Delta Annual Report 2010

Transcript

DELTA Annual Report 2010 DELTA in 2010 In this report, DELTA gives stakeholders and other interested parties information on its performance in 2010, explains significant developments and provides background information. CSR report: to be published towards the end of the year In late 2011, DELTA will publish a corporate social responsibility report, which will also discuss the company’s role in the community and provide more information on such aspects as DELTA’s environmental performance. 1 2 DELTA Annual Report 2010 1 Profile and key figures 2 No profit, but a good result 3 Financial performance 4 DELTA in 2010: networks 5 DELTA in 2010: energy 6 DELTA in 2010: waste management 7 Link with Zeeland 8 Corporate governance 9 Report of the Supervisory Board 10 Members of the Supervisory Board, Executive Board, Corporate Leader Group and Works Councils Financial Statements 2010 4 6 8 11 12 20 23 32 37 40 47 3 1 Profile and key figures DELTA is an independent company specialising in networks, energy and waste management. Most of the shares (96.55%) are held by municipal authorities in Zeeland and the Province of Zeeland. DELTA employs over 3,000 people. The company is active in the following areas: Networks DNWB is the network operator for Zeeland and performs its statutory tasks autonomously within the DELTA organisation. DNWB is responsible for managing the gas and electricity distribution networks. These networks are constructed and maintained by DELTA Infra, which also constructs and maintains the Evides water networks and the DELTA cable network. DELTA Infra’s other areas of expertise include high-voltage applications and measurement technology. Energy In addition to electricity generation and energy trading, DELTA also supplies gas and electricity to private and business customers. As well as energy, DELTA serves the consumer market in Zeeland as a provider of digital services (internet, telephony, TV and radio signals) and, via its interest in Evides, as a water supplier. Thanks to its multi-utility approach, DELTA has a large share of these markets in Zeeland. Waste management All the waste management operations have been brought together in the Indaver subsidiary, which is 75% owned by DELTA. Indaver works for the public sector (mainly in Belgium, the Netherlands and Ireland) and private sector (North-West Europe). In the Netherlands, the company uses the DELTA brand name in the public-sector market. Indaver processes over four million tonnes of waste a year, of which Belgium accounts for more than half. Most of the waste is processed at Indaver’s own facilities but some is processed at other plants. The company employs a variety of waste processing techniques including recycling, biomass production and waste-to-energy (energy produced from waste incineration). Key figures* Revenue Electricity supply Gas supply Electricity and gas transport Cable, internet and telecoms Waste management Other 2010 2.073 1,073 312 101 71 462 54 2009 1.870 875 300 125 69 446 55 * Excluding discontinued activities (x EUR million) 4 DELTA: BBB/positive outlook Standard and Poor’s determines DELTA’s credit rating each year. In 2009 DELTA’s rating was BBB, with a stable outlook. In 2010 the rating was again BBB, but with a positive outlook. If DELTA performs as expected, the rating will be upgraded. Factors which the rating agency considered positive included the cancellation of the unbundling exercise, the lower debt and the better risk profile. 5 2 No profit, but a good result The write-down of EUR 260 million on our solar activities meant that we ended 2010 with a substantial net loss of EUR 178 million. As explained in our 2009 report, the solar division had to demonstrate its viability in 2010 with an ambitious business plan. However , the market conditions for solar cells produced by our subsidiary Solland continued to deteriorate and it was decided in September 2010 to write down these activities. It was no longer justifiable for DELTA to continue alone with its activities in the solar segment and it was decided to reduce this interest. Whether it will be possible to sell the business should become clear by mid-2011. Apart from a number of exceptional charges, 2010 was a good year for DELTA’s normal operations. The energy and waste management businesses achieved good results despite the difficult market conditions. The network segment (management and maintenance of the electricity and gas networks in the Zeeland region) performed well. Electricity sales to business customers were almost 28% higher at 7.7 TWh. This growth can be attributed in part to the commissioning of the Sloe power station. The CO2 emitted by DELTA’s electricity generating operations was only 0.33 tonnes per MWh, compared with a national average for the Netherlands of 0.40 tonnes per MWh. Total gas deliveries were also higher (+23%). Due to the lower energy prices, however, only part of this growth translated into higher revenue. DELTA Milieu’s activities were transferred in 2010 to the Indaver subsidiary. Indaver has since been converted into a country organisation focusing on North-West Europe, with bases in the Netherlands, Belgium, Germany, the United Kingdom and Ireland. Waste management performed well in 2010, with processing volume up from 3.9 to 4.3 million tonnes, due to higher waste volumes generated by existing clients and expansion of the client base. On 22 June 