 39. Financial assets carried at fair value through profit or loss
are initially recognised at fair value and are subsequently carried at
fair value. Transaction costs are expensed in the income statement.
Gains or losses arising from changes in the fair value of the financial
assets at fair value through profit or loss category are presented in the
income statement within Net turnover from sale of goods and delivery
of services or Financial income or expense in the period in which they
arise. Classification depends on the nature of the derivative contract
(e.g. commodity contract or interest or foreign exchange contract).
Other financial liabilities
This category includes interest-bearing and non-interest-bearing
financial liabilities that are not held for trading and are valued at
amortised cost. Trade liabilities have a short anticipated term and are
therefore valued at nominal amount which approaches amortised cost.
Other financial liabilities are non-derivative financial liabilities with
fixed or determinable payments that are not quoted in an active market.
They are included in current liabilities, except for liabilities with
maturities greater than 12 months after the end of the reporting period,
which are classified as long-term liabilities. Nuon’s other financial
liabilities comprise Interest-bearing debt and Trade and other payables
in the statement of financial position (notes [10] and [15]). Other
financial liabilities are initially recognised at fair value adjusted for
transaction costs and are subsequently carried at amortised cost using
the effective interest method.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed
or floating receipts that are not quoted in an active market. They are
included in current assets, except for instruments with maturities of
more than 12 months after the end of the reporting period, which are
classified as non-current assets. Nuon’s loans and receivables comprise
Other financial assets, Trade and other receivables and Cash and cash
equivalents in the statement of financial position (notes [4], [7] and
[8]). Loans and receivables are initially recognised at fair value adjusted
for transaction costs. Loans and receivables are subsequently carried
at amortised cost using the effective interest method. If the fair value
of these financial assets has been hedged, the amortised cost is adjusted
for the profit or loss attributable to the hedged risk. These adjustments
are recognised in the income statement.
Impairment of financial assets carried at amortised cost
Nuon assesses at the end of each reporting period whether there is
objective evidence that a financial asset or group of financial assets
requires an impairment. A financial asset is impaired if there is objective
evidence of impairment as a result of one or more events impacting
the estimated future cash flows of the financial asset that can be reliably
estimated. Nuon uses criteria indicating the creditworthiness of the
borrower to determine whether there is objective evidence of an
impairment loss. The amount of the loss is measured as the difference
between the asset’s carrying amount and the present value of estimated
future cash flows (excluding future credit losses that have not been
incurred) discounted at the financial asset’s original effective interest
rate. The loss is recognised in the income statement.
Financial liabilities
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss are financial
liabilities held for trading. A financial liability is classified in this
category if acquired principally for the purpose of selling in the short
term. Derivatives are categorised as held for trading unless they are
designated as a hedging instrument.
Derivatives and hedge accounting
General
Nuon uses different types of derivative instruments (forwards, futures
and swaps) to hedge various financial risks, currency risks, electricity
and fuel price risks and interest rate risks.
Derivative instruments with a positive fair value are reported as a
separate item in the statement of financial position as non-current or
current assets, while derivative instruments with a negative fair value
are reported as a separate item as long-term or short-term liabilities.
Derivatives are initially recognised at fair value on the date a derivative
contract is entered into and are subsequently remeasured at their fair
value. The fair values are derived from market prices that are listed in
active markets or by using comparable recent market transactions or
valuation methods, e.g. discounted cash flow models and option pricing
models in the case that there is no active market.
The fair value of a hedging derivative is classified as a non-current asset
or liability when the remaining maturity of the hedged item is more
than 12 months and as a current asset or liability when the remaining
maturity of the hedged item is less than 12 months. Trading derivatives
are classified as current or non-current, based on the remaining term
of the derivative.
Accounting for the movements in fair value of derivatives
The accounting treatment for the movements in fair value of derivatives
depends on whether the derivative is designated as held for trading
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purposes or as a hedging instrument and if the latter is the case,
the risk that is being hedged.
In principle, all fair value movements of derivatives are recognised in
the income statement. The exception to the general principle that fair
value movements are recognised in the income statement is applicable
for derivatives for which hedge accounting is applied.
Commodity contracts
Nuon uses energy commodity contracts for oil, gas, coal and electricity
for the purpose of the production, sale and purchase of energy. The
majority of these contracts, which can be net, settled as derivatives, are
valued at fair value through profit or loss. Hedge accounting is applied
for these contracts if possible. For further information, please refer to
the section on ‘Judgements, estimates and assumptions used in the financial
statements’ (critical accounting policies).
Derivatives used for hedging
Nuon uses derivatives to hedge foreign exchange risks on assets
and liabilities, and fair value and cash flow risks arising from energy
commodity contracts. These hedge transactions can be divided into
three categories:
1.Fair value hedges: these hedge transactions hedge the risk of
movements in the fair value of all or part of the assets and/or
liabilities held on the statement of financial position, or firm
commitments, or a part thereof, that may affect profit or loss. A firm
commitment is a binding agreement for the exchange of a specified
quantity of resources at a specified price on a specified future date
or dates. Fair value movements of derivatives that are designated as
fair value hedges are recognised in the income statement, together
with the movements in the fair value of the assets or liabilities or
groups of assets or liabilities that are attributable to the hedged risk;
2.Cash flow hedges: these hedge transactions hedge the risk of
movements in (future) cash flows that may affect profit or loss. The
hedges are attributable to a specific risk that is related to a statement
of financial position item or a future transaction that is highly
probable. The effective part of the changes in the fair value of the
hedge is recognised in other comprehensive income (‘OCI’) in the
hedge reserve. The non-effective part is taken to the income
statement. The accumulated amounts that are taken to OCI are
recycled to the income statement in the same period in which the
hedged transaction is recognised in the income statement. However, if
an anticipated future transaction that is hedged leads to the recognition
of a non-financial asset or liability, the accumulated value movements
of the hedges are included in the initial measurement of the asset or
liability involved. If a hedge ceases to exist, or is sold, or if the criteria
for hedge accounting are no longer being met, the accumulated fair
value movements are held in equity until the anticipated future
transaction is recognised in the income statement. If an anticipated
future transaction is no longer expected to take place, the accumulated
fair value movements that were recognised in OCI are recycled to the
income statement;
3.Net investment hedges: these hedging instruments hedge the risk
of movements in the value of net investments in foreign activities,
whose functional currency differs from the euro, resulting from
changes in foreign exchange rates. If the hedge is effective, the fair
value movement of the hedging instrument is charged or credited to
Other comprehensive income and included in the Currency translation
reserve within Shareholders’ equity. If this is not the case, the fair value
movements are taken to income. In the case of a disposal of a foreign
entity, the accumulated exchange rate differences of the hedge that are
included in Shareholders’ equity are recycled to the income statement.
Leasing
Leases where Nuon acts as lessor
Finance leases
Nuon has concluded a number of leases for energy-related installations.
Where all risks and rewards with regard to the ownership of the assets
have effectively been transferred to the lessee, the lease is accounted for
as a finance lease. The net present value of the lease payments, together
with the residual value if appropriate, is recognised as the carrying
amount on the statement of financial position. The estimated residual
values used in the determination of Nuon’s gross investment that are not
guaranteed by parties other than the lessee are reviewed periodically.
If the residual value is expected to be lower, the decrease of the finance
lease receivables is charged directly to income. The lease payments
received are treated as repayments of, and interest payments on, the
investment of Nuon in the lease. The interest income reflects the
effective interest on Nuon’s net investment.
Operating leases
In addition to finance leases, Nuon has concluded a number of operating
leases for energy-related installations. Operating leases are leases that
are not designated as finance leases and where the risks and rewards
with regard to the ownership of the assets have not been effectively
transferred, or not completely transferred, to the lessee.
The assets that are leased to third parties under operating leases are
classified under the item Property, plant and equipment. The proceeds
from operating leases are recognised in the results on a straight-line
basis over the lease term.
Leases where Nuon acts as lessee
Finance leases
If all risks and rewards with regard to the ownership have effectively
been transferred to Nuon, the contract is accounted for as a finance lease.
In this case an asset and a liability are recognised on the statement of
financial position at the lower of the fair value and the net present value
of the future lease payments. The asset is depreciated over the shorter
of the useful life of the asset and the term of the lease contract.
Consequently, the lease payments are regarded as repayment of
principal amounts and interest expenses for the counterparty (lessor).
The interest expenses reflect the effective interest on the investment
made by the lessor.
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The assets that Nuon holds under finance leases are recognised as
Property, plant and equipment. The corresponding lease obligations
Emission allowances
With regard to the accounting for emission allowances, a distinction
are recognised as long-term liabilities.
is made between emission allowances designated for own use, necessary
to cover the number of rights required for the actual emissions, and
emission allowances that are held for trading purposes.
Operating leases
Operating leases are leases that are not classified as finance leases and
where the risks and rewards with regard to the ownership of these assets
have effectively not been transferred, or not completely transferred, to
the lessee. The cost of operating leases is charged to the profit and loss.
Inventories
General
Inventories, except for coal-, oil-, and gas inventories, are valued at the
lower of cost and lower net realisable value. These inventories consist
of raw materials and consumables, inventories in process of production,
finished goods and spare parts. The cost of inventories is determined
by using the FIFO (first-in, first-out) method. Net realisable value is
determined using the estimated sales price under normal operating
circumstances, less the estimated selling costs. In contrast to the above,
coal-, oil-, and gas inventories are valued at fair value less costs-to-sell,
as these inventories form part of the trade position in this type of
commodity. Movements in the fair value of coal-, oil-, and gas inventories
are recognised in the result in the period in which the movement
takes place.
Work in progress
Nuon uses the percentage of completion method for determining the
costs and proceeds that are recognised in the income statement during
a period. If the outcome of a project cannot be reliably estimated,
the recognised proceeds are limited to the costs that have been incurred
up to the reporting sheet date and that will probably be reimbursed.
Work in progress includes the amounts that are owed by Nuon’s
customers in respect of work in progress, as far as the costs incurred
and realised profits, less losses, exceed the advance payments. Advance
payments to be received and amounts withdrawn are recognised as current
assets under the item Trade and other receivables.
The net amount that Nuon owes to its customers, being the costs incurred
and realised profits less advance payments and recognised losses, is
recognised under liabilities. Advance payments, received for projects
for which no work has been performed yet, are recognised as short-term
liabilities under the item Trade and other payables. The progress of the
project is determined from the costs incurred on the project up to the
reporting date, taking into account inefficiencies, in relation to the total
estimated costs of the project.
Project costs are recognised at the moment they are incurred. If the
outcome of a project can be estimated reliably and it can be assumed
that the project will be profitable, the profit on the project is recognised
over the period in which the project is executed. Losses on projects are
recognised immediately.
Emission allowances designated for own use are recognised at cost.
When actual emissions exceed the volume of emission allowances
available, a liability is recognised for the deficit and charged to the
income statement, measured at market prices. These liabilities are
subsequently carried at fair value (market price) until additional
emission allowances are purchased to offset the deficit. Gains or losses
arising from changes in the fair value of these deficits are presented
in the income statement within Operating expenses in the period in
which they arise.
The trading position in emission allowances is accounted for at market
prices at the reporting date and changes are recognised directly in the
income statement. The possibility of converting Certified Emissions
Reductions (CERs) or Emissions Reduction Units (ERUs), into (European)
emission allowances is taken into account for the trading positions in
CERs and ERUs.
Cash and cash equivalents
The item Cash and cash equivalents comprises all liquid financial
instruments with a maturity date at inception of less than three months.
Cash and cash equivalents include cash at hand, cash held on bank
accounts, cash held at banks through the cash pool of Vattenfall, shortterm deposits held at Vattenfall, call money and other short-term
deposits. Amounts owed to banks are only classified as cash and cash
equivalents when Nuon has the right to offset amounts owed and due
held on bank accounts with the same banks and Nuon has the intention
to use this right and effectively uses this right.
Amounts owed to credit institutions are reported under the item ­
Interest-bearing debt.
Construction contributions, government grants,
investment premiums and operating subsidies
Construction contributions
Contributions to construction and payments received from customers,
property developers and local and regional governmental bodies for
the costs incurred for heating infrastructure of new housing projects
and industrial estates are measured at their fair value and subsequently
recognised as Deferred income on the statement of financial position.
Deferred income is amortised over the expected useful lives of the
assets involved.
Government grants, investment premiums and operating subsidies
Government grants, investment premiums and operating subsidies are
recognised at fair value if there is reasonable certainty that the criteria
for receiving the grant or premium are or will be met, and that the grant
or premium will be received. Grants and premiums received for
capital expenditures for property, plant and equipment are subsequently
recognised as Deferred income in the statement of financial position
and are amortised over the expected useful lives of the assets involved.
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76 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Government grants and operating subsidies that do not relate to capital
expenditures for property, plant and equipment or other non-current
assets are taken to income at the moment the associated costs are incurred.
Taxation
Deferred tax assets and liabilities that arise from temporary differences
between the carrying amount in the financial statements and the
carrying amount for tax purposes are determined based on the
corporate income tax rates that are currently applicable or will be
applicable, based on current legislation, at the time of settlement of the
deferred tax asset or liability. Deferred tax assets arising from operating
losses, for example, are only recognised if it can be reasonably assumed
that sufficient future taxable income will be available. Deferred tax
assets and liabilities are only offset if Nuon has a legal right to offset
current tax assets and liabilities and the assets and liabilities relate to
taxes that are levied by the same tax authority or governmental body.
Deferred tax assets and liabilities are measured at nominal value.
The corporate income tax charge is determined based on the applicable
rates for corporate income taxes and is measured at nominal (i.e.
undiscounted) value. The effective tax rate is affected by permanent
differences between the results for tax purposes and financial reporting
purposes as well as the possibilities of the utilisation of tax losses carried
forward, to the extent that no deferred tax assets have been recognised
for these tax losses.
Provisions for employee benefits
Multi-employer plans
Nuon has a number of defined benefit plans and defined contribution
plans for which contributions are generally paid to pension funds or
insurance companies. The most significant pension plans have been
transferred to the ABP pension fund and the ‘Metaal en Techniek’
pension fund. These plans can be characterised as multi-employer plans.
The pension plans offered by these funds are, in fact, defined benefit
plans; however, as Nuon does not have access to the required
information, both pension plans are treated as defined contribution
plans. The pension contributions paid during the financial year are
accounted for as pension costs in the financial statements. If there is
a contractual agreement with a multi-employer plan determining how
a surplus is distributed to the participants or a deficit is to be financed,
and the plan is accounted for as a defined contribution plan, a
receivable or liability following from the agreement is recognised in
the statement of financial position. The resulting gains or losses are
recognised in the income statement. The pensions of the majority
of Nuon’s workforce have been transferred to the ABP pension fund
and the ‘Metaal en Techniek’ pension fund. These plans do not contain
the aforementioned contractual agreements. As a result, no receivable
or liability has been recognised in the statement of financial position.
Other long-term employee benefits
Other long-term employee benefits include plans, other than pension
plans, in which payment does not occur within 12 months after the
end of the period in which the employees render the related service.
These plans consist of long-term sickness benefits, jubilee benefits,
disability benefits for former employees, conditional bonuses and
additional annual leave for older employees. These obligations
have not been transferred to pension funds or insurance companies.
The obligation for other long-term employee benefits recognised in
the statement of financial position consists of the net present value
of the vested benefits. If appropriate, estimates are used for example
for future salary raises, employee turnover and similar factors. These
factors are incorporated in the calculation of the provision. Changes
in the provision resulting from changes in actuarial assumptions used
and changes in the benefits are taken directly to the income statement.
The service costs attributable to the year of service and the accretion
of interest to the provision are reported under the item Employee
compensation and benefit expenses in the income statement.