2010, the Court of Appeal in The Hague ruled that DELTA was not required to unbundle its electricity and gas networks and that DELTA Netwerkbedrijf could continue to perform its task independently within the group. The State of the Netherlands has lodged an appeal against this judgment. On 3 November, the French energy company EdF and DELTA jointly announced their intention to set up a development company to pave the way for a second nuclear power station at Borssele. The plan is to transfer the work currently in progress on the new nuclear station to this company in 2011. Meanwhile, work on the environmental impact report is continuing and we expect to file the permit application for the new power plant in 2012. Full account will be taken of the lessons learned from the events in Japan in preparing this application. 6 DELTA was able both to retain the confidence of existing customers and gain new customers in 2010. The number of households in Zeeland considering a switch to a different supplier is low at 1–2%, compared with 11% nationally. Surveys conducted by independent agencies also show that DELTA is highly regarded by its customers. In the satisfaction survey published in October by Vereniging Eigen Huis, the Dutch homeowners’ association, DELTA’s average score was 7.6, placing it third in a field of thirteen suppliers. According to Consumentenbond, the Dutch consumer organisation, ZeelandNet’s customers are the most satisfied with their supplier’s services, giving a total score of 7.8 averaged over the second half of the year. Two regular and three informal shareholders’ meetings were held in 2010. The latter were held to inform the shareholders about strategically important developments (unbundling, investments, Evides, solar). Outlook We intend to dispose of the loss-making solar activities in 2011. Thanks in part to the efficiency improvements implemented last year, the company is now in a stronger position. Excluding gains and losses on the trading portfolio, DELTA’s earnings from ordinary operations in 2011 is expected to be close to the 2010 figure, despite structurally lower energy prices in 2011. Peter Boerma CEO 7 3 Financial performance In financial terms, 2010 was an eventful year for DELTA. With the solar energy segment suffering the effects of the weak economy, it was decided to withdraw from this business and unwind DELTA’s interest in it. IFRS requires separate recognition of the financial consequences of that decision as ‘discontinued operations’ in the financial statements, and the consolidated balance sheet, income statement and cash flow statement have been prepared on that basis. Although the reported loss is a disappointment, DELTA had a good year in all segments except solar cell production. The results in the energy segment were very good, largely due to the fixing of selling prices in 2008. The networks segment also performed well. The waste management division successfully integrated all DELTA’s activities in this field and delivered good results. Revenue and profit Owing to the separate recognition of the solar energy activities as ‘discontinued operations’ in the 2010 financial statements, the 2009 financial information has been restated to facilitate comparison. Revenue from continuing operations in 2010 was about 10% higher at almost EUR 2.1 billion, mainly due to higher electricity sales. The Sloe power station, which came on stream in 2010, has boosted DELTA’s generating capacity. Despite the low economic growth in 2010, DELTA was able to increase the gross margin on continuing operations by EUR 8 million. This increase is all the more remarkable because the gross margin in 2009 was boosted by an upward revaluation of the trading portfolio of EUR 34 million, compared with the revaluation of +EUR 3 million in 2010. The growth in net operating expenses was held down by rigorous cost control and efficiency improvement, but additional costs were incurred by the separation of ICT systems in connection with the independent positioning of DELTA Netwerkbedrijf and faster amortisation of several IT applications (EUR 9 million). A number of one-off provisions were formed in the energy segment (EUR 20 million) and a fair-value write-down (EUR 12 million) was applied in the waste management segment in the light of the restrictions on landfill and the economic developments in Ireland. Reflecting DELTA’s strict recruitment policy, the number of full-time equivalent employees decreased by 88 as at year-end 2010 compared with the year before, which translated into a slight reduction in staff costs (excluding inflation). Adjusted for the non-recurring expenses and write-downs referred to above, net operating expenses showed little change in 2010. 8 The share in the profit of joint ventures and associates in 2010 was very close to the 2009 figure. The profits were generated largely by the power stations (EPZ, Elsta and Sloe), waste incineration companies Sleco and AZN and water company Evides. With higher operational cash flow and the capital expenditure held at the same level as in 2009, there was little change in the level of borrowing in 2010. Finance costs were lower in 2010, helped by the repayment of the bridging finance for the Sloe power station at the end of 2009 and movements in external interest rates. These factors together resulted in profit after tax on continuing operations of EUR 90 million in 2010. The assets and liabilities relating to the solar energy activities were written down to zero. The financial implications are recognised together with the operating profit for 2010 and the expected proceeds of sale in ‘Profit for the year from discontinued operations’. The financial implications of the insolvency of Biovalue are also recognised under this heading. The total cost involved amounts to EUR 265 million. Less the profit attributable to non-controlling interests (EUR 2 million), the profit for the year was EUR 178 million negative. Cash flow and Investments Although the balance sheet and income statement have been restructured in connection with the discontinuation of activities, the cash flow statement for 2010 (and 2009) has been prepared in accordance with IFRS on the basis of the result and the balance sheet before recognition of the effect of that decision. Consequently, movements in the income statement and/or the balance sheet cannot be reconciled directly with cash flows. In the light of the financial results and the need to improve the longer-term finance structure, DELTA continued in 2010 to pursue structural improvement in the cash flow. This took the form of a strict debt collection policy, close focus on cost control and a conservative investment policy. The negative operating result can be attributed largely to the effects of write-downs and impairment within the solar energy segment. Because these decisions required only a low cash outflow in 2010, their adverse effect was more than offset by the positive cash flow from operating activities. The debt collection policy also contributed by further reducing the receivables. In 2009, there was non-recurring revenue in the form of the proceeds of sale of assets (to TenneT) and a non-recurring improvement in the working capital due to the adoption of more rigorous collection and payment terms (total EUR 135 million). 9 The total investment in property, plant and equipment and intangible assets (EUR 141 million) was higher than in 2009 (EUR 125 million), mainly due to the investment in a new incinerator (EUR 55 million). Regular investment expenditure on expansion and replacement of operating equipment and networks in 2010 (EUR 90 million) was less than the regular depreciation charge (EUR 110 million). The cash flow generated by the above events was used to pay the 2009 dividend, so there was little change in the net debt position in 2010. Financial position and profitability The net effect of the movement in the hedge reserve (EUR 103 million), the payment of the 2009 dividend (EUR 50 million) and various movements in reserves was to increase equity by EUR 49 million, but this was offset by the negative result (EUR 178 million), so that group equity before profit appropriation ended the year EUR 129 million lower compared with year-end 2009. In combination with the reduction in total assets due to the lower derivatives position, the group’s equity ratio improved to 42.2% (2009: 40.6%). Prospects for 2011 Work will continue in 2011 on developing a more effective organisational structure and reducing costs still further. Cost reduction is essential because margins are expected to come under pressure from lower energy prices and high fuel prices in the years ahead. Further progress is being made in optimizing the financing structure, for example by matching longterm investments and long-term finance. The new waste management facility (a waste-to-energy plant) in Ireland will come on stream in 2011 and work is continuing on the plans for a new nuclear power station in Zeeland. 10 4 DELTA in 2010: networks DELTA Netwerkbedrijf and DELTA Infra DELTA Netwerkbedrijf (DNWB) is the regional electricity and gas network operator in the province of Zeeland. The company performs its statutory tasks independently. DNWB provides dependable and cost-efficient management of the gas and electricity networks and is also responsible for their construction and maintenance. Maintenance is handled by DELTA Infra. DELTA Netwerkbedrijf ‘DELTA has decided to halt all activities relating to the unbundling of network operator DNWB and DELTA NV with immediate effect.’ That was the statement issued after the ruling by the Court of Appeal in The Hague on 22 June that the ‘group prohibition’ (a ban on network managers being part of the same group of companies as producers, traders and suppliers of electricity and gas) under the Independent Network Management Act (Wet Onafhankelijk Netbeheer) was contrary to European regulations. The group prohibition was accordingly abandoned and DELTA responded with ‘delight’, because ‘the judgment vindicates the position we have taken from the start: unbundling is a bad solution to a non-existent problem.’ The judgment means that DNWB can remain part of DELTA and continue to perform its statutory tasks as a network operator independently within the group. To enable those tasks to be performed effectively, further progress was made in 2010 in implementing the unbundling plan approved at the end of 2009 by the then Minister of Economic Affairs Ms. Van der Hoeven. DNWB’s independence is strengthened by having its own offices in Goes, which were made ready in 2010 and to which DNWB relocated in early 2011. A new Executive Board was appointed for the network operator, consisting of Steven Quast (53, CEO) and Michel van Neutigem (49, COO). DELTA Infra: more efficient and more commercial DELTA Infra was able to add a whole list of new clients to its order book in 2010. Stedin, TenneT and BAM Duurzaam are among the clients who will benefit from the services of the DELTA base in Goes. The contract with Stedin is especially significant because it makes DELTA Infra the first service provider in the Netherlands to work for another network operator outside its own region. Water company Evides, DELTA Infra’s most important client alongside DNWB, also signed a new service contract in 2010. Erik Duim, General Manager of DELTA Infra: ‘Infra achieved its commercial target for 2010 largely through its success in acquiring new clients. Infra also met its efficiency target. Overheads were reduced, savings were made in ICT and a number of business processes were redesigned to make them more efficient.’ 11 5 DELTA in 2010: energy Around three-quarters of DELTA’s revenue comes from energy-related activities of various kinds. DELTA generates electricity, trades in fuels (gas, coal and oil) and emission rights on various markets and supplies gas and electricity to business customers and domestic consumers. 5.1 Business market Production, trading and supply to business customers: its integrated approach places DELTA in a strong position as a medium-sized energy company. Asset based: solid operation, lower risk In mid-October, CEO Peter Boerma signed a long-term contract with Gasunie Zuidwending for use of the gas storage facility near Veendam in Groningen. This was the second contract with Gasunie, giving DELTA access to larger and more flexible gas storage capacity from 2016 onwards. The contract is consistent with an ‘asset-based’ business strategy: supplying customers with gas and electricity that as far as possible comes from production facilities to which the company itself has access. Guido Custers, Director of Origination, Trade & Supply: ‘Because we are not just an energy supplier and trader and also have our own production capacity, we have more options for reducing risks. DELTA can influence the entire process, from production to billing. That makes for more stable operation and a good price/quality ratio.’ The hypermodern Sloe power station in the port of Vlissingen is a good example of this strategy. The station was officially opened on 15 February by Marc Boudier, director of co-owner EDF Europe, and Peter Boerma. The plant generates enough power for two million households and has low CO2 emissions: 25% lower than comparable stations. 12 DELTA generating capacity EPZ (50% owned) Nuclear power station Fuel: uranium Output: 512 MW (DELTA: 50%) Coal-fired power station Fuel: coal and biomass Output: 426 MW (DELTA: 50%) ELSTA (25% owned) Fuel: gas Output: 420 MW (DELTA: 50%) Sloe power station (50% owned) Fuel: gas Output: 870 MW (DELTA: 50%) Biomass power station (50% owned) Fuel: chicken manure Output: 36 MW (DELTA: 100%) Wind farms (wholly and partly owned and under contract) Number of turbines: 74 at 12 locations Total output: 87 MW (DELTA: 100%) Combined heat and power 80 engines Total output: 60 MW (DELTA: 100%) Wind and solar energy In cooperation with several partners, DELTA continued to work in 2010 on the plan to reconfigure the Kreekraksluis wind farm. This will involve replacing 26 wind turbines with 30 new units, around half of which will be built on the south side of the A58 motorway where there are no turbines at present. The new wind farm, which is scheduled to come into service during 2012, will generate 7–10 times more power than the existing facility. A solar farm consisting of 12,000 solar panels, with a total output of 2.6MW, on a roof covering 4 hectares at a distribution centre in Willebroek in Belgium, was officially commissioned in 2010. The total area of solar panels is 26,000 m2, making it the largest solar farm in the Benelux. 13 Trading: risk management and profit. Electricity , fuels (gas, oil and coal) and emission rights are traded daily on various markets. At DELTA, the Trade department is responsible inter alia for the sale of electricity and the purchase of fuels for the power stations. The department trades on markets in the Netherlands, Belgium and France. Guido Custers: ‘It’s all about reducing the risks posed by fluctuating energy prices and safeguarding the energy supply. By negotiating advantageous purchase terms and benefiting from volume effects, our colleagues at Trade make a significant contribution to operating profit.’ Energy for the large business market As an energy supplier, DELTA occupies a unique position in the large business market. Guido Custers: ‘It’s evident from talking to our customers that our Dutch roots and our size make us an attractive partner. When it comes to closer cooperation, we have an advantage as a mid-sized company: we’re more flexible and we’re seen as an equal.’ Closer cooperation is especially attractive to customers whose energy costs account for a large proportion of their production costs. ‘Working together to find ways of optimising energy supply requires openness on the part of both parties and in practice results in contracts that are more beneficial to both customer and supplier, because you can map energy demand more accurately.’ As well as this customer-specific approach, the multi-site market also offers good potential for DELTA. Both public and private sector organisations working at many different sites benefit from clear and itemised billing for their energy use. Guido Custers: ‘Our processes are designed to give multi-site customers the best possible service. Clear billing shows the customer how energy is being used at its sites and facilitates energy management and cost reduction.’ Highlights of 2010 February - Official opening of Sloe power station October - Signature of long-term contract with Gasunie Zuidwending for gas storage 14 5.2 Zeeland consumer market In Zeeland, its home market, DELTA provides digital services as well as supplying energy. This multiutility concept has won DELTA a large share of the Zeeland market. DELTA scores above average DELTA emerges well from a comparison with other large suppliers. Its energy prices are attractive, which has not come about by chance: DELTA works hard to keep prices down. This is one way to reward Zeeland consumers for their loyalty and underline DELTA’s links with the province. Not for nothing did DELTA choose as its slogan for its 2010 campaign: ‘DELTA, voordelig en dichtbij’, which translates as ‘DELTA, low prices and close to home’. As well as price, service is also a priority for DELTA, because these are the main areas in which it can set itself apart from the competition. There was also good news in 2010 on the service front. The results published by the Dutch Competition Authority of a number of surveys of the service provided by energy suppliers placed DELTA at the top, with an average score of 6.0. DELTA also performed well in a survey by Vereniging Eigen Huis, the Dutch homeowners’ association, coming third with a score of 7.6. The quality of service of ZeelandNet, DELTA’s digital service provider, was also rated highly by consumers. In late 2010, ZeelandNet and another provider shared first place in the Consumer Association’s Provider Monitor survey. The consumer panel gave both providers a score of 7.8, on such aspects as quality and level of service and problem resolution. Over the past year, the twomonthly surveys have shown a steadily rising line. The research indicates that ZeelandNet’s customers are the most satisfied with their provider’s services, giving an overall score of 7.5. On the aspect of ‘friendliness’, the score was 8.1. Highlights of 2010 May  DELTA reduces the variable energy price by 11% with effect from 1 July 2010, making it the lowest variable price at that time. The gas price was also kept low. July  The number of digital TV viewers has grown 6.3%, according to the Telecompaper market research bureau. DELTA is outperforming the national growth rate of 4%. September  ZeelandNet Zakelijk announces that the 3,000th business customer has opted for internet via cable.  More HD-quality channels on air: DELTA HD subscribers can now receive 17 channels in HD quality. October  DELTA performed well and took third place in a customer satisfaction survey published by the Dutch homeowners’ association. 15 The teams at DELTA Comfort and ZeelandNet, the DELTA divisions that address the consumer market in Zeeland, see good ratings as an important stimulus to raising the service level even higher, and they worked hard again last year to further optimise the service. In the energy sector, they use the ‘customer journeys’ method: what steps does a customer have to take, for example, to sign up for services, report faults or change the amount of a regular direct debit payment? Careful analysis of these processes, as viewed from the customer’s perspective, can result in improvements that benefit the company as well as the customer. The digital services provided by ZeelandNet were also placed under the microscope last year. General Manager Pascal de Klerk, who is responsible for operations on the Zeeland consumer market: ‘The good scores given by independent bodies such as the Competition Authority and consumer organisations are a sign that we’re doing it right. For us, they are a strong incentive to keep focusing on the combination of price and quality.’ Market trends DELTA’s share of the energy segment of its Zeeland home market is large and comparatively stable. Pascal de Klerk: ‘Although there has been competition on the energy market for seven years now, DELTA still serves most of the consumer market. The number of households in Zeeland that switch suppliers is low, at 1.5–2%. Nationally, the figure is around 10%.’ DELTA provides internet and telephone services under the ZeelandNet brand. In this segment, too, DELTA has a large share of the market. Low prices and good products are the key to its success. Its above-average level of service and unique multi-utility concept ensure that customers remain loyal to DELTA. Campaigns in 2010 DELTA again ran several advertising campaigns in 2010 to raise its profile with consumers. Competition in the energy and digital services markets is intense and it is essential to maintain a highprofile presence in the marketplace if you want to extend your market share. Energy Every six months, in the middle and at the end of the year, DELTA customers are given details of attractive energy deals by letter or e-mail, backed up by an intensive regional campaign of radio and TV commercials and advertisements in regional media. Digital advertising media are also used, to ensure full coverage of Zeeland’s population. The ‘I love Zeeland’ campaign in late 2010 was the first phase of a drive to sign up households outside the province. Green DELTA mounted a number of advertising campaigns in 2010 to raise Zeelanders’ awareness of the importance of energy saving and CO2 reduction. The spring campaign under the slogan ‘Dagelijks duurzaam’ (approximately ‘Green every day’) was rounded off with a sustainable dinner for many guests in the Zeelandhallen centre. From October to December, CO2 reduction was the central theme of the ZeeuwsGroen ( ‘Zeeland Green’) campaign. By buying ZeeuwsGroen energy, households are helping to reduce CO2 emissions. 