Termination benefits
Termination benefits are benefits resulting from the decision of Nuon
to terminate the employment contract before the retirement date,
or resulting from the voluntary decision of an employee to agree
to the termination of the employment contract.
The nature and amount of the termination benefits are laid down
in the Social Plan. The Social Plan is renegotiated periodically.
A provision is only recognised when Nuon has drawn up a detailed plan
for the restructuring, the plan has been approved and communicated,
and it is not probable that the plan will be withdrawn at a later date.
The provision is measured at the present value of the expenditures
expected to be required to settle the termination benefit obligation.
Other provisions
Provisions are recognised when:
■■ There is a legal and/or constructive obligation as at the reporting
date, arising from events that occurred before the reporting date;
■■ It can be reasonably assumed that there will be an outflow of
economic resources in order to settle the obligation;
■■ The obligation can be reliably estimated.
Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation using a pre-tax rate
that reflects current market assessments of the time value of money
and the risks specific to the obligation. The increase in the provision
due to passage of time is recognised as interest expense.
Net turnover from sales of goods and delivery
of services
Net turnover comprises the following components:
■■ Supply of goods – electricity, gas, heating and cooling: net turnover
from electricity, gas, heating, cooling and other energy-related
products is recognised at the moment of supply to the customer, when
the sales price has been agreed and the receipt of the sales proceeds
can be reasonably assumed. Value-added taxes (VAT) and regulating
energy taxes (RET) are not included in net turnover. In addition,
Nuon uses derivatives, such as energy commodity contracts, swaps
and options, in order to hedge financial risks (mainly price risks)
of sales contracts. The net results of these hedging instruments are
also reported under this item;
■■ Supply of goods – heating equipment and other equipment:
net turnover from the supply of heating and other equipment is
recognised at the moment of supply or installation, when practically
all risks and rewards with regard to the ownership have been
transferred, the sales price has been agreed and the receipt of
the sales proceeds can be reasonably assumed;
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77
■■
■■
■■
■■
Work in progress: this encompasses the proceeds from construction
activities on behalf of third parties. Turnover is determined based
on the percentage of completion method;
Income from operating leases: these proceeds are recognised
on a straight-line basis over the term of the lease;
Delivery of service/maintenance contracts: the amounts received
for maintenance contracts are allocated to the periods to which
they relate;
Fair value movements of energy commodity contracts. This item
consists of the following categories of fair value movements:
■■ Trading activities: Nuon actively trades in oil, gas, coal and energy
commodity contracts and in options and swaps within the boundaries and risk limits. The trading portfolio is valued at fair value and
fair value movements on the open energy commodity positions
are recognised in the income statement;
■■ Fair value movements of commodity contracts designated for
own use: Nuon uses energy commodity contracts for the physical
sale and purchase of raw materials and energy. Optimisation takes
place due to uncertainties with regard to future production and
consequently the expected and contracted purchases, sales and
production deviate from the actual purchases, sales and production.
These contracts are recognised at fair value and hedge accounting
is applied where this is possible;
■■ The non-effective part of hedges: Nuon uses commodity contracts
in order to hedge price and other risks that arise from the future
expected sales of electricity and gas and from the purchases necessary
for covering the generation of power or the sourcing of sales.
These contracts are designated as cash flow hedges. The effectiveness
tests may demonstrate that the hedges, or part of the hedges, are
not effective. The non-effective part of the fair value movements
of the hedges is recognised in the income statement.
Net turnover is recognised in the period in which the supply of goods
and services takes place at the fair value of the transaction. In addition,
turnover is only recognised if the risks and rewards with regard to
the ownership have effectively been transferred to the customer, if it is
probable that the economic benefits will flow to Nuon and the proceeds
can be measured reliably.
Other operating income
Other operating income consists of the following items:
■■ Amortisation of construction contributions, government grants,
investment premiums and operating subsidies: please refer to
the specific accounting policies for these items;
■■ Result from the disposal of assets (including subsidiaries, joint
ventures and associates): this relates to the net proceeds from the
disposal and the carrying amount of the disposed asset. Gains and
losses from the disposal of assets are presented as a net amount;
■■ Services to external parties such as activities of the Customer
Service Center.
Cost of energy, raw materials and supplies
This item consists of the cost of gas and electricity purchased from
third parties and the raw materials used for the generation of power
for supply to Nuon’s customers. The results of derivatives, such as
energy commodity contracts, swaps and options, in order to hedge
financial risks (mainly price risks) of purchase contracts are recognised
under this item. The cost of raw materials, consumables and supplies
used for the supply of goods and services are recognised under this item.
Own work capitalised
This item includes the cost of own personnel, incurred on capital
expenditure projects.
Financial income
This item consists of the interest income on financial interestbearing assets being loans, receivables and cash and cash equivalents,
determined using the effective interest method.
Financial expenses
This item consists of the following:
■■ Interest expense: this includes the interest expense on interestbearing debt, determined using the effective interest method.
In addition, expenses related to the time value of provisions are
included. The costs of financing, such as costs of letters of credit,
commitment fees, etc., are also reported under this item;
■■ Foreign exchange results: foreign exchange results arising from
the translation of transactions denominated in foreign currencies
and the translation of financial assets and liabilities and derivatives
in foreign currencies are reported under this item. The exchange rate
differences arising on cash flow hedges and net investment hedges
are initially recognised in Shareholders’ equity;
■■ Fair value movements of interest derivatives (including those that
are used as fair value hedges) and the corresponding adjustment
of the amortised cost value of hedged financial assets and liabilities
for the movement in the value of the hedged risk.
Policies for the consolidated cash flow statement
The cash flow statement is prepared in accordance with the indirect
method. The movement in Cash and cash equivalents is derived from
Profit after taxation according to the income statement. Exchange rate
differences are eliminated as far as they did not lead to cash flows.
In addition, non-cash transactions (such as finance leases) are excluded
from the Cash flows used in/from investing and/or financing activities.
The financial consequences of the acquisition or sale of subsidiaries,
joint ventures and associates are shown separately in the Cash flow
used in investing activities. As a result, the cash flows presented do not
necessarily reconcile with the movements in the items in the consolidated
statement of financial position.
The definition of cash and cash equivalents used in the cash flow statement
and statement of financial position includes the bank overdrafts, and are
recognised under interest-bearing debt.
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78 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Note 1 Property, plant and equipment
Property, plant and equipment
€ million
Power
generation
facilities
Land and
buildings
Gas fields and Other plant
Assets under
platforms and equipment construction
Networks
Total
As at 1 January 2010
Historical cost
Accumulated depreciation
and impairments
Carrying amount
as at 1 January 2010
117
1,461
424
556
885
892
4,335
-52
-723
-168
-177
-468
–
-1,588
65
738
256
379
417
892
2,747
948
Movements 2010
Capital expenditure
2
1
4
12
49
880
New consolidations
–
–
–
–
13
–
13
Disposals
–
–
–
–
-3
-1
-4
Depreciation
-3
-82
-18
-142
-71
–
-316
Impairments
-8
–
-29
–
-29
–
-66
–
–
6
–
–
–
6
1
126
80
79
60
-267
79
-8
45
43
-51
19
612
660
Historical cost
120
1,588
505
647
991
1,504
5,355
Accumulated depreciation
and impairments
-63
-805
-206
-319
-555
–
-1,948
57
783
299
328
436
1,504
3,407
–
180
-71
–
-104
-5
–
–
–
-76
104
50
-21
–
–
26
-78
–
-5
–
–
2
-3
-3
-4
–
7
-1
7
-14
-105
-1
–
95
-18
–
-16
-15
–
39
73
81
–
-298
-38
–
–
8
-328
38
-31
-75
-13
3
78
–
1,006
-10
–
-15
–
-282
699
1,053
-372
-236
-33
42
-21
433
125
1,749
484
–
839
2,228
5,425
-69
-880
-125
–
-481
-30
-1,585
56
869
359
–
358
2,198
3,840
Reversal of impairments
Transfers and other movements
Total
As at 31 December 2010
Carrying amount
as at 31 December 2010
Reclassifications 2011
Reclassification of historical
cost
Reclassification of depreciation
and impairments
Total
Movements 2011
Capital expenditure
Disposals
Depreciation
Impairments
Reversal of impairments
Transfers and other movements
Total
As at 31 December 2011
Historical cost
Accumulated depreciation
and impairments
Carrying amount
as at 31 December 2011
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79
Borrowing costs
The borrowing costs of Nuon that can be attributed to the acquisition,
production or construction of qualifying assets amounted to € 13 million
(2010: € 14 million) and are included in the capital expenditure.
Operating leases
Property, plant and equipment includes € 84 million (2010: € 74 million)
relating to assets for which operating lease contracts have been agreed
upon with third parties and for which Nuon is the lessor.
Reclassification 2011
From the alignment of our asset classification with Vattenfall accounting
principles, a reclassification was made between different categories
of € 180 million of historical costs and € 76 million of related
accumulated depreciation.
Capital expenditures
Capital expenditure in 2011 mainly relates to investments in the
power plant Nuon Magnum in Eemshaven and two gas-fired power plants
in Amsterdam and Diemen.
Disposals
The disposals mainly relate to the sale of Nuon E&P and Nuon Belgium.
in an additional value component. This flexibility value is mainly
dependent on two key elements: the volatility of energy prices and
the technical flexibility of the power plants, which affects decisions
in the daily production optimisation. The calculation models that
have been developed in previous years and which include both of these
factors were further evaluated and improved in 2011 in a group-wide
process involving experts from Vattenfall Group Asset Management,
Vattenfall Energy Trading, Group Risk Management and Energy
Business Management. Scientific institutes have reviewed the models.
The main driving force behind the estimated flexibility value for the
power-generating assets in the Generation division segment consists
of the effects of production optimisation; however, calculation of the
flexibility value is also affected by a multitude of simulation scenarios
for future prices of electricity, fuel and CO2 emission allowances.
The calculation of these scenarios takes into account fundamental
market dynamics, including the historical as well as the anticipated
future level of volatility. Future cash flows have been discounted to
value in use using a discount rate of 7.0% (2010: 8.6%) before tax.
In the year’s impairment testing, the calculated value in use exceeds
the carrying amount, which is why no impairment has been recognised.
A change of the discount rate by +/- 0.5% would affect the estimated
value in use for the Nuon group by approximately € -/+ 78 million
and would not lead to an impairment.
Impairments and reversal of impairments
In 2011 a net impairment gain of € 9 million (2010: € 60 million charge)
was recognised, consisting of reversals of previously recognised
impairments on Heat networks totalling € 42 million (2010: € 6 million)
offset by an impairment charge of € 33 million (2010: € 66 million)
mainly relating to an impairment on the CO2 separation pilot plant.
As part of the Vattenfall group, impairment testing has been conducted
through calculation of the value in use at a Business unit’s level. As a
result of Vattenfall’s new organisation, the definition of cash-generating
units (CGUs) of Nuon also changed per 1 January 2011. The adjustment
in definition of CGUs resulted in a reversal of previously recognised
impairments on Heat networks of € 42 million.
The main assumptions that management has used in calculating
projections of future cash flows for the Business units within the
Generation segment are – for the power-generating assets – based
on forecasts of the useful life of the respective assets. In other respects,
they are based on the business plan for the coming five years, after
which their residual value is taken into account, based on a growth
factor of 1.5%. The calculated revenues in these forecasts are based
on long-term pricing projections, which are the result of a very large
number of simulations. In calculations of the value of power-generating
assets in the Generation segment, a so-called flexibility value is taken
into account. Most of the power-generating assets have a technical
degree of flexibility that gives the owner the opportunity to adapt
generation to current prices in the market. If spot prices are low, a
production plant can reduce its generation or even go off line during
the time in which generation would be unprofitable. On the other hand,
a production plant can be brought back on line or be ramped up in
cases where spot prices allow for positive production margins. In option
valuation theory, this asymmetry in potentially earned margins results
The main assumptions that management has used in calculating the
projected future cash flows for the Distribution and Sales division are
based on the business plan for the coming five years and residual value,
based on a growth factor of 1.5%. Future cash flows have been discounted
to value in use using a discount rate of 7.0% (2010: 8.6%) before tax.
In the year’s impairment testing, the calculated value in use exceeds
the carrying amount, which is why no impairment has been recognised.
A change of the discount rate by +/- 0.5% would affect the estimated
value in use of the CGUs in the Nuon Distribution and Sales division
by approximately € -/+ 76 million and would not lead to an impairment.
The main assumptions that management has used in calculating
the projected future cash flows for the wind power operations in
the Renewables division are based on forecasts of the useful life
of the respective assets and the commercialisation of planned projects
in the existing investment plan. The calculated revenues in these
forecasts are based on Vattenfall’s long-term price forecasts, which
are the result of a large number of simulations. Future cash flows have
been discounted to value in use using a discount rate of 7.0% (2010: 8.6%)
before tax. In the year’s impairment testing, the calculated value in
use exceeds the carrying amount, which is why no impairment has
been recognised. A change of the discount rate by +/- 0.5% would
affect the estimated value in use by approximately € -/+ 7 million
and would not lead to an impairment.
Value of assets held under finance leases
The value of assets held under finance leases totalled € 15 million as
at year-end 2011 (2010: € 18 million) and is classified under Other plant
and equipment. These finance leases relate to property, plant and
equipment for the production of renewable energy, such as wind farms,
solar and biomass generation assets.
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80 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
The heating networks belonging to Alliander N.V. that had been placed
within a cross-border lease were subleased in mid-2008 via subleases
to N.V. Nuon Warmte, now part of Nuon. This was done in connection
with the implementation of the Independent Network Operation Act
(WON) and the preparations for the unbundling of our former
shareholder n.v. Nuon. The strip risk (the part of the termination
value – i.e. the possible compensation payable by Nuon to N.V. Alliander
in the event of premature termination of the transaction – that cannot
be settled from the deposits and investments held for this purpose)
related to these subleased assets is borne by Nuon and amounted to
$ 47 million as at year-end 2011 (2010: $ 58 million). As these subleases
are still operational, no liability for this strip risk is included in the
statement of financial position.
Note 2 Intangible assets
Intangible assets
€ million
Exploration and
evaluation assets
Goodwill
Other
intangible assets
Total
As at 1 January 2010
Historical costs
210
158
38
406
Accumulated amortisation and impairments
-43
–
-3
-46
Carrying amounts as at 1 January 2010
167
158
35
360
Movements 2010
Capital expenditure and new consolidations
–
2
2
4
Impairments
–
-2
-5
-7
Transfers and other movements
1
-62
-1
-62
Total
1
-62
-4
-65
As at 31 December 2010
Historical cost
211
98
39
348
Accumulated amortisation and impairments
-43
-2
-8
-53
Carrying amount as at 31 December 2010
168
96
31
295
3
-105
–
–
–
-102
–
-96
–
–
–
-96
42
–
-1
-1
21
61
45
-201
-1
-1
21
-137
Accumulated amortisation and impairments
93
-27
–
–
102
-10
195
-37
Carrying amount as at 31 December 2011
66
–
92
158
Movements 2011
Capital expenditure and new consolidations
Disposals
Impairments
Amortisation
Transfers and other movements
Total
As at 31 December 2011
Historical cost
The Other intangible assets item comprises concessions, permits and
licences. Concessions, permits and licences are amortised over their
term. Transfers and other movements relates to reclassifications from
or to Property, plant and equipment.
Capital expenditures and new consolidations
The capital expenditures and new consolidations in 2011 partly relate
to the acquisition of Zuidlob Wind B.V.
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81
Disposals
The disposals relate to the sale of Nuon E&P.
Goodwill
The goodwill as at 31 December 2011 relates to subsidiaries acquired
in former years (mainly in the retail business).
At the end of 2011, the goodwill on the statement of financial position
was tested for impairment. The value in use was taken as a basis for
this calculation. The value in use was determined on the basis of the
most recent business and strategic plan (including a long-term outlook),
using a discount rate before taxation of 7.0% (2010: 8.6%) for the ­
cash-generating units to which goodwill is allocated. Based on a
sensitivity analysis, an increase of the pre-tax discount rate by 0.5%
would have only a limited impact on the outcome of the impairment
test. The change in discount rate compared to 2010 was due in part
to movements in market interest rates.
The main assumptions on which the business plan and long-term
outlook are based are estimates with regard to the most recent tariff
estimates and estimates of operating and other expenses and capital
expenditure. To a large extent, these estimates are based on past
experience. The strategic plan covers a period of five years, and the
terminal value is calculated on the basis of the projected cash flows
at the end of that period. A prudent growth rate is assumed for the
years after the strategic plan period.
Note 3 Investments in associates and joint ventures
Investments in associates and joint ventures
€ million
Associates
2010
2011
28
17
Carrying amount as at 1 January
Joint ventures
2011
2010
83
93
Movements
10
Total
4
–
-5
-1
-2
Carrying amount as at 31 December
26
Investments
Disposals
Share in results
Dividends received
11
–
–
21
-19
2
-10
28
85
83
–
2
-1
–
-2
15
-23
Financial information of investments in associates
As at 31 December
€ million
Assets
Liabilities Revenue
Profit/
(Loss)
% Interest Carrying
held
amount
2011
Other
14
12
Total
26
B.V. NEA, the Netherlands
64
–
–
–
23
2010
B.V. NEA, the Netherlands
68
–
3
4
23
14
Other
14
Total
28
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82 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Financial information of investments in joint ventures
As at 31 December
€ million
Noncurrent
assets
Current
assets
Long-term Short-term
liabilities liabilities Revenue
Provisions
Expenses
% Interest
held
15
6
50
50
Carrying
amount
2011
Other
75
–
10
Total
85
NoordzeeWind C.V., the Netherlands
Westpoort Warmte B.V.
160
61
19
8
7
–
20
55
1
12
55
8
2010
NoordzeeWind C.V., the Netherlands
170
10
6
22
3
42
15
50
74
Westpoort Warmte B.V.
58
8
–
50
15
7
5
50
–
Other
9
Total
83
Note 4 Other financial assets
Other financial assets consist mainly of loans and receivables
(including incremental costs) with related parties.
Note 5 Derivatives
Derivatives
As at 31 December
€ million
Current
assets
2011
Non-current
assets
2011
2010
2010
Short-term
liabilities
2011
2010
Long-term
liabilities
2011
2010
Trading derivatives
Commodity contracts oil
Commodity contracts gas
Commodity contracts coal
Commodity contracts power
Commodity contracts other
Foreign exchange contracts
Interest rate contracts
Other derivatives
Total
177
1,059
234
516
221
72
–
–
2,279
204
816
516
612
78
47
–
–
2,273
60
239
163
125
33
36
–
–
656
101
367
265
135
136
46
–
–
1,050
192
868
220
490
233
63
–
3
2,069
239
782
528
603
62
29
7
–
2,250
281
177
42
102
35
15
–
–
652
307
275
97
145
101
37
–
–
962
Cash flow hedges
Commodity contracts oil
Commodity contracts gas
Commodity contracts coal
Commodity contracts power
Commodity contracts other
Foreign exchange contracts
Total
Effect from netting agreements
Total
12
60
8
1
26
8
115
4
155
37
26
–
13
10
1
243
4
–
28
-1,811
-1,591
583
925
–
21
25
87
16
14
11
117
4
40
164
35
6
213
-422
-589
262
625
–
22
9
–
1
42
–
15
8
5
–
1
–
33
57
32
–
60
47
-1,786
-1,599
-447
-581
496
708
265
428
1
4
2
11
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Overall, the gross value of the derivatives decreased compared to the
previous year as at year-end 2011 cash settlements of derecognised
derivative assets and derecognised derivative liabilities have been
netted. Also, the limited volatility in market prices had a decreasing
effect on the total derivatives balances.
Note 6 Inventories
Inventories
As at 31 December
€ million
2011
2010
Inventories at fair value
32
1
153
193
Total
186
219
Raw materials
Finished goods
Inventories at fair value include coal, gas, emission allowances
and oil inventories.
23
3
In 2011, a devaluation of inventories valued at lower of cost and
net realisable value has occurred for € 1 million (2010: € 1 million).
Note 7 Trade and other receivables
Trade and other receivables
As at 31 December
€ million
Trade receivables - regular sales
Trade receivables - trade activities
Provisions for impairments on trade receivables
2011
461
438
-51
2010
554
250
-68
Trade receivables (net)
848
736
Taxes and social security premiums
17
54
390
41
15
Receivables from related parties
Other receivables
Accrued income and prepayments
Total
The net balance of trade receivables from regular sales related mainly
to energy receivables in the business and consumer markets. Receivables
from trading activities have a maximum credit term of one month since
they are normally settled in the month following invoicing.
–
704
382
1,350
1,837
At the end of 2011, the impairments on trade receivables totalled
€ 51 million (2010: € 68 million). The decrease is mainly due to
the divestment of Nuon Belgium. An impairment charge on trade
receivables of € 25 million (2010: € 21 million) was charged to
the income statement in 2011.
Current tax assets
As at 31 December
€ million
2011
2010
Corporate income tax
22
17
Total
22
17
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Note 8 Cash and cash equivalents
Cash and cash equivalents
As at 31 December
€ million
2011
Cash held at banks
Vattenfall group cash pool
Deposits
Vattenfall group deposits
Total
The effective interest rate on credit balances available on demand and
short-term deposits was 0.63% (2010: 0.29% to 0.81%). Cash and cash
equivalents are denominated almost entirely in euros. Cash and cash
equivalents included cash and deposits of € 83 million (2010: € 27 million)
to which Nuon does not have free access. This amount relates to cash
held at banks which is provided as collateral and for margin call payments
to cover exchange-based commodity trades.
The balance of cash held at banks is presented gross and therefore
excludes the credit balance of cash held at banks of € 0 million
(2010: € 182 million). This amount is classified as short-term interestbearing debt.
Note 9 Shareholders’ equity
Authorised, issued and paid-up share capital
The authorised share capital of Nuon amounts to € 1,500,000,000
consisting of 150,000,000 class A shares and 150,000,000 class B
shares, each with a nominal value of € 5 per share. The total number
of issued and paid-up shares amounts to 49,246,182 class A shares and
87,548,782 class B shares totalling € 683,974,820. The class B shares,
equal to 64% of the total number of outstanding shares, are held
by Vattenfall.
In accordance with the ‘share sale and purchase agreement’ between
the class A shareholders in Nuon, Vattenfall AB and Nuon, 15% of the
class A shares were delivered to Vattenfall AB on 1 July 2011 at € 72.10
per share. These shares have subsequently been converted into B shares.
The remaining class A shares, representing a 36% stake in Nuon, will
be sold to Vattenfall AB at € 72.10 share in the coming period. The last
tranche will be acquired as per 1 July 2015. After each subsequent sale,
the sold class A shares will also be converted into class B shares.
2010
181
115
3
–
306
299
1,204
364
9
525
The class A shareholders are entitled to an annual fixed preferred
dividend on the remaining class A shares, amounting to 2% of the
outstanding predetermined purchase price for the outstanding class A
shares. As these payments qualify as a liability rather than equity in
accordance with IAS 32, a liability of € 430 million was recognised
as at 1 July 2009, as a charge to Other reserves. This represented the
net present value of the fixed dividends payable until 1 July 2015.
As per 31 December 2011 this liability amounted to € 244 million.
Interest is accreted to the dividend liability. The dividend becomes
payable every year around 30 June of the following year, with a final
payment around 30 June 2015. As a result of presenting this future
dividend distribution as a liability, the future profit appropriation has
been partially determined in advance. Annually, part of the profit equal
to the 2% preferred dividend for that financial year will be allocated to
Other reserves. If insufficient profits are available, future profits covering
the deficit will be allocated to Other reserves.
Share premium
Share premium consists of the additional paid-up or contributed value
to Nuon. Under the ‘share sale and purchase agreement’, no dividend
distributions can be made from the freely distributable reserves,
including the share premium, until all class A shares have been sold
to Vattenfall AB.
Hedge reserve and currency translation reserve
The changes in the fair value of derivatives, net of taxes, which
effectively hedge the risk of changes in future cash flows, are included
in the Hedge reserve. The exchange rate differences resulting from the
assets and liabilities of subsidiaries with a different functional currency
being translated at closing rate while their results are translated at an
average rate, are recognised in Other comprehensive income and included
in the Currency translation reserve within Shareholders’ equity. Neither
the Hedge reserve nor the Currency translation reserve is freely distributable.
Rights and obligations related to class A and B shares
The ‘one share, one vote’ principle applies to the issued shares.
Further information is provided in the Corporate Governance section
of the annual report on page 18.
Other reserves
Other reserves consist mainly of retained earnings. Results which are not
distributed as dividend to class B shareholders are in principle added to
the other reserves. The Other reserves are not freely distributable until all
class A shares have been sold to Vattenfall AB.
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Note 10 Interest-bearing debt
Interest-bearing debt
€ million
2011
Carrying amount as at 1 January
2010
736
650
49
–
-138
-182
-115
5
-381
235
Movements
Additions and loans received
New consolidations
Loans repaid
Bank overdrafts repaid
Dividend liability class A shareholders
Other movements
Total
Carrying amount as at 31 December
Loans repaid include € 103 million relating to the transfer of
external green loans to Vattenfall AB. This transfer was settled in cash.
Bank overdrafts repaid in 2011 relates to the negative cash and cash
equivalents balances as at 31 December 2010.
3
-61
–
-101
10
86
355
736
The carrying amount of the long-term interest-bearing debt, including
the short-term part, is as follows.
Short- and long-term interest-bearing debt
As at 31 December
€ million
Green loans
Banks
Debt to class A shareholders
Other
Total
Some of the company’s credit contracts with respect to the green loans
are subject to covenant clauses, under which the company is required
to meet certain key performance indicators. Nuon fulfilled all indicators
as required in these contracts.
Effective interest rate
2010
2011
3.2%
3.5%
–
4.8%
3.4%
3.3%
7.4%
4.8%
Short-term part
2011
2010
23
47
–
182
71
115
4
–
98
344
Long-term part
2011
2010
58
150
–
3
173
234
26
5
257
392
At year-end 2011 (as well as 2010), the carrying amount of the interestbearing liabilities was denominated almost entirely in euros.
Maturities of interest-bearing debt
As at 31 December
€ million
2011
Less than 1 year
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
Between 4 and 5 years
Over 5 years
Total
2010
98
99
47
58
17
36
344
355
736
93
92
45
98
64
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Short-term interest-bearing debt amounting to € 98 million at year-end
2011 (2010: € 344 million) comprised the short-term part of the ­
long-term debt in addition to liabilities in respect of employee schemes
(mainly deposit schemes) and current account liabilities with
credit institutions.
Note 11 Deferred income
Deferred income
€ million
2011
Carrying amount as at 1 January
2010
166
–
4
-8
8
-8
170
166
New consolidations
Contributions received
Amortisation recognised as income
Transfers and other
Carrying amount as at 31 December
Deferred income relates to construction contributions, government
grants, investment premiums and operating subsidies received.
These amounts were mainly attributable to ‘green’ investments.
157
1
23
-7
The amortisation periods of these amounts are equal to the depreciation
periods of the underlying assets and range from 10 to 50 years.
Note 12 Provisions for employee benefits
Provisions for employee benefits
As at 31 December
€ million
Termination benefits
Jubilee benefits
Long-term sickness leave and disability benefits
Unemployment benefits
Reduction in working hours older employees
Other
Total
Pensions
Nuon has various pension and similar plans for its current and former
employees. The majority of the pension obligations have been transferred
to the ABP pension fund and the ‘Metaal en Techniek’ pension fund.
In addition to these two main pension plans, Nuon has a number of
other defined benefit plans that are not material. The ABP and ‘Metaal
en Techniek’ plans can be characterised as multi-employer plans. The
pension benefits offered by these funds are in fact defined benefit plans.
In principle, a pro rata share of the defined benefit obligation, the plan
assets and the costs associated with the plan should be included in
Nuon’s financial statements. However, as Nuon does not have access
Short-term part
2010
2011
9
1
5
2
4
1
22
6
1
3
2
4
1
17
Long-term part
2011
2010
1
1
9
11
4
4
4
1
3
7
1
4
22
28
to the required information, both pension plans are treated as defined
contribution plans. If there is a contractual agreement with a multiemployer plan determining how a surplus is distributed to the
participants or a deficit is to be financed, and the plan is accounted
for as a defined contribution plan, a receivable or liability following
from the agreement should be recognised in the statement of financial
position. The resulting gains or losses are recognised in the income
statement. The pension plans that are transferred to the ABP pension
fund and the ‘Metaal en Techniek’ pension fund do not contain the
aforementioned contractual agreements. As a result, no receivable
or liability has been recognised in the statement of financial position.
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Termination benefits
The provision covers payments and/or supplements to benefits paid
to employees whose employment contract has been terminated.
These benefits and supplements are based on the Social Plan operated
by Nuon and individual arrangements. The Social Plan is periodically
renegotiated and established during the Collective Labour Agreement
negotiations. In 2011 a net amount of € 10 million (2010: € 6 million)
was added to the provision for new restructuring programmes.
The provision for termination benefits totalled € 10 million at the end
of 2011 (2010: € 7 million).
Other provisions for employee benefits
Nuon operates a number of other employee benefit schemes,
including the following:
■■ Jubilee benefits: this benefit covers the jubilee benefits paid
to employees after 10, 20, 30 and 40 years of service;
■■ Long-term sickness benefits: this benefit covers the obligation
to continue paying all or part of an employee’s salary during
the first two years of sick leave;
■■
■■
■■
Disability benefits: Nuon is the risk-bearer within the meaning
of the Income and Employment Act (WIA); this benefit covers
the obligation in respect of Nuon employees who have become
partly or fully incapacitated for work;
Unemployment benefits: Nuon is the risk-bearer within the meaning
of the Unemployment Act (WW); if a Nuon employee becomes
unemployed, the unemployment benefit they receive is borne by
Nuon for a period of between six months and five years, depending
on the employment history of the employee concerned;
Reduction of working hours of older employees: in the light of
the legal measures in relation to early retirement, it was agreed
in the 2005 Collective Labour Agreement to create a transitional
scheme in which older employees would work less in the future.
Movements in provisions for employee benefits
The following table shows the movements in the provisions
for termination benefits and other employee benefits.
Movements in provisions for employee benefits
€ million
Termination benefits
As at 1 January 2010
Releases to income
Other
employee benefits
Total
7
40
47
-2
-3
-5
Additions
8
7
15
Interest accretion
–
1
1
-6
-5
-11
Benefits paid
Actuarial gains and losses that are recognised immediately
–
-2
-2
Total
–
-2
-2
As at 31 December 2010
7
38
45
-1
11
–
-7
–
6
1
-11
-1
17
1
-18
Total
–
3
–
-4
–
-1
As at 31 December 2011
10
34
44
Releases to income
Additions
Interest accretion
Benefits paid
Actuarial gains and losses that are recognised immediately
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The main assumptions used in determining the provisions are given below.