16 Digital The aim of the ‘fast 4ward’ campaign launched in the spring was to draw Zeelanders’ attention to ZeelandNet’s lightning-fast internet service: four times faster than the competition. The campaign included TV and radio commercials and special websites. The soccer World Cup provided an opportunity to promote the company’s HD television service. An ambitious campaign was mounted under the slogan ‘Hup HD Hup’, using posters, newspaper advertisements and TV commercials. DELTA helped to bring super sharp TV viewing within reach by giving a €100 discount on an HD receiver. At the end of the year, first-time subscribers to ZeelandNet’s internet service were given a 50% discount for six months. The same discount was given to new customers signing up for digital telephone and TV services. Effectiveness The effectiveness of the campaigns was carefully monitored. Pascal de Klerk, General Manager of DELTA Comfort: ‘The ‘Hup HD Hup’ campaign achieved high penetration in a very short time: surveys found that 62% of Zeelanders were aware of it. The number of HD subscription sales rose sharply during the campaign period and most of our other products also benefited.’ DELTA.nl in 2010 DELTA.nl had a successful year in 2010, with the number of people visiting the site rising to 586,079, up 60% compared with 2009 (365,863). On average, they viewed six pages per visit and surfed the site for five minutes. There were a record 70,000 visitors to DELTA.nl in December, who were mainly interested in the sixmonthly energy campaign, the activities relating to nuclear energy and the ZeeuwsGroen green energy campaign. The DELTA HD TV campaign in June also attracted many more visitors to the website. DELTA expanded its social media activities in 2010 with Facebook and Twitter accounts. These digital platforms are expected to generate growth in customer, press and other contacts in 2011. 17 Renewable energy under pressure In light of the effects on the renewable energy sector of the volatile market conditions and the repercussions of the financial crisis, DELTA announced in 2010 that it intended to unwind its interest in solar cell production and close Biovalue, the biodiesel plant in Eemshaven. In November, DELTA announced its decision to withdraw from solar cell production in response to the shifts in the solar energy market caused by the economic crisis and in recognition of the fact that the entry of large Asian players heralded the end of the era of unlimited growth for European solar energy companies. DELTA consequently intends to unwind its interest in Solland Solar, the Heerlen-based solar cell manufacturer. DELTA acquired the interest in Solland in late 2006, when the outlook for the solar industry was still promising. ‘The returns on these investments were very disappointing’, says CEO Peter Boerma. ‘Like others, we did not foresee the market turbulence we have experienced in recent years. We still believe in solar as the energy source of the future, but further investment cannot be justified by a company like DELTA in the current market conditions. The know-how Solland has accrued makes the company attractive to potential buyers who can grow it to the required scale.’ Consistent with its present view of the solar market, DELTA has written down its interest in Solland and Sunergy (a research and development subsidiary). Drastic changes in the biodiesel market Domestic output of biodiesel has fallen sharply in recent years in the face of rising imports. The government’s decision to reduce the mandatory biodiesel content in diesel to 4% has also been a negative factor. In July, DELTA decided to close Biovalue, the biodiesel plant in Eemshaven. DELTA had spent several months before that trying to find other uses for the plant, which employs 26 people, but its efforts proved unsuccessful. 18 Preparations for a new nuclear power station To achieve a 20% reduction in CO2 emissions by 2020, greater use has to be made of nuclear power. Those were the words of the Rutte administration in September’s coalition agreement. DELTA sees this as vindication of its position: that it would be irresponsible not to use nuclear energy if we want to achieve a significant reduction in CO2 emissions. Carbon reduction is essential to prevent global warming. DELTA aims to be carbon-neutral by 2050 and, to that end, it is making preparations for a second nuclear power station in Borssele. The following are some of the preparatory steps taken in 2010 to enable work on the new station – which has to be in service in 2018 – to proceed.  In June, the Ministry of Housing, Physical Planning and the Environment notified DELTA of the requirements that its environmental impact report had to meet for DELTA to qualify for a permit.  On Thursday, 16 September, the first group of students taking Nuclear Technology as a secondary subject embarked on their course. The launch of this course at senior secondary vocational education (MBO) level and higher professional education (HBO) level represented the fulfilment of a long-held wish. In the space of a year, a course had been organised by Hogeschool Zeeland, the Westerschelde Regional Training Centre, the Zeeland Regional Training Centre, DELTA and EPZ to train students for jobs in the nuclear industry alongside their regular course work.  