Assumptions
As at 31 December
2011
2010
Generation table
2010-2060
3.0%
2.5%
2.5%
Mortality table
Discount rate
Expected future salary increases
Expected increase in disability benefits
GBM/GBV 00-05
3.3%
2.5%
2.5%
Note 13 Other provisions
Other provisions
€ million
Environment
and dismantling
Carrying amount as at 1 January 2010
76
Onerous
contracts
Other
22
Total
58
156
Movements 2010
Additions
12
3
11
26
Withdrawals
-1
-2
-9
-12
Release to other expenses
-2
-13
-27
-42
Interest accretion
–
–
–
–
Other movements
–
8
-1
7
Total
9
-4
-26
-21
85
18
32
135
1
-1
3
-68
-65
–
-3
–
–
-3
9
-16
–
–
-7
10
-20
3
-68
-75
20
15
25
60
Carrying amount as at 31 December 2010
Movements 2011
Additions
Release to other expenses
Interest accretion
Companies sold
Total
Carrying amount as at 31 December 2011
The environmental restoration provision, as included in Environment
and dismantling, covers expected obligations related to soil pollution.
The provision for dismantling costs, as included in Environment and
dismantling, is formed for the dismantlement and removal of assets,
including gas caverns and drilling rigs and the expenses to be incurred
to restore certain sites to their original condition.
The decrease in environment and dismantling provision included
in Companies sold results from the divestment of Nuon E&P.
The provision for onerous contracts relates mainly to obligations in
relation to the purchase of green certificates from Norwegian wind
farms and contracts for the construction of heat pumps.
The item Other includes provisions for various claims and litigation.
An amount of € 9 million (2010: € 29 million) of the Other provisions
is expected to lead to a cash outflow in 2012.
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Note 14 Deferred taxation
The balances and gross movements of the deferred tax assets
and deferred tax liabilities were as follows:
Gross movement in deferred tax assets/(liabilities)
€ million
Property,
plant and
equipment
Carrying amount
as at 1 January 2010
Intangible
assets
Non-settled
Settled
derivatives derivatives
Tax
losses
Provisions
Other
Total
-64
-79
16
-3
12
10
4
-104
-72
31
-39
–
-4
6
4
-74
–
–
-92
1
–
–
–
-91
Movements 2010
Charged to income
Charged to other
comprehensive income
Reclassifications and
other movements
Total
Carrying amount
as at 31 December 2010
-4
–
–
–
–
–
–
-4
-76
31
-131
1
-4
6
4
-169
-140
-48
-115
-2
8
16
8
-273
Of which:
- Deferred tax asset
- Deferred tax liability
–
–
–
–
8
–
–
8
-140
-48
-115
-2
–
16
8
-281
153
-78
48
–
–
3
–
–
-4
-4
3
-10
–
-9
200
-98
–
–
101
–
–
–
–
101
-3
72
-9
39
–
104
–
–
–
-8
–
-7
3
-6
-9
194
-68
-9
-11
-2
–
9
2
-79
Movements 2011
Disposals
Charged to income
Charged to other
comprehensive income
Reclassifications and
other movements
Total
Carrying amount
as at 31 December 2011
Of which:
- Deferred tax asset
- Deferred tax liability
–
–
–
–
–
–
–
–
-68
-9
-11
-2
–
9
2
-79
The deferred tax liabilities for property, plant and equipment and
intangible fixed assets mainly represent the difference between
the carrying value and the value for tax purposes of the assets of the
power-generating facilities and are recorded at 25.0% (2010: 25.5%).
valuation of derivatives for tax purposes and the valuation in the
financial statements. The settled derivatives refer to cash-settled
derivatives of which the fair value movements are not yet recognised
in the income statement as cash flow hedge accounting is applied.
The deferred tax liabilities in respect of derivatives reflect the temporary
differences – measured at the prevailing tax rate – between the
The disposals in 2011 related to the sale of Nuon E&P and Nuon Belgium.
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Unrecognised deferred tax assets
Unrecognised deferred tax assets relate to the temporary differences in
the valuation of tax losses carried forward and amounted to € 12 million
(2010: € 10 million). These tax losses carried forward relate mainly to
losses in foreign operations, where insufficient taxable profit is considered
to be available in the foreseeable future to recognise the losses carried
forward. These tax losses on the foreign operations do not have an
expiration date.
Note 15 Trade and other payables
Trade and other payables
As at 31 December
€ million
2011
2010
198
515
49
40
450
15
Trade payables
Invoices to be received from energy supplies and trading activities
Deposits received
Payables to related parties
Other payables
Other taxes and social securities
Total
145
1,131
177
42
254
284
1,267
2,033
Other payables included short-term employee benefit accruals of
€ 65 million at the end of 2011 (2010: € 74 million) relating to salaries
to be paid, holiday allowances, bonuses payables and other personnel
expenses to be paid.
Note 16 Leases
Receivable from leases
The total future minimum lease receipts from non-cancellable operating
leases were as follows:
Operating lease receivables
As at 31 December
€ million
2011
Less than 1 year
Between 1 and 5 years
Over 5 years
Total
These operating lease receivables relate mainly to leases of heating
equipment to consumers.
2010
30
91
19
99
140
136
32
5
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Lease payables
Finance lease payables
As at 31 December
€ million
Less than 1 year
Between 1 to 5 years
Over 5 years
Total
2010
Future minimum lease obligations
8
12
–
20
Future finance charges on finance leases
–
-1
–
-1
Present value of finance lease obligations
8
11
–
19
Future finance charges on finance leases
4
–
5
–
2
–
11
–
Present value of finance lease obligations
4
5
2
11
2011
Future minimum lease obligations
Finance lease payables relate to property, plant and equipment mainly
for the generation of renewable energy, such as wind farms and solar
and biomass generation assets.
The total future minimum lease payments in respect of non-cancellable
operating leases were as follows.
Operating lease payables
As at 31 December
€ million
2011
2010
218
Over 5 years
81
227
39
Total
347
342
Less than 1 year
Between 1 and 5 years
Nuon has off-balance operating lease payables in respect of district heating
networks, buildings, company cars, IT assets and gas storage assets.
64
60
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Note 17 Contingent assets and liabilities
Rights and obligations arising from operating leases
Please refer to note [16] Leases for a breakdown of the rights
and obligations with regard to operating leases.
Capital expenditure and purchasing commitments
The outstanding capital expenditure commitments and other purchasing
commitments at the end of the year are listed below:
Capital expenditure and purchasing commitments
As at 31 December
€ million
2011
2010
1,253
Other purchasing commitments
526
–
Total
526
1,254
Capital expenditure commitments regarding property, plant and equipment and intangible assets
Sales and purchase commitments
Nuon has concluded a number of long-term purchase contracts with
terms varying from 2012 to 2017. In addition, Nuon has concluded ­
long-term sales contracts on varying terms and conditions. Nuon enters
into energy commodity contracts for the sale and purchase of electricity,
oil, gas, coal and emission allowances. The energy commodity contracts
that are held for trading purposes and the energy commodity contracts
that are designated as hedging instruments are recognised on the
statement of financial position at fair value. These contracts are not
generally settled by means of physical delivery but by concluding
opposite transactions in which only the net cash flows are settled.
The energy commodity contracts that are designated for own use are
generally settled by physical delivery. The majority of these contracts
are also valued at fair value. Hedge accounting is applied if possible.
1
N.V. Nuon Energy has issued declarations of joint and several liabilities
pursuant to article 403, Part 9, Book 2 of the Netherlands Civil code for
a number of its subsidiaries. The significant group companies for which
such a declaration is issued are included in the list of subsidiaries,
joint ventures and associates included in note [28] Related parties of
the consolidated financial statements. As partners in a number of general
partnerships, subsidiaries of Nuon are liable for the obligations of these
partnerships. The exposure under these obligations is not considered
to be significant.
N.V. Nuon Energy and the majority of its subsidiaries form a fiscal unity
for both corporate income tax and VAT purposes. Consequently, every
legal entity forming part of the fiscal unity is jointly and severally liable
for the tax liabilities of the legal entities forming part of the fiscal unity.
Contingent liabilities
Contingent assets
At the reporting date, Nuon (including its subsidiaries, associates
and joint ventures) was involved in a number of legal proceedings
and investigations by tax authorities. Provisions have been made
as far as deemed necessary.
At the end of 2005, Nuon and Statkraft reached agreement on the
settlement of the obligation to purchase green energy certificates
from the Norwegian Smøla 1 and 2 and Hitra wind farms. Nuon retains
the right to 50% of the gain on any future sale of green certificates from
these three wind farms.
On the instruction of Nuon, bank guarantees had been issued
amounting to € 23 million at the end of 2011 (2010: € 22 million)
and letters of credit had been issued amounting to € 9 million
(2010: € 8 million).
Note 18 Net turnover from sales of goods and delivery of services
Net turnover from sales of goods and delivery of services
For the year ended 31 December
€ million
2011
2010
2,194
Heat and other products
2,066
1,797
587
Total
4,450
5,458
Electricity
Gas
2,611
653
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Net turnover was affected by the impact of fair value movements of
certain derivatives. These fair value movements relate to the change
The total impact of these fair value movements was € 56 million positive
in 2011 (2010: € 346 million positive).
in value of commodity contracts which are designated for own use.
Note 19 Other operating income
Other operating income
For the year ended 31 December
€ million
2011
2010
Other
8
161
57
Total
169
64
Amortisation of construction obligations
7
The item Other consists mainly of the income related to the services
of the Customer Care Center of € 29 million (2010: € 34 million)
and the gain on the divestment of Nuon Belgium and Nuon E&P.
Note 20 Cost of energy, raw materials and supplies
Cost of energy, raw materials and supplies
For the year ended 31 December
€ million
2011
2010
-1,786
Heat and other products
-1,125
-1,687
-198
Total
-3,010
-3,589
Electricity
Gas
-1,633
-170
Note 21 Cost of sub-contracted work
The cost of sub-contracted work relates mainly to external hires.
Note 22 Employee compensation and benefit expenses
Employee compensation and benefit expenses
For the year ended 31 December
€ million
2011
2010
-333
Other personnel expenses
-333
-33
-36
-10
-2
-11
Total
-425
-425
Wages and salaries
Social security contributions
Pension expenses
Termination benefit expenses
Other long-term employee benefit expenses
-33
-34
-6
-3
-16
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94 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
The other long-term employee benefits consist mainly of medical
benefits for Nuon employees after retirement.
The number of employees (FTE based on a 38-hour working week)
is shown in the following table.
Number of employees (FTEs)
2011
2010
Average
Employed FTEs
5,641
5,859
5,490
5,766
99
254
As at 31 December
Employed FTEs
Number of employees abroad
The decrease of number of employees abroad results mainly
from the divestment of Nuon Belgium.
Note 23 Other operating expenses
Other operating expenses
For the year ended 31 December
€ million
2011
2010
Other
-27
-74
-55
-23
-115
-32
-30
Total
-356
Additions to provisions
Maintenance expenses
Marketing expenses
Costs charged by Vattenfall and its subsidiaries
Related office and ICT expenses
Transportation and travelling expenses
-5
-97
-52
-15
-129
-27
-30
-355
Note 24 Financial income
Financial income
For the year ended 31 December
€ million
2011
Interest income deposits and call money
Financial income current account with Vattenfall
Other financial income
Currency translation differences
Total
2010
3
7
2
1
–
13
15
7
4
4
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Note 25 Financial expenses
Financial expenses
For the year ended 31 December
€ million
2011
Interest on loans and liabilities
Interest added to provisions
Other financial expenses
Currency translation differences
Total
2010
-7
-4
-3
–
-12
-14
-20
–
-6
-2
Note 26 Taxation
Taxation
For the year ended 31 December
€ million
2011
2010
-105
Movement in deferred taxes
-33
-98
Total
-131
-169
Current tax expense
-64
The following table provides a reconciliation between the corporate
income tax rate in the Netherlands and the effective tax rate.
Reconciliation of effective corporate income tax rate
For the year ended 31 December
%
2011
Enacted corporate income tax rate in the Netherlands
2010
25.0
25.5
Impact of:
- Other
-2.0
5.0
0.5
-5.4
0.3
0.4
-0.9
Effective corporate income tax rate
22.9
- Valuation of temporary differences
- Prior-year adjustments
- Non-deductible cost
- Tax-exempt income
- Unrecognised tax losses
- (Foreign) tax rate difference
The statutory tax rate is 25.0% (2010: 25.5%). The difference between
the statutory tax rate and other (foreign) tax rates is disclosed in the
corresponding line. This includes the difference with respect to the
state profit share (which amounts to 50%). Part of the exploration
and production results is exempt from state profit share and the effect
of this is included in the tax-exempt income line.
–
-0.5
1.5
-4.2
0.5
0.3
-0.1
23.0
Note 27 Licences
Nuon has a licence for the supply of electricity and gas and holds licenses
for constructing its district heating network.
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Note 28 Related parties
As of 1 July 2011, 64% of Nuon’s shares are owned by Vattenfall AB
(class B shares). Vattenfall AB has a casting vote in the Supervisory
Board and qualifies as a related party. The remaining 36% (class A
shares) are held by various municipalities and provinces in the
Netherlands (a total of 58 shareholders), none of which has significant
influence (>20%) and they therefore do not qualify as related parties.
Nuon also conducts transactions with subsidiaries within the group
and with other entities in the Vattenfall group. Furthermore, the group
has interests in various associates and joint ventures over which it
exercises significant influence, but no control or joint control of the
operations and financial policy. Transactions with the parties classified
as related parties, some of which are significant, are conducted at
market conditions and prices that are not more favourable than
the conditions and prices offered to independent third parties.
The following list includes the significant subsidiaries, associates
and joint ventures and the share that Nuon holds in these entities.
Significant subsidiaries, associates and joint ventures
As at 31 December 2011
Registered office
%
Subsidiaries
Nuon Isolatie B.V.
Veendam
Nuon Energie Advies B.V.1
Amsterdam
Zuidlob Wind B.V.
Ede
100
100
100
100
100
100
100
100
100
100
100
100
100
100
82.2
100
100
100
100
100
100
100
Amsterdam
22.5
N.V. Nuon Energy Sourcing1
Amsterdam
Nuon Power Generation B.V.1
Utrecht
Nuon Storage B.V.
Amsterdam
N.V. NUON Duurzame Energie1
Amsterdam
Nuon Wind Development B.V.1
Rhenen
Nuon UK Ltd.
Long Rock, Penzance (United Kingdom)
ENW Duurzame Energie B.V.1
Amsterdam
Nuon Power Projects I B.V.1
Amsterdam
Vattenfall Energy Trading Netherlands N.V.1
Amsterdam
N.V. Nuon Warmte1
Arnhem
De Kleef B.V.1
Arnhem
Emmtec Services B.V.1
Emmen
N.V. Nuon Sales Nederland1
Amsterdam
Ingenieursbureau Ebatech B.V.1
Amsterdam
Yellow & Blue Clean Energy Investments B.V.
Amsterdam
n.v. Nuon Customer Care Center1
Arnhem
Nuon Energie und Service GmbH
Heinsberg (Germany)
Nuon Retail Beveiliging Service B.V.1
Didam
Feenstra Verwarming B.V.
Lelystad
Associates
B.V. Nederlands Elektriciteit Administratiekantoor
Joint Ventures
1
NoordzeeWind C.V.
The Hague
Westpoort Warmte B.V.
Amsterdam
N.V. Nuon Energy has issued a declaration of liability for these subsidiaries.
A complete list of subsidiaries, other associates and joint ventures, as required by sections 379 and 414 of Book 2 Title 9 of the Netherlands Civil Code, is filed with the Chamber
of Commerce in Amsterdam.
50
50
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The following transactions have taken place with related parties with
regard to sales and purchases of goods and services, including leases.
Related parties transactions
For the year ended 31 December
€ million
2011
Costs charged by Vattenfall and its subsidiaries
Various goods and services are bought or provided on normal commercial
terms and conditions within Vattenfall. Also a cost-sharing programme
is in place following the change from a country-based to a businessdivision management structure from the start of 2011. This entails
that general divisional costs within the group are recharged to all users
of that division based on estimated usage.
In the ordinary course of business, Nuon has outstanding payables
and receivables with Vattenfall companies (note [8]) as well as with
its associated companies and joint ventures (note [3]). Nuon has also
granted a limited number of loans to related parties. Where relevant,
this has been disclosed in these financial statements.
The members of the board of Nuon have been identified as individuals
who qualify as related parties. The employee benefits related to these
individuals have been disclosed in the Remuneration Report set out
on page 30 of the Annual Report.
Note 29 Information on risks
and financial instruments
General
The following risks can be identified with respect to financial
instruments: market risk, credit risk and liquidity risk. Market risk is
defined as the risk of loss due to an adverse change in market prices.
Credit risk is the risk resulting from counterparty default, including
suppliers, investments and trading counterparties. Liquidity risk is the
risk that the company will not be able to meet its obligations associated
with financial liabilities.
This note provides information on the above-mentioned financial risks to
which Nuon is exposed, the objectives and the policy for the management
of risks arising from financial instruments as well as the management
of capital.
2010
13
-23
Sales of goods and services to associates and joint ventures
12
-15
Market risk
Nuon is exposed to the following market risks:
■■ Electricity and fuel price risk: the risk that the value of a financial
instrument will fluctuate due to changes in commodity prices;
■■ Currency risk: the risk that the value of a financial instrument
will fluctuate due to changes in exchange rates;
■■ Interest rate risk: the risk that the value of a financial instrument
will fluctuate due to changes in market interest rates.
Nuon hedges market risks through the purchase and sale of derivatives.
Nuon seeks to reflect this practice as far as possible in its financial
statements through the application of hedge accounting. All transactions
are carried out within the boundaries and risk limits set.
Electricity and fuel price risk
Nuon is exposed to the impact of market fluctuations in the prices of a
range of energy commodities including, but not limited to, electricity,
coal, natural gas, oil and emission allowances. These risks are a result
of ownership of physical assets (primarily gas- and coal-fired power
plants in the Netherlands), sales positions in electricity and gas
to both households and business customers in the Netherlands and
the proprietary positions taken in the energy commodity markets.
All market risk associated with commodity price risk is measured using
the Value at Risk (VaR) method. VaR calculation quantifies potential
changes in the value of commodity positions as a result of market price
movements. Nuon takes the view that all commodity price risks should
be monitored in the same way, irrespective of their origin – whether as
a consequence of asset ownership, customer sales, hedging or proprietary
trading. The inputs to the VaR calculation are positions (open volumes),
current market prices and the variability of prices (volatilities and
correlations), all of which are updated daily. A 95% confidence level
and a 1-day VaR holding period is used. Thus, the VaR measures the
marked-to-market loss arising from a 1-day change in market prices,
under normal market conditions, which should only be exceeded 5%
of the time (1 day in 20 days).
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It is Vattenfall’s policy to centralise its exposures on group level and
to hedge via different Market Access Points. Vattenfall Energy Trading
Netherlands (‘VET NL’), which is legally part of Nuon, is designated
as Market Access Point for a number of commodities for Vattenfall
and is also active in proprietary trading. Hedge contracts between
VET Germany and VET NL as well as hedge contracts between VET NL
and the market are treated as derivatives and valued against fair value
in the statement of financial position. Since the second quarter of 2011,
the position is closely monitored using a VaR methodology on total
Vattenfall level. The VaR for Vattenfall as at 31 December 2011 amounts
to 7.8 (10.4 on average), which is based on a 99% confidence level.
However, for the best measurement of market risk for Nuon as a whole,
see below the VaR levels for VET NL. These VaR levels mainly include
oil, gas, and coal positions, and some small power positions.
The VaR on Nuon level for trading is:
Trading VaR levels
€ million
2011
Average for the year
As of 1 February 2010, Nuon changed its risk management strategy
as a result of the change in the Vattenfall Energy Trading organisation.
The changed organisation is managed based on the actual operational
structure instead of the legal structure. As of February 2010, all commodity
exposures arising from assets and the customer book are fully hedged
via Vattenfall Energy Trading Germany (‘VET Germany’) and as such
do not result in a direct open position on Nuon level. Nuon treats the
aforementioned contracts with VET Germany as derivatives which are
valued at fair value on the statement of financial position. If possible,
hedge accounting is applied.
■■
Currency risk
General
Nuon is exposed to currency risk on purchases, trading activities, cash
and cash equivalents, loans borrowed and other positions denominated
in a currency other than the euro. Currency risks mainly arise in respect
of positions in USD and, to a more limited extent, in respect of positions
in JPY, CHF and GBP.
■■
Nuon has an exposure-based currency policy. Nuon recognises three
types of risk in relation to foreign currency:
■■ Transaction risk concerns the risk in respect of future cash flows
in foreign currency as well as in relation to statement of financial
positions in foreign currency. This risk is 100% hedged. Subsidiaries
report current positions and risks to the Treasury Department within
Nuon. These positions and risks are principally hedged ‘back-to-back’
with external counterparties through average rate options, crosscurrency interest rate swaps and spot and forward exchange contracts.
The financial settlement of foreign currency purchases of commodities
are, as far as committed, hedged by means of forward exchange
contracts and average rate options (AROs). Nuon classifies the AROs
(forward contracts) to hedge expected transactions as far as possible
2010
4.2
4.3
As at 31 December
6.6
3.3
as cash flow hedges, measured at fair value, with changes in fair value
deferred in equity until the hedged item affects the income statement.
Changes in the fair value of these derivatives are recognised in the
income statement. Other non-euro-denominated monetary assets
and liabilities as well as expected transactions in foreign currency
that are almost certain to be affected are generally hedged with
forward exchange contracts. The expected transactions in foreign
currency include, amongst other things, the purchase of parts of the
planned power station and spare parts to an amount of JPY 18 billion
(€ 182 million) (2010: JPY 21 billion/€ 173 million).
Translation risk concerns the risk in respect of the translation of foreign
subsidiaries with a functional currency other than the euro. The risk
arising from this is only hedged if Nuon expects to terminate the
business activities in question in due course. The net asset value
of the subsidiary can be hedged in this case. If no decision has been
taken to sell or close the subsidiary, the translation differences are
accounted for via Other comprehensive income and included in the
currency translation reserve in Shareholders’ equity;
Economic risk is related to a possible deterioration of the competitive
position as a result of a change in the value of foreign currencies. This
risk is generally not hedged but is considered on a case-by-case basis.
Exposure to currency risks and sensitivity analysis
Nuon’s exposure to significant currency risks based on nominal values
for these foreign currencies is included in the following table. This table
indicates the pre-tax effect that a possible increase or decrease in the
value of foreign currencies relative to the euro would have, assuming
all other circumstances remain unchanged, on Nuon’s financial income
and expenses and shareholders’ equity. In this connection, account was
taken of derivatives concluded to hedge the currency risk. The effects
on shareholders’ equity and income are calculated using the closing rate
at the reporting date.
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Sensitivity analysis currency risk
As at 31 December
€ million
Position
Income
Decrease by
10% relative
to the euro
Equity
Increase by
10% relative
to the euro
Decrease by
10% relative
to the euro
Increase by
10% relative
to the euro
2011
-141
141
–
-5
-11
-16
6
15
21
3
-3
–
-4
4
–
-182
180
-2
–
–
–
–
–
–
–
-18
-18
–
18
18
-40
40
–
–
–
–
–
–
–
–
-4
-4
–
4
4
57
-74
-17
-5
7
2
6
-8
-2
2
–
2
-2
–
-2
-306
-10
12
5
-6
Total hedged position in foreign currencies
287
-4
7
-25
26
Sensitivity cash flow in foreign currencies (net)
-19
-14
19
-20
20
Exposure in USD
Hedged position in USD
Sensitivity cash flow in USD (net)
Exposure in JPY
Hedged position in JPY
Sensitivity cash flow in JPY (net)
Exposure in CHF
Hedged position in CHF
Sensitivity cash flow in CHF (net)
Exposure in GBP
Hedged position in GBP
Sensitivity cash flow in GBP (net)
Total exposure in foreign currencies
2010
Exposure in USD
Hedged position in USD
-338
–
1
13
-16
337
-14
16
-13
16
-1
-14
17
–
–
Sensitivity cash flow in USD (net)
Exposure in JPY
Hedged position in JPY
-193
–
–
–
–
193
–
–
-19
19
–
–
–
-19
19
–
Sensitivity cash flow in JPY (net)
Exposure in CHF
-44
–
–
–
44
–
–
-4
4
–
–
–
-4
4
-1
Hedged position in CHF
Sensitivity cash flow in CHF (net)
Exposure in GBP
23
-5
5
1
Hedged position in GBP
-35
3
-3
–
–
Sensitivity cash flow in GBP (net)
-12
-2
2
1
-1
-554
-5
6
14
-17
Total hedged position in foreign currencies
539
-11
13
-36
39
Sensitivity cash flow in foreign currencies (net)
-15
-16
19
-22
22
Total exposure in foreign currencies
The table includes risk positions from any exposure in foreign currencies,
whether arising from financial instruments or not, while the effects on
income and equity have been presented taking into account financial
instruments only.
The most important effects in the table in respect of the exposure to
currency risks in USD are related to the AROs concluded to hedge the
currency risk on purchased commodities. The effects of the sensitivity
analysis for AROs that are not designated for cash flow hedging are
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recognised in the income statement. Conversely, opposite effects
The following exchange rates regarding the significant currency risks
exposures were applicable as at the reporting date:
take place at the time of the physical delivery of the commodities.
These effects are not presented in the table.
Exchange rates
As at 31 December
€ 1
Spot rate
2011
2010
1.29
0.84
1.22
100.22
USD
GBP
CHF
JPY
Interest rate risk
General
Nuon makes limited use of derivatives such as interest rate swaps to
mitigate the interest rate risk. Nuon had interest-rate derivatives
outstanding with a notional amount of € 10 million at 31 December 2011
(2010: € 10 million).
1.32
0.85
1.24
107.87
The following tables provide insight into the degree to which Nuon
is exposed to changes in the interest rates for financial instruments.
The tables show the effective interest rate as at the reporting date as
well as the maturity date or – if earlier – the contractual interest
repricing date. This means that a long-term loan whose interest reprices
in the forthcoming year is classified in the category Less than 1 year.
Earliest of maturity or repricing
As at 31 December
€ million
Effective
interest rate
Variable/
Fixed
Carrying amounts
Less than
1 year
Between
1 and 5 years
Over
5 years
Total
2011
Other financial assets
Loans and receivables
2.8%
Trade and other receivables
Cash and cash equivalents
Fixed
Variable
Variable
6
165
299
26
–
–
5
–
–
37
165
299
470
26
5
501
Fixed
Variable
Fixed
Fixed
Variable
23
7
71
–
4
40
–
173
1
–
11
–
–
25
–
74
7
244
26
4
Fixed
4
5
2
11
109
219
38
366
Total assets
Interest-bearing debt
Green loans
3.2%
Green loans
Debt to class A shareholders
Other
3.4%
8.0%
Other
Finance lease payables
3.1%
Total short-term and long-term financial liabilities
Trade and other payables
Variable
49
–
–
49
Derivatives
Variable
10
–
–
10
Derivatives
Fixed
–
-10
–
-10
168
209
38
415
Total liabilities
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Earliest of maturity or repricing (continued)
As at 31 December
€ million
Effective
interest rate
Variable/
Fixed
Carrying amounts
Less than
1 year
Between
1 and 5 years
Over
5 years
Total
2010
Other financial assets
Loans and receivables
2.9%
Trade and other receivables
Cash and cash equivalents
Fixed
10
5
22
37
Variable
677
–
–
677
Variable
1,204
–
–
1,204
1,891
5
22
1,918
Total assets
Interest-bearing debt
Green loans
3.5%
Green loans
Banks
4.8%
Banks
Debt to class A shareholders
3.3%
Other
Finance lease payables
3.6%
Fixed
46
85
58
189
Variable
1
7
–
8
Fixed
–
3
–
3
Variable
182
–
–
182
Fixed
115
234
–
349
Variable
–
5
–
5
Fixed
8
11
–
19
352
345
58
755
Total short-term and long-term financial liabilities
Trade and other payables
Variable
177
–
–
177
Derivatives
Variable
10
–
–
10
Derivatives
Fixed
–
-10
–
-10
539
335
58
932
Total liabilities
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Sensitivity analysis in relation to fair value for fixed-interest assets
and liabilities
Nuon has one fixed-interest financial asset that is recognised through
profit or loss at fair value. This represents an interest derivative whose
fair value is not significant. As such no sensitivity analysis has been added
for this derivative.
Sensitivity analysis in relation to cash flows for variable interest
assets and liabilities
A change of 100 basis points in the interest rates as at 31 December
2011 would, assuming all other circumstances remain unchanged,
have a pre-tax effect on Nuon’s shareholders’ equity and income on
an annual basis (financial income and expenses) as indicated in the
following table.
Sensitivity analysis interest rate risk
As at 31 December
€ million
Position
Income
Equity
Decrease by 100 Increase by 100 Decrease by 100 Increase by 100
basis points
basis points
basis points
basis points
2011
Interest rate swaps
404
-10
-4
–
4
–
–
n/a
–
n/a
Sensitivity cash flow (net)
394
-4
4
–
–
1,509
-15
15
–
–
-10
–
–
n/a
n/a
1,499
-15
15
–
–
Variable rated instruments
2010
Variable rated instruments
Interest rate swaps
Sensitivity cash flow (net)
Hedging transactions
Cash flow hedging
Future cash flows where price risks are hedged relate to the purchase
of gas and coal for the company’s own use as well as the purchase of
gas for direct supply to our customers. In this connection, use is made
of variable price contracts where the gas price is indexed to the average
price of coal or oil over a preceding period. The price risks arising from
these purchases are hedged by means of coal swaps and oil swaps.
These swaps are usually expressed in USD. The additional currency risk
is hedged by means of AROs. The fair value changes of these swaps and
AROs that are recognised in the hedge reserve in equity will be released
from the hedge reserve when the cash flows of the underlying item (the
gas contract) take place. For instance, if the above-mentioned example
is followed, the hedge reserve will be released gradually over the first
quarter period when the gas under contract is delivered and both will
be taken to the income statement. For the contracts that were hedged
as at 31 December 2011, all cash flows will take place and have an effect
on income within the subsequent five years.
In addition to the above cash flow hedges, Nuon has used currency
forward contracts to hedge, amongst other things, the capital expenditure
on the new Nuon Magnum power station, which will be settled in
Japanese yen.
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The following table presents the movement of the cash flow hedge
reserve in the financial year before tax. As at 31 December 2011,
the hedge reserve after tax amounted to € 67 million negative
(2010: € 233 million positive).
Movement schedule cash flow hedge reserve
€ million
Hedge
ineffectiveness
Hedge reserve
as at 1 January
Changes in
fair value
Release
to income
Hedge reserve
as at 31 December
–
–
1
–
–
-1
–
52
362
-103
-4
-36
-4
267
13
-274
106
-34
-55
1
-243
-59
-146
-3
2
48
6
-152
6
-58
–
-36
-43
3
-128
Forward contracts
–
43
-7
1
37
Total
–
310
-250
-151
-91
2011
Fuels
Coal swaps
Gas swaps
Oil swaps
CO2 contracts
Power contracts
Currency contracts
Total hedges on fuels purchased
Currency
2010
Fuels
Coal swaps
–
-32
56
28
52
Gas swaps
1
186
291
-115
362
-103
Oil swaps
1
-69
-14
-20
CO2 contracts
–
-3
-2
1
-4
Power contracts
–
-126
29
61
-36
Currency contracts
-1
-21
27
-10
-4
1
-65
387
-55
267
–
13
27
3
43
1
-52
414
-52
310
Total hedges on fuels purchased
Currency
Forward contracts
Total
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Credit risk
General
Credit risk arises as a result of the activities of Nuon’s sales divisions,
development projects, trading and other activities. Credit risk is the risk
of a loss incurred through a counterpart’s lack of willingness or ability
to perform. A consistent approach to credit analysis and management is
applied throughout the organisation, with the degree of review undertaken
varying depending on the magnitude of credit risk in a transaction.