In November, DELTA announced that it was to cooperate with EdF, the French energy company, on preparations for the construction of a new nuclear power station. EdF has a wealth of experience in building power stations of this kind and DELTA and EdF are no strangers: they are joint owners of the Sloe power station in Vlissingen.  Throughout 2010, DELTA organised ‘drop-in evenings’ to tell people living in the area about the new nuclear power station and the environmental impact report. Members of DELTA’s Executive Board also held a series of informal meetings with people at home, to answer their questions about the plans for the new power station. 19 6 DELTA in 2010: waste management The recent history of DELTA’s Indaver subsidiary shows that the company is achieving its growth ambitions in North-West Europe. Expenditure on waste management has risen sharply in the past few years. Companies and public authorities are outsourcing management of their waste streams to specialists because efficient and cost-effective waste management has become a complex task. Indaver, which has its headquarters in Mechelen in Belgium, has grown to become an international group with bases across Europe. As well as Belgium, Indaver is also active in the Netherlands, Ireland, Portugal, Italy and Germany. The company’s clients include public authorities (chiefly in Belgium, the Netherlands and Ireland) and industry (North-West Europe). Indaver processes almost three million tonnes of waste a year, over half of it in Belgium. Most of it is processed at the company’s own plants, but some is processed at other facilities. The company employs several waste management methods including recycling, biomass production and waste-toenergy (waste incineration combined with energy generation). Integration of DELTA Milieu into Indaver DELTA Milieu, formerly one of the DELTA divisions, was integrated into Indaver in 2010. Indaver is 75% owned by DELTA; 16% of the shares in Indaver are held by Vlaamse Milieuholding and the remaining 9% are held by six industrial companies. The integration of DELTA Milieu has led to the creation of a country organisation. Indaver has divided the market into four regions (Belgium, Netherlands, Ireland/UK and Germany) and reconfigured the internal organisation to suit this market approach. DELTA Milieu has 225 employees and generates revenue of EUR 117 million. Post-integration, Indaver will have some 1,700 employees in 2011 and will generate revenue of about EUR 500 million. DELTA Milieu operates out of 30 sites in Zeeland, Noord-Brabant and Zuid-Holland. Integration is the logical culmination of a development that was initiated in 2007, when DELTA decided to expand its waste management activities by acquiring a stake in Indaver because a wider range of energy and waste-related services offered more growth potential. The interest in Indaver thus broadened DELTA’s commercial base. The combination of waste management and energy services not only meets customers’ needs, but is also a logical step in terms of technology. A growing volume of waste is being recycled into new materials or used as fuel for electricity generation. 20 Indaver Nederland: DELTA Milieu, IGA and AROC DELTA Milieu specialises in management mainly of non-hazardous and domestic waste produced by public-sector and business clients. DELTA Milieu handled over one million tonnes of waste in 2010, using a number of processing methods: Composting of vegetable matter to produce high-grade soil conditioner Fermentation of organic waste streams Production of biomass from green waste Paper recycling Waste-to-energy (incineration combined with electricity generation) Landfill DELTA Milieu is the waste collection, recycling and processing partner of the Zeeland municipalities. As well as DELTA Milieu, IGA and AROC are also part of Indaver Nederland. IGA (Indaver Gevaarlijk Afval, which translates as ‘Indaver Hazardous Waste’) is based in Terneuzen and AROC is based at the Corus Staal bv site in IJmuiden. Ronny Ansoms, Indaver’s CEO: ‘Indaver’s Dutch arm will continue to work for public authorities under the DELTA brand. The integration of DELTA Milieu has created a single organisation with a strong position on the North-West European market. Its combination of expertise and customer concepts Total Waste Management and Public Waste Partnerships – places Indaver in a strong position.’ With its Total Waste Management concept, Indaver offers industrial customers a total package. The service can take various forms, from processing and transport to running processing plants at the customer’s site. The concept is successful because it frees customers to focus their core business. Indaver is also an attractive partner for public authorities. Ronny Ansoms: ‘Guaranteed continuity and sustainable processing of waste streams are essential for public authorities and Indaver is able to meet their needs.’ Public Waste Partnerships, the market concept targeted on public authorities, encompasses three types of service: processing of household waste, organisation of waste management systems and operation of processing installations. Indaver’s Public Waste Partnerships concept operates mainly in Belgium, the Netherlands and Ireland. DELTA waste management: a brief history DELTA acquired a 60% stake in Indaver NV in Belgium in 2007 and increased it to 75% in late 2008. DELTA Milieu’s waste management activities were transferred to Indaver in 2010. Waste management accounted for over a quarter of DELTA’s revenue in 2010. 