In the trading segment, credit risk is calculated as a settlement plus
replacement cost. The credit risk calculations are based on the markedto-market value calculated by the Risk Analysis & Reporting Group
within Risk Management and aggregated on a counterparty level.
In cases where legally enforceable netting agreements have been
reached, the exposure is monitored on a net basis. In some cases,
credit protection has been purchased in the credit default swap market.
These instruments are measured on a monthly basis, but are not
actively traded.
Credit risk is managed through established credit policies, regular
monitoring of credit exposures and application of appropriate mitigation
tools. While credit exposure is also managed at portfolio level, there
are limitations to the extent to which diversification is possible as
Nuon is exposed to concentration risk in the energy markets as well
as to energy-intensive industries.
Credit quality
Treasury
Cash and cash equivalent surpluses are to a large extent held within
Vattenfall, by using both a cash pool and deposits.
Trading
As a result of the application of high credit risk standards, the trading
portfolio has remained at a stable investment grade throughout the
last years. No write-offs linked to credit risk were made for the trading
portfolio in 2011 or 2010.
Sales
The sales segment is exposed to credit risk in the case of non-payment
by customers for energy delivered as well as the loss from the resale
of energy previously committed to a customer at a fixed price. In the
business segment, most of the small and medium-sized trade debtors are
rated by Dun & Bradstreet and Moody’s KMV Riskcalc®. Due to a strong
focus on credit control, the composition of the debtors aging relatively
improved slightly during 2011 compared to 2010 despite the continued
economic stress. Nuon considers the credit quality of this portfolio as
satisfactory. Credit risk mitigation tools in this segment include parent
company guarantees, bank guarantees, letters of credit and prepayments.
Our debtors in the retail market are not rated. Nuon considers this
portfolio to be comparable to the average credit quality of this segment
for the Netherlands as a whole. Following the economic downturn,
the average credit losses in 2011 slightly increased compared to 2010,
which is reflected in the level of our provisions (excluding the effect
of the divestment of Nuon Belgium).
Maximum credit risk
The maximum credit risk is the value in the statement of financial
position of each financial asset, with the exception of the following
instruments: trade receivables – trade activities, commodity derivatives,
interest rate derivatives and currency derivatives.
The credit risk for these trade debtors and derivatives are lower than
their carrying amounts for several reasons. Firstly, there is a difference
between the use of netting agreements by Nuon and the netting rules
in accordance with IFRS. For example, Nuon uses Master Netting
Agreements (MNAs) where legally enforceable. These MNAs allow
netting over multiple classes and categories of financial assets and
liabilities as well as non-financial assets and liabilities that are excluded
under IFRS. Also, Nuon nets positions when calculating credit risk
(close-out nettings) even though in its daily operations Nuon does not
intend to settle on a net basis or if it is practically not possible to settle
on a net basis, for example due to timing differences. Secondly, there
is a difference between the way Nuon calculates credit risk (the net
settlement per counterpart plus replacement value) and the carrying
amount of the derivatives in the statement of financial position
(fair value).
Furthermore, the credit risk is mitigated through the use of collateral
such as bank guarantees, letters of credit and cash. Nuon also uses
bilateral margining agreements with many of the major trading
counterparties. As a result of these agreements, but also due to other
credit support received, as at 31 December 2011 Nuon held € 49 million
in cash and € 1,447 million as collaterals (including parent company
guarantees) (2010: € 176 million and € 1,405 million respectively).
Included in collaterals are credit default swaps purchased for a nominal
amount of € 80 million (2010: € 80 million).
Overall the group evaluates the concentration of credit risk with respect
to trade receivables as low, due to the use of bank guarantees and letters
of credit and also as its customers are located in several jurisdictions
and industries and operate in largely independent markets.
Past due instalments
The provision for bad debts and uncollectible receivables exclusively
concerns trade receivables from regular sales. The ageing of trade
receivables, concerning trade receivables from regular sales and trade
receivables from trade activities, was as follows on the reporting date
(gross amounts).
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Fina n c ia l s ta tem ent s
105
Age analysis trade debtors
As at 31 December
€ million
2011
Not past due
0 to 30 days
30 to 90 days
90 to 360 days
>360 days
Total
2010
725
53
28
42
51
600
899
804
62
34
49
59
The movement of the provision for bad debt in relation to the trade
debtors can be presented as follows.
Movement schedule provision for bad debt
€ million
2011
2010
Balance as per 1 January
68
64
Use of allowance account (impairment trade receivables)
-19
25
-23
-17
51
68
Addition to allowance account charged to income
Disposals
Balance as per 31 December
21
–
Liquidity risk
For the latter, Nuon makes use of a Margin-VaR as well as a Margin
Stress Test tool. These tools allow Nuon to assess future margin
calls based upon historic market price developments, stress tests
and contractual agreements including rating thresholds on Nuon
and its counterparties. The overall aim is to have sufficient committed
credit facilities at all times in order to secure the required liquidity
in the coming year. Capital requirement planning is performed
by Vattenfall for the Vattenfall group over a horizon of five years.
Liquidity risk comprises the risk that Nuon is not able to obtain the
required financial resources for the timely fulfilment of its financial
commitments. In this connection, Nuon regularly assesses the expected
cash flows over a period of one year. These cash flows include operational
cash flows, dividends, payments of interest and repayments of debts,
(replacement) investments, the consequences of changes in the
creditworthiness of Nuon and ‘margin calls’ for trading activities.
To provide insight into the liquidity risk, the following table shows
the contractual terms of the financial obligations (translated at
reporting date rate), including interest payments. The contractual
cash flows of non-current assets as well as current assets combined
with the credit facility available cover the current need for liquidity
as included in the following table.
The major part of the provision for bad debt is formed based
on graduated calculations (€ 23 million; 2010: € 42 million).
The remainder is formed based on an individual assessment of debtors
(€ 28 million; 2010: € 26 million).
No collateral relating to past due and impaired debtors has been obtained.
<
Fina n c ia l s ta tem ent s
Contents financia l sta tem ents
106N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Liquidity risk
As at 31 December
€ million
Carrying amount
Contractual cash flows
Less than
1 year
Between
1 and 5 years Over 5 years
Total
2011
Interest-bearing debt
-81
–
-252
-22
-30
-4
-68
-8
-40
-5
-158
-40
-11
-1
-26
-13
-81
-10
-252
-61
-11
-4
-8
–
-12
Trade payables
-198
-198
–
–
-198
Other payables
-1,069
-1,069
–
–
-1,069
-81
-227
-39
-347
–
1
–
1
-53
-11
–
-64
-738
785
-161
178
-7
9
-906
972
-618
588
17
-92
86
11
–
–
2
-710
674
30
788
-769
19
614
-686
-72
–
–
–
1,402
-1,455
-53
-2,322
11,332
-1,529
3,522
-3
–
-3,854
14,854
-11,795
1,887
-898
-3,213
972
-248
-10
–
-13
-15,018
2,859
-1,159
-2,377
-797
-101
-3,275
Green loans - notional amounts
Green loans - interest
Other interest-bearing debt - notional amounts
Other interest-bearing debt - interest
Finance lease payables
Off-balance sheet commitments
Operating lease payables
Interest rate swaps
Forex instruments
AROs
-67
Forward contracts1
Forward receivables
69
Buy
Sell
Forward obligations
-37
Buy
Sell
Total forward contracts
Commodity derivatives1
Swap receivables
Swap obligations
450
-504
Total swaps
Forward receivables
1,962
Buy
Sell
Forward obligations
-1,860
Buy
Sell
Total forwards
Total
1Forward
-1,620
contracts are settled on a gross basis with our counterparties. Payments and receipts coincide. To best present the actual liquidity risk, both outgoing and incoming cash flows
are presented for each contract. Also for commodity derivatives, both outgoing and incoming cash flows are presented.
<
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Fina n c ia l s ta tem ent s
107
Liquidity risk (continued)
As at 31 December
€ million
Carrying amount
Contractual cash flows
Less than
1 year
Between
1 and 5 years
Over
5 years
Total
2010
Interest-bearing debt
Green loans - notional amounts
-197
-45
-91
-58
–
-5
-18
-4
-27
-336
-109
-222
–
-331
Other interest-bearing debt - interest
-18
-6
-38
–
-44
Finance lease payables
-19
-8
-11
–
-19
Trade payables
-145
-145
–
–
-145
Other payables
-1,888
-1,814
–
–
-1,814
-64
-218
-60
-342
–
1
–
1
-35
-24
–
-59
Buy
-500
-324
-13
-837
Sell
531
349
15
895
Buy
-482
-235
–
-717
Sell
462
225
–
687
11
15
2
28
Green loans - interest
Other interest-bearing debt - notional amounts
-194
Off-balance sheet commitments
Operating lease payables
Interest rate swaps
Forex instruments
AROs
-63
Forward contracts1
Forward receivables
Forward obligations
62
-31
Total forward contracts
Commodity derivatives1
Swap receivables
1,192
3,013
1,505
–
4,518
Swap obligations
-1,149
-2,989
-1,488
–
-4,477
24
17
–
41
Buy
-8,564
-3,420
–
-11,984
Sell
3,222
1,816
–
5,038
Buy
-3,335
-1,982
–
-5,317
Sell
7,539
2,623
–
10,162
-1,138
-963
–
-2,101
-3,334
-1,552
-120
-5,006
Total swaps
Forward receivables
Forward obligations
2,401
-2,074
Total forwards
Total
1Forward
-2,265
contracts are settled on a gross basis with our counterparties. Payments and receipts coincide. To best present the actual liquidity risk, both outgoing and incoming cash flows
are presented for each contract. Also for commodity derivatives, both outgoing and incoming cash flows are presented.
<
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Contents financia l sta tem ents
108N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Fair values
General
Nuon’s financial assets and liabilities are valued at either amortised
cost or fair value. The following table provides insight into the different
IAS 39 categories Nuon presents its financial assets and liabilities in,
the measurement principle used and the fair value of the financial
assets and liabilities.
Fair value of financial assets and liabilities
As at 31 December
€ million
Carrying amount IAS 39 categories
Fair value
through profit
or loss/hedge Loans and
accounting receivables
2011
Other financial assets
Derivative assets
37
Cash and cash equivalents
Derivative assets
Fair value
I
II
III
39
845
845
1,350
1,350
1,350
7
299
299
299
8
-355
-355
-365
10
-11
-1,267
-761
-11
-1,267
-761
-11
-1,267
37
35
1,550
1,550
Interest-bearing debt
-761
2010
Other financial assets
Total
Note
37
845
Trade and other receivables
Derivative liabilities
Finance lease payables
Trade and other payables
Other
financial
liabilities
Level
37
1,550
4
616
-434
229
-327
5
5
16
15
4
1,270
280
5
Trade and other receivables
1,837
1,837
1,837
7
Cash and cash equivalents
1,204
1,204
1,204
8
-736
-759
10
Interest-bearing debt
Derivative liabilities
Finance lease payables
Trade and other payables
-736
-1,136
-875
-261
5
-1,136
-1,136
-19
-19
-19
16
-2,033
-2,033
-2,033
15
<
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Contents financia l sta tem ents
Fina n c ia l s ta tem ent s
109
than one year) applicable on the reporting date for the remaining
term of the contracts. The present value in foreign currency
Financial instruments valued at fair value through profit
or loss/hedge accounting
IFRS 7 requires disclosure of fair value measurements of financial
instruments that are valued in the statement of financial position at
fair value, per level of the following fair value measurement hierarchy:
■■ Quoted prices (unadjusted) in active markets for identical assets
or liabilities (level I);
■■ Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices)
or indirectly (that is, derived from prices) (level II);
■■ Inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs) (level III).
■■
■■
The fair value of financial instruments traded in active markets is based
on quoted market prices at the reporting date. A market is regarded
as active if quoted prices are readily and regularly available from an
exchange, dealer, broker, industry group, pricing service or regulatory
agency, and those prices represent actual and regularly occurring
market transactions on an arm’s length basis. The quoted market price
used for financial assets held by the group is the current bid price.
These instruments are included in level I.
The fair value of financial instruments that are not traded in an active
market (for example, over-the-counter derivatives) is determined by
using valuation techniques. These valuation techniques maximise
the use of observable market data where it is available and rely as little
as possible on entity-specific estimates. If all significant inputs required
to fair value an instrument are observable, the instrument is included
in level II. If one or more of the significant inputs is not based on
observable market data, the instrument is included in level III. The fair
value of financial instruments is determined as follows:
■■ Derivatives. Reference is made to the summary of significant
accounting policies and note [5] Derivatives;
■■ The measurement of certain purchased and sold commodity
derivatives were perceived to take place on the basis of market prices
obtained from third parties (Level I). Compared to the previous year
Nuon reclassified these commodity derivatives to level II due to an
improved understanding that their measurement is derived from
market prices. As such Nuon held no Level I fair value measurements
of financial instruments in the years 2011 and 2010;
■■ Currency derivatives and interest rate derivatives are recognised on
the basis of the present value of the future cash flows, making use of
the interbank rate (such as Euribor, or Euroswap for cash flows longer
■■
is translated at the spot rate applicable on the reporting date.
These financial instruments are included in level II;
Futures, for which quoted prices can be obtained: the marked-to-market
valuation is applied (Level II);
For certain commodities, delivery tenors and market instruments:
no reliable market quotes are available for fair value calculation.
In these cases, positions are marked-to-model. For some positions
(e.g. illiquid commodities, long-dated tenors) the price of the
commodity is modelled and positions marked against this price.
For certain structured derivatives where a similar instrument is
not regularly traded in the market, the value of the derivative is
modelled based on market prices together with the specific terms
of the agreement. This also relates to the valuation of CERs from
CDM projects, which is derived from so-called risk adjustment factors.
These factors are calculated using the carbon valuation tool developed
by Point Carbon to quantify the risk and calculate the fair value
of CER projects or contracts. The tool is based on Point Carbon’s
valuation methodology, which was developed by several experienced
market players. The valuation methodology is strictly empirical, and
all risk parameters are extracted from Point Carbon’s proprietary
databases of CER project data, which entails a correct valuation of
the contracts even where market prices are not listed (Level III).
As at 31 December 2011 the total risk adjusted volume of CERs
amounting to 1.0 million is valued at a market price of 4.19 per CER;
The most significant exposure that is marked against modelled prices
is the long-term portion of a large gas supply contract. This contract
extends further ahead in time than liquid trading in the gas market.
The agreement is valued at the market price, as long as a market
price can be observed. For commodity deliveries beyond the market
horizon, long-term price forecasts (modelled prices) are used for
the relevant commodities. The large gas supply contract is hedged
with OTC forward trades of underlying products. These trades
are also marked against the same market and modelled prices. The
long-term price forecasts are benchmarked against reliable financial
information obtained from the company Markit; this information is
well-known and is used by many energy companies, offering a fair
valuation of the portion of the large gas supply contract that cannot
be valued against market prices (Level III). The fair value movements
of the large gas contact and the hedged position together are limited
with respect to market price movements.
<
Fina n c ia l s ta tem ent s
Contents financia l sta tem ents
110 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
The movement of the financial instruments categorised in Level III
is as follows:
Level III Fair value of financial assets and liabilities
€ million
2011
Balance as at 1 January
2010
19
-13
Total
-117
-117
32
Balance as at 31 December
-98
19
Movements
Included in income statement
Fair value of other financial instruments valued at amortised cost
The fair value of all short-term financial instruments equals the carrying
amount. The fair value of financial instruments valued at amortised cost
is determined as follows:
■■ Other financial assets are discounted at the appropriate market rate;
■■ The fair value of financial obligations is determined by making use
of market quotes. As no market quotes are available for the majority
of the loans, the fair value of the short-term and long-term loans
is determined by calculating their present value at the yield curve
applicable to Nuon as at 31 December. This yield curve is derived
from the zero coupon rate plus the credit spread applicable to Nuon;
■■ At year-end 2011 the following yield curve was applied:
1-year 1.86% (2010: 1.56%)
5-year 2.49% (2010: 3.10%)
10-year 3.53% (2010: 4.23%)
20-year 4.32% (2010: 5.00%);
■■ Finance lease payables: the fair value is estimated at the present value
of the future cash flows, discounted at the interest rate applicable to
comparable contracts on reporting date;
■■ The fair value of the trade and other receivables and short-term
payable tax liabilities is, in view of their short-term nature,
identical to the carrying amount;
■■ Cash and cash equivalents are recognised at nominal value which,
in view of their short-term and risk-free nature, corresponds with
the fair value.
Capital management
The group’s objectives when managing capital are to safeguard its
ability to continue as a going concern in order to provide returns
for shareholders and benefits for other stakeholders and to maintain
an optimal capital structure to reduce the cost of capital. In order to
maintain or adjust the capital structure, which is based on Vattenfall
group policies, the group may adjust the amount of dividends paid to
shareholders, return capital to shareholders or sell assets to reduce debt.
32
Nuon’s financial policy, which is part of its general policy and strategy,
is to obtain an adequate return for shareholders and lenders, while
maintaining the flexibility to grow and invest in the business.
According to the articles of association:
■■ The company will distribute an annual 2% dividend yield on the
average outstanding number of class A shares valued at € 72.10
per share to the holders of class A shares around 30 June of each year
until the class A shares are sold to Vattenfall AB or revoked by Nuon.
This dividend shall be distributed from profits available. Should no
profit be available in any year, the amount shall be distributed from
freely distributable reserves. In this case, part of the future profits
equalling the preferred dividend distributions from freely distributable
reserves shall be added to these freely distributable reserves;
■■ The remaining profit shall be put at the disposal of the General
Meeting provided that no further dividend shall be distributed
on the class A shares;
■■ Distributions of profit shall be made after the adoption of the
annual accounts if permissible under the law, given the contents
of the annual accounts.
Nuon’s major shareholder is Vattenfall AB, holding the B shares
representing 64% of the paid-up share capital of Nuon as at
31 December 2011. The largest other shareholders in Nuon per
year end are the provinces of Gelderland and Noord-Holland,
B.V. Houdstermaatschappij Falcon and the Municipality of Amsterdam.
These parties jointly hold approximately 76% of Nuon’s class A shares.
The remainder is in the hands of 54 other shareholders.
<
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Fina n c ia l s ta tem ent s
111
Financial income and expenses
The table below indicates which income and expenses are recognised
in respect of financial instruments in the income statement, excluding
tax impact.
Effect on income statement from financial instruments
For the year ended 31 December
€ million
2011
2010
Net result on financial assets and liabilities at fair value through profit or loss
-241
–
279
- Fair value changes and settlements of other derivatives
Net turnover from sale of goods and supply of services
-241
279
Net changes in fair value of cash flow hedges transferred from equity
-151
-52
Cost of energy, raw materials and supplies
-151
-52
Impairment charges loans and receivables
-25
-21
Other operating expenses
-25
-21
–
-2
10
-7
–
-12
3
-2
- Fair value changes and settlements of commodity derivatives
–
Net result on financial assets and liabilities at fair value through profit or loss
- Fair value changes and settlements of derivatives held for trading: forex instruments
Net result on financial assets and liabilities at amortised cost
- Interest income on financial assets
- Interest expense on financial liabilities
Ineffective part of changes in fair value of cash flow hedges
Net financial income and expenses
11
1
The table below indicates which income and expenses are recognised
directly in shareholders’ equity in respect of financial instruments,
excluding tax impact.
Effect on shareholders’ equity from financial instruments
For the year ended 31 December
€ million
2011
2010
Net change in fair value of cash flow hedges transferred to the income statement
-250
-151
-52
Total recorded in cash flow hedge reserve
-401
362
Effective part of changes in fair value of cash flow hedges
414
<
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112 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Company financial statements
Company balance sheet
As at 31 December, before appropriation of result
€ million
Assets
2011
Note
2010
Non-current assets
Property, plant and equipment
Investments in subsidiaries and associates
Derivatives
Deferred tax assets
Receivables from group companies
Other financial assets
48
2,994
19
7
1,247
32
Total non-current assets
30
56
3,246
31
19
33
4
32
288
32
32
4,347
3,645
Current assets
Trade and other receivables
Derivatives
Current receivables from group companies
Cash and cash equivalents
34
225
2,010
24
55
33
135
440
34
917
Total current assets
2,293
1,547
Total assets
6,640
5,192
<
Contents financia l sta tem ents
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Fina n c ia l s ta tem ent s
113
Company balance sheet
As at 31 December, before appropriation of result
€ million
Shareholders’ equity and liabilities
2011
Note
2010
Shareholders’ equity
Share capital
Share premium
Hedge reserve
Currency translation reserve
Legal reserves
Other reserves
Unappropriated profit for the year
684
2,797
-67
1
177
69
438
Total shareholders’ equity attributable to Nuon shareholders
Provisions
684
2,797
233
1
129
-275
563
4,099
4,132
35
40
26
36
Long-term liabilities
Interest-bearing debt
Derivatives
231
42
Total long-term liabilities
384
37
–
33
273
384
Short-term liabilities
Trade and other payables
Interest-bearing debt
Current payables to group companies
Derivatives
121
97
1,810
200
153
37
344
–
33
153
Total short-term liabilities
2,228
650
Total shareholders’ equity and liabilities
6,640
5,192
Company income statement
For the year ended 31 December
€ million
2011
Note
2010
Other income less expenses after taxation
457
-19
-54
Profit after taxation
438
563
Result after taxation from subsidiaries
617
39
<
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Contents financia l sta tem ents
114 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Notes to the company financial statements
Summary of significant accounting policies
The company financial statements have been prepared in accordance
with the provisions of Part 9, Book 2 of the Netherlands Civil Code.
In the company financial statements, Nuon uses the option provided for
in Part 9, Book 2 of the Netherlands Civil Code to prepare the company
financial statements in accordance with the IFRS accounting policies
that are used in the preparation of the consolidated financial statements.
The company income statement is presented in abridged form, as
allowed by section 402, Part 9, Book 2 of the Netherlands Civil Code.
In addition to the accounting policies for the consolidated financial
statements, specific accounting policies for the company financial
statements are included below.
Investments in subsidiaries
Investments in subsidiaries are valued at net asset value, which is
determined on the basis of IFRS accounting policies as used in the
consolidated financial statements.
Legal reserve for unrealised fair value gains
of financial instruments
A legal reserve, in the form of a revaluation reserve, is recognised for
unrealised fair value gains of financial instruments of Nuon’s subsidiary
VET NL that are recognised in income, and for which no frequent market
quotations are available (Level II and Level III financial instruments).
With regard to Nuon, this issue relates to energy commodity contracts
for oil, gas, coal, electricity and emission allowances that are not
traded through recognised exchanges (e.g. Amsterdam Power Exchange,
Endex), known as over-the-counter or OTC contracts. A legal reserve
of € 177 million in total is held for the unrealised fair value movements
of these contracts (2010: € 129 million), which is calculated on a
collective basis.
<
Contents financia l sta tem ents
Fina n c ia l s ta tem ent s
Fina n c ia l s ta tem ent s
1 15
Note 30 Property, plant and equipment
Property, plant and equipment
€ million
Land and
buildings
Other plant
Assets under
and equipment construction
Total
As at 1 January 2010
Historical cost
Accumulated depreciation and impairments
Carrying amount as at 1 January 2010
1
133
39
173
–
-87
–
-87
1
46
39
86
Movements 2010
Capital expenditure
–
2
10
12
Disposals
–
-2
–
-2
Depreciation
–
-24
–
-24
Internal transfer
–
-8
-8
-16
Transfers and other movements
–
34
-34
–
Total
–
2
-32
-30
As at 31 December 2010
Historical cost
1
148
7
156
Accumulated depreciation and impairments
–
-100
–
-100
Carrying amount as at 31 December 2010
1
48
7
56
–
–
–
–
–
8
–
-24
4
-12
8
–
–
-4
4
16
–
-24
–
-8
Accumulated depreciation and impairments
1
–
160
-124
11
–
172
-124
Carrying amount as at 31 December 2011
1
36
11
48
Movements 2011
Capital expenditure
Disposals
Depreciation
Transfers and other movements
Total
As at 31 December 2011
Historical cost
For further disclosure, reference is made to note [1] Property, plant
and equipment in the consolidated financial statements.
<
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116 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Note 31 Investments in subsidiaries
Investments in subsidiaries
€ million
Investments
in subsidiaries
Carrying amount as at 1 January 2010
3,389
Movements 2010
Capital contributions
Acquisitions
Disposals
Share premium repaid
6
3
-39
-1,000
Result of the year
617
Movement hedge reserve
271
Currency translation adjustments and other movements
Total
Carrying amount as at 31 December 2010
-1
-143
3,246
Movements 2011
Capital contributions
Disposals
Share premium repaid
Dividends received
Result of the year
Movement hedge reserve
Currency translation adjustments and other movements
Total
Carrying amount as at 31 December 2011
A list of directly and indirectly held participations in subsidiaries
is included in note [28] Related parties in the consolidated financial
statements. The disposals in 2011 relate to the sale of Nuon E&P.
73
-36
-374
-71
457
-301
–
-252
2,994
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Fina n c ia l s ta tem ent s
Contents financia l sta tem ents
Fina n c ia l s ta tem ent s
117
Note 32 Deferred tax assets and other f­inancial assets
Deferred tax assets and other financial assets
€ million
Deferred tax assets Other financial assets
Carrying amount as at 1 January 2010
6
Total
18
24
Movements 2010
Internal transfers
-1
–
-1
Loans granted
–
16
16
Loans and interest repaid
–
-2
-2
Temporary differences charged to profit or loss
-1
–
-1
Total
-2
14
12
4
32
36
Total
–
–
3
3
22
-22
–
–
22
-22
3
3
Carrying amount as at 31 December 2011
7
32
39
Carrying amount as at 31 December 2010
Movements 2011
Loans granted
Loans and interest repaid
Temporary differences charged to profit or loss
Other financial assets consist of loans and receivables (including
incremental costs) with related parties of which € 5 million is short-term.
Note 33 Derivatives
Derivatives
As at 31 December
€ million
Current
assets
2011
Non-current
assets
2011
2010
2010
Short-term
liabilities
2011
2010
Long-term
liabilities
2011
2010
Trading derivatives
225
–
134
–
42
–
–
–
200
–
153
1
19
–
19
Interest instruments
Total
225
135
19
19
200
153
42
–
Foreign exchange contracts
–
Note 34 Cash and cash equivalents
Note 35 Shareholders’ equity
The cash and cash equivalents at the end of 2011 included € 5 million
restricted cash (2010: € 13 million).
The Consolidated statement of changes in shareholders’ equity and
disclosure to that statement are included in the Consolidated financial
statements. In addition to the Consolidated statement of changes in
shareholders’ equity, a legal reserve was formed within shareholders’
equity for the unrealised gains on OTC contracts for an amount of
€ 177 million (2010: € 129 million). This reserve was charged against
the Other reserves. The hedge reserve, legal reserve and the currency
translation reserve are not freely distributable.
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Fina n c ia l s ta tem ent s
Contents financia l sta tem ents
118 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Note 36 Provisions
Movements in provisions for employee benefits
€ million
Termination
benefits
As at 1 January 2010
Other
employee
benefits
Other
Total
2
26
2
30
Movements 2010
Releases to income
-8
-9
-1
-18
Additions
8
7
–
15
Interest accretion
–
1
–
1
Reclassifications and other movements
-1
-1
–
-2
Total
-1
-2
-1
-4
1
24
1
26
Total
-1
11
–
-7
6
9
-1
4
1
-8
10
6
–
–
–
-1
–
-1
-2
15
1
-16
16
14
As at 31 December 2011
10
30
–
40
As at 31 December 2010
Movements 2011
Releases to income
Additions
Interest accretion
Benefits paid
Reclassifications and other movements
Note 37 Interest-bearing debt
Interest-bearing debt
€ million
2011
Carrying amount as at 1 January
2010
728
641
Movements
New loans
Dividend liability class A shareholders
Loans repaid
Currency translation adjustments and other movements
Total
Carrying amount as at 31 December
25
-115
-324
14
-400
328
235
-101
-59
12
87
728
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Fina n c ia l s ta tem ent s
Fina n c ia l s ta tem ent s
1 19
Both the interest rates and carrying amounts of interest-bearing debt
can be analysed as follows.
Short-term and long-term interest-bearing debt
As at 31 December
€ million
Green loans
Banks
Dividend liability class A shareholders
Other
Effective interest rate
2010
2011
3.2%
3.6%
–
4.8%
3.4%
3.3%
2.5%
–
Short-term part
2011
2010
23
47
–
182
71
115
3
–
Total
Note 38 Contingent assets and liabilities
97
344
Long-term part
2011
2010
58
150
–
–
173
234
–
–
231
384
Reference is made to note [17] Contingent assets and liabilities.
The employee benefits related to the members of the Management Board
have been disclosed in the Remuneration Report as included on page 30
of the Annual Report.
Note 39 Other income less expenses
after taxation
Amsterdam, 17 April 2012
Other income less expenses after taxation was € 19 million
negative (2010: € 54 million negative) and consists mainly of
expenses of company-wide activities at holding company level.
Supervisory Board
Øystein Løseth, Chairman
Torbjörn Wahlborg
Tuomo Hatakka
Tom de Waard
Leni Boeren
Pieter Bouw
Derk Haank
Jacques Schraven
Management Board
Huib Morelisse
Peter Smink
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12 0 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Other
Independent auditor’s report
To: the General Meeting of Shareholders of N.V. Nuon Energy.
Report on the financial statements
We have audited the accompanying financial statements 2011
of N.V. Nuon Energy, Amsterdam as set out on pages 61 to 119.
The financial statements include the consolidated financial statements
and the company financial statements. The consolidated financial
statements comprise the consolidated statement of financial position
as at 31 December 2011, the consolidated statements of comprehensive
income, changes in equity and cash flows for the year then ended
and the notes, comprising a summary of significant accounting policies
and other explanatory information. The company financial statements
comprise the company balance sheet as at 31 December 2011, the company
income statement for the year then ended and the notes, comprising
a summary of accounting policies and other explanatory information.
Management Board’s responsibility
The Management Board is responsible for the preparation and fair
presentation of these financial statements in accordance with International
Financial Reporting Standards as adopted by the European Union and
with Part 9 of Book 2 of the Dutch Civil Code, and for the preparation
of the Management Board report in accordance with Part 9 of Book 2
of the Dutch Civil Code. Furthermore, the Management Board is
responsible for such internal control as it determines is necessary
to enable the preparation of the financial statements that are free
from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with Dutch
law, including the Dutch Standards on Auditing. This requires that
we comply with ethical requirements and plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor’s judgement, including the assessment
of the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the company’s preparation and
fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the company’s
internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting
estimates made by the Management Board, as well as evaluating
the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
Opinion with respect to the consolidated financial statements
In our opinion, the consolidated financial statements give a true and fair
view of the financial position of N.V. Nuon Energy as at 31 December 2011,
and of its result and its cash flows for the year then ended in accordance
with International Financial Reporting Standards as adopted by the
European Union and with Part 9 of Book 2 of the Dutch Civil Code.
Opinion with respect to the company financial statements
In our opinion, the company financial statements give a true and fair
view of the financial position of N.V. Nuon Energy as at 31 December
2011, and of its result for the year then ended in accordance with Part 9
of Book 2 of the Dutch Civil Code.
Report on other legal and regulatory requirements
Pursuant to the legal requirement under Section 2: 393 sub 5 at e and f
of the Dutch Civil Code, we have no deficiencies to report as a result
of our examination whether the Management Board report, to the
extent we can assess, has been prepared in accordance with Part 9 of
Book 2 of this Code, and whether the information as required under
Section 2: 392 sub 1 at b-h has been annexed. Further we report that
the Management Board report, to the extent we can assess, is consistent
with the financial statements as required by Section 2: 391 sub 4 of
the Dutch Civil Code.
Amsterdam, 17 April 2012
PricewaterhouseCoopers Accountants N.V.
Original has been signed by
Drs. R. Dekkers RA
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121
Profit appropriation
■■
Profit appropriation is governed by Article 34 of the Articles of
Association of N.V. Nuon Energy, which reads as follows.
■■
Article 34: Profits and distributions
■■
■■
■■
■■
■■
ubject to the approval of the Supervisory Board, the Management
S
Board shall decide annually what portion of the distributable profit –
the positive balance of the profit and loss account – shall be retained
with due observation of a dividend policy, to be discussed with the
General Meeting;
Any unretained profit shall be available to the General Meeting. In
the case that the General Meeting decides for distribution of profits,
a dividend shall be distributed as far as possible on the class A shares,
the percentage of which, to be computed on the computation basis set
out below, shall be two percent (2%). The basis for the computation
of the dividend on the class A shares amounts to € 72.1042626 per
class A share;
If, for any financial year, the distribution on the class A shares cannot be
effected or cannot be fully effected because the profit after reservation
does not suffice, the deficit shall be distributed to the debit of the
following financial years, without prejudice to the provisions of
Article 34.6. In that case, each time as much as possible, the overdue
dividend, augmented by the dividend for the last expired financial year,
shall be distributed on the class A shares according to Article 34.2;
The remaining profit shall be put at the disposal of the General Meeting
provided that no further dividend shall be distributed on the class
A shares;
Distributions of profit shall be made after the adoption of the
annual accounts if permissible under the law, given the contents
of the annual accounts.
Dividend policy
In Nuon’s General Meeting of Shareholders held on 13 May 2011,
the following dividend policy was discussed:
■■
The basis for dividend distribution is the net profit, adjusted for
significant non-cash fair value movements on financial instruments
other than fair value movements on trade positions;
In accordance with the ‘Shareholders Agreement’ class A shareholders
– the provinces and municipalities that will sell their respective
interests to Vattenfall in tranches until 2015 – will receive a
predetermined annual dividend yield, irrespective of the net profit
achieved in a financial year. A separate liability for the dividend
payments to class A shareholders had been recognised in Nuon’s
balance sheet on 30th June 2009, which is reduced every year by
the dividend payments;
The remaining profit after taking into account the adjustments/
payout in points 1 and 2 above is available for distribution to class B
shareholders (Vattenfall AB), subject to:
■■ A gearing ratio (Interest-Bearing Debt/(Interest-Bearing Debt
+ Total Equity) of no more than 50%. This ratio is based on
the ­guidance of S&P and Moody’s as the maximum for investment
grade companies;
■■ Fulfilment of financial restrictions in Nuon’s financial
­documentation (i.e. covenants);
■■ Sufficient sustainable cash position over the next 12 months
as proven by the long-term cash forecast of Nuon;
■■ Adequate liquidity lines available to Nuon.
Proposed profit appropriation
In accordance with the Articles of Association and the ‘Shareholders
Agreement’, the Management Board, after consulting the Supervisory
Board, proposes to distribute the preferred dividend payable amounting
to € 71.0 million to class A shareholders (€ 1.44 per class A share) as
per 1 July 2012. As this amount is already included as a liability in the
statement of financial position, this part of the net profit after taxation
will not deduct the profit appropriation to the other reserves.
Furthermore, the Management Board proposes to distribute a dividend
of € 75.0 million to class B shareholders (€ 0.86 per class B share)
and add the remaining profit of € 363.4 million to other reserves.
Dividend proposal
€ million
2011
Dividend
Preferred dividend shareholders
Dividend class B shareholders
71.0
75.0
Total dividend to be distributed
146.0
Profit after taxation
438.4
Dividend proposal: Dividend to be distributed
Dividend paid from dividend liability
Profit to be added to other reserves
-146.0
71.0
363.4
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122 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
Ratios and definitions
Ratios
Combined Heat and Power (CHP)
Operating margin
An alternative to the classical supply of electricity and heating is the local
The 12-months profit before taxation and interest divided by net turnover.
co-generation of heating and electricity: an engine powers a generator for the
production of electricity; the released heat is used for heating purposes. This is
Return on Invested Capital (ROIC)
referred to as combined heat and power generation (CHP). If properly implemented,
Net operating profit as a percentage of invested capital.
CHP can lead to energy savings.
Definitions
Credit spread
Credit spread is the difference between the rate of return on a bond and that
AHP
on a benchmark (mid swap) used by the market. This difference can be attributed
Auxiliary Heat Plant.
to the risk profile of the company issuing the bond.
ARO
Cross-border lease
Average rate option are option contracts used to hedge against fluctuations
A cross-border lease is a structured financial transaction by virtue of which a
in exchange rates by averaging the spot rates over the life of the option and
business sells the user rights of certain non-current assets to a foreign company,
comparing that to the strike price of the option.
only to lease these user rights back.
Bar
Dark spread
Unit of gas pressure.
The difference between the market price of raw materials for the production
of energy in our coal-fired power stations and the market price of electricity.
Carbon footprint
See also spark spread.
The total CO2 emissions.
Degree days
CCS
The unit of measurement that indicates the number of fictitious days that the
Carbon Capture and Storage; capture, transport and storage of CO2 released
average 24-hour temperature (T) lies below the reference temperature of 18 °C.
during, for example, industrial activities or the production of electricity.
T is derived from 24-hour observations (UT) of the Netherlands Meteorological
Office (KNMI). Each degree of average 24-hour temperature below the reference
CDM
temperature is counted as one degree day. If T is higher than 18 °C, then no degree
Clean Development Mechanism, projects aimed at reducing greenhouse gases
day has occurred.
registered by the CDM Executive Board in countries that are not signatories of
the Kyoto Protocol.
District heating
An environmentally friendly supply of energy that makes use of residual heat.
CERs
The generation of electricity or the burning of waste or biomass releases heat.
Certified Emissions Reductions, certificates originated from CDM projects.
Nuon utilises this heat for the district heating network. The central generation of
heat means that the emission of harmful gases, such as CO2, is significantly reduced.
CHP
Combined Heat and Power plant/installation.
Emission allowances
A right to emit a predetermined quantity of carbon dioxide (CO2) during a
CO2
certain period. Any organisation operating one or more installations that emit
Carbon dioxide; mainly released during the burning of fossil fuels such as natural
CO2 is required to apply for an emission permit. This permit is granted by the
gas and coal.
Dutch Emission Authority (Nederlandse Emissieautoriteit or NEa).
CO2-equivalent
Energy Tax
The effect of greenhouse gases other than CO2 converted into CO2 values.
This is a tax on the use of energy. The energy tax (or ecotax) is levied on
environmentally-unfriendly sources of energy: nuclear energy and energy
Coal gasification
generated by means of fossil fuels. Green energy does not pollute and is
A process for converting coal into synthesis gas (a mixture of mainly carbon
therefore exempt from ecotax.
monoxide and hydrogen).
Energy and Water Disputes Committee
Co-combustion
The Energy and Water Disputes Committee is an independent body to
Co-combustion or co-firing is the combustion of two types of materials
which customers can submit disputes with energy companies.
at the same time.
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1 23
ERUs
kWh
Emissions reduction units, certificates for Greenhouse Gas reduction originating
Kilowatt hour, unit of electricity.
from JI projects.
LTIF
Fair value
Lost Time Injury Frequency (number of accidents leading to absenteeism divided
Fair value is the amount for which an asset could be exchanged, or a liability
by the total number of hours worked, in millions).
settled between knowledgeable willing parties in an arm’s length transaction.
m3 natural gas
Footprint
One cubic metre (1,000 litres) of natural gas.
See Carbon Footprint.
Methane
Fossil-based power
Type of gas, chief component of natural gas.
Fossil-based power is understood as energy generated from coal, natural gas
and other non-renewable resources.
Mid swap
The mid swap rate can be defined as the rate (or rates) equivalent to a series of
FTE (full time equivalent)
current, observable and objective euro interest rate swap mid (in between bid/offer)
Equivalent of the number of employees working a full week of 38 hours.
rates (derived from the relevant zero coupon curve) that relates to the term of the
future liability cash flows.
Gasification
When determining the mid swap rate, separate zero coupon discount rates should
See coal gasification.
apply to cash flows of different outstanding terms. To the extent that such an
approach is not feasible in practice, a single rate may be used such that, when
GJ
applied to all cash flows, the resulting present value is expected to be materially
Gigajoule, 1,000,000,000 joules. One GJ is equal to about 32 m3 gas or 278 kWh.
the same as the sum of the present values of the separate cash flows discounted
at an appropriate zero coupon rate.
GRI
Global Reporting Initiative, global organisation that issues guidelines for
MJ
CSR reporting.
Megajoule, 1,000,000 joules.
Guarantees of origin
MW
Guarantees of origin are certificates that give the customer guarantees on
Megawatt, 1,000 kW.
the way in which the power was generated. Guarantees of origin are tradable.
MWh
GW
Megawatt hour, 1,000 kWh.
Gigawatt, 1,000,000 kW.
GWh
Gigawatt hour, 1,000,000 kWh.
NEa Dutch Emission Authority
(Nederlandse Emissieautoriteit)
The competent authority that enforces the law on trade in NOx and CO2 emission
allowances. The activities of the NEa are made up of permit issuing, keeping
HE
Housing Equivalent, a household or a 10 kWh connection capacity of a large user.
records of the balance of emission allowances and supervising. NEa supervises
the trade in emission allowances and manages the CO2 and NOx Emission Trade
Registers, which contain all the Dutch account balances of emission allowances.
IFRS
Trading via the NEa is therefore not possible. Instead, companies trade among
International Financial Reporting Standards.
themselves or via trade platforms.
J
NGO
Joule, unit of energy.
Non-governmental organisation.
kW
Nm3
Kilowatt, 1,000 watts (kWe is a unit of electric power, kWth is a unit of
Standard measurement conditions for gas production and gas reserves estimates,
thermal power).
based on a temperature of 0 °C and 1 atmosphere of absolute pressure.
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124 N.V. N uon Energ y A nn ua l Re p o r t 2 0 1 1
NOx
Syngas
Nitrogen oxides, gases that arise during the burning of fuels.
Synthesis gas, a mixture of mainly carbon monoxide (CO) and hydrogen (H2).
Office of Energy Regulation
TJ
The Office of Energy Regulation is a department within the Netherlands
Terajoule, 1 billion kJ.
Competition Authority (NMa) charged with the implementation and supervision
of compliance with the Electricity Act 1998 and the Gas Act.
TWh
Terawatt hour, 1 billion kWh.
OHSAS
Operational Health and Safety Standard, international accreditation for safe
VCA
working practices.
Contractor Safety Checklist, Dutch guideline for safe working procedures.
PCB
VER
Polychlorinated biphenyl, chemical name for chloride compound with strong
Verified Emission Reductions, certificate used to offset CO2 emissions.
heat-resistant properties.
The certificate originates from CDM projects (see above) that are not registered
by the CDM Executive Board.
RA-verified
Items in scope for the Corporate Social Responsiblity Report on which reasonable
W
assurance is provided by PwC as explained in the Assurance report of PwC.
Watt, unit of power.
SDE
Whistleblower facility
Renewable Energy Incentive Scheme.
This is the procedure for dealing with suspected abuse, including abuses relating,
for instance, to a serious offence, defeating the ends of justice or endangering
SO2
public health. Whistleblowers who report an instance of abuse may not be faced
Sulphur dioxide, a gas produced by burning sulphur or substances containing
with retaliatory action in any way.
sulphur (such as coal).
Spark spread
The difference between the purchase price of raw materials for the production
of energy in our gas-fired power stations and the market price of electricity.
See also dark spread.
Colophon
N.V. Nuon Energy
Spaklerweg 20
1096 BA Amsterdam
Telephone: +31 (0)88 098 00 00
P.O. Box 41920
1009 DC Amsterdam
The Netherlands
Email: [email protected]
The annual report is available in PDF on our website www.nuon.com
Contact information
Media relations
Spaklerweg 20, P.O. Box 41920, 1009 DC Amsterdam, the Netherlands
Telephone: +31 (0)88 098 88 88
Email: [email protected]
Publication
© N.V. Nuon Energy, 2012
Concept and realisation
Dart | Brand guidance & Design, Amsterdam, the Netherlands
Editing
Bosch & Bosch Translations and Copy, Amsterdam, the Netherlands
Printing
Stadsdrukkerij Amsterdam N.V., the Netherlands
Paper
Cover: Fastprint Gold 250 gm
Inside pages: Fastprint Gold 120 gm
Disclaimer
‘We’, ‘Nuon’, ‘Nuon Energy’, ‘the company’, ‘Nuon Energy group’,
‘the Nuon group’ ‘the group’ or similar expressions are used in
this report as a synonym for N.V. Nuon Energy and its subsidiaries.
N.V. Nuon Energy originated from the unbundling of former parent
company n.v. Nuon, currently Alliander N.V. In order to avoid
misunderstanding, the names ‘our former shareholder n.v. Nuon’,
‘Alliander’ or ‘the Alliander group’ are used in this annual report
to refer to n.v. Nuon, Alliander N.V. and/or Liander N.V. with their
respective subsidiaries, which jointly form the network company.
Where the name Nuon is used in terms, project names or other titles,
such as Nuon Magnum, this relates to activities that fall under the
Nuon group. The name ‘Vattenfall’ or similar expressions refer to
Vattenfall AB and its subsidiaries. Vattenfall acquired 49% of the
shares of N.V. Nuon Energy on 1 July 2009 and an additional 15%
on 1 July 2011 and consequently holds 64% of the shares in Nuon.
The financial data of Nuon are consolidated in the financial
statements of Vattenfall.
Parts of this report contain prospective information. These parts
– without exceptions – may include unqualified statements on
future operating results, government measures, the impact of other
regulatory measures on all activities of Nuon as a whole, Nuon’s
shares and those of its subsidiaries and joint ventures in existing
and new markets, industrial and macro-economic trends and Nuon’s
performance in these, and statements preceded or followed by or
containing words such as ‘believes’, ‘expects’, ‘anticipates’ or similar
expressions. These prospective statements are based on the current
assumptions concerning future activities and are subject to unknown
factors, and other uncertainties, many of which are beyond Nuon’s
control, so that future actual results may differ significantly from
these statements.
AR2011/N.V. Nuon Energy
www.nuon.com