21 New projects in Meath and Antwerp Indaver worked hard in 2010 on two projects that illustrate both the importance of sustainable waste management and the company’s versatility: the first large waste-to-energy incineration plant in Ireland and Medipower, a processing plant for hospital waste in Antwerp. Construction of a waste management plant in Meath in Ireland, 30km north of Dublin, started in August 2009 and will be completed in September 2011. This waste-to-energy facility can process up to 200,000 tonnes of household waste and a similar volume of industrial waste per year. The plant generates electricity in the process: the 20MW turbine generates enough power to supply 20,000 homes. At an Indaver site in Antwerp, construction started in September 2010 on Medipower, a processing facility for hospital and other waste. Medipower is scheduled to enter service in early 2012. The Antwerp site is ideal, because some components of the existing installation there will be reused. The entire incineration section is being renewed, however, and a new flue gas scrubber will be installed. Ronny Ansoms: ‘Belgian hospitals generate 14,000 tonnes of waste a year. Dutch hospital waste will probably also be brought to Antwerp for processing. Medipower produces electricity and steam. We use the steam to heat some of the buildings and we feed the power generated by the plant into the public grid.’ Priorities Preparations were made in 2010 for the organisational changes needed to accommodate Indaver’s growth. These changes took effect at the beginning of 2011 and the company has a new country organisation divided into four regions (Belgium, Netherlands, Ireland/UK and Germany). The following priorities have been set:  to expand the Public Waste Partnerships for the public-sector market, with waste incineration and high-grade recycling as core activities, in Belgium, the Netherlands and Ireland;  to roll out Total Waste Management more widely, focusing on incineration of hazardous industrial waste in the EU;  to expand the biomass and composting activities and secure a strong leading position in the processing of biomass streams in the Netherlands and Belgium. Highlights of 2010 June - On 21 June, DELTA’s shareholders approved the integration of DELTA Milieu and Indaver. The new organisational structure became operational at the beginning of 2011. September - Work starts on the construction of Medipower, a new processing plant for hospital waste in Antwerp. December - Indaver’s growth necessitates organisational changes. The new country organisation based on four regions – Belgium, Netherlands, Ireland/UK and Germany – became operational at the beginning of 2011. 22 7 Link with Zeeland There is a special link between DELTA and the province, not only because it is in public ownership, which is becoming increasingly rare, but also because so many Zeelanders are customers, buying one or more services from the multi-utility company. There are few businesses whose links to the region are as close. DELTA is well aware of this and wants not only to contribute to the province at the economic level but also to be involved at the social level. 7.1 DELTA’s social significance Rooted in Zeeland’s soil, one of the biggest employers in the province, with a client base that includes over 95% of Zeeland households and with the Province of Zeeland and all the Zeeland municipalities as its shareholders, DELTA is an integral part of the region. This forms the basis of DELTA’s social involvement. Public-sector shareholders are different from other shareholders such as pension funds and have their own priorities. Their focus is on preserving local employment and investing in sustainability and social support. DELTA’s social involvement is not, however, driven solely by its shareholders’ preferences: DELTA sees involvement in Zeeland as a logical step. ‘We want to give something back to our customers and to the community’’, says CEO Peter Boerma. ‘And of course it’s important for DELTA that our shareholders see us investing part of our revenue in their community and showing that we value and share Zeeland’s qualities. That also engenders goodwill on the part of Zeelanders and loyalty among our customers.’’ DELTA’s own future also benefits from investment in the community, for example in the labour market, which is why DELTA invests in education. In 2010, for example, DELTA worked with EPZ and COVRA (the Dutch Central Organisation for Radioactive Waste) to introduce a nuclear energy course at senior secondary vocational education (MBO) level and higher professional education (HBO) level. The first moves were also made last year to introduce a new course for energy professionals. Boerma: ‘We are creating niches in which Zeeland educational institutions can specialise, while at the same time ensuring a future supply of well-trained staff.’’ DELTA continued to pursue its targeted sponsorship policy in 2010, after the radical shift of emphasis three years ago. DELTA formerly supported all kinds of projects, from very small to very large, but to little net effect. It was decided to focus on supporting mainly social initiatives, but external to the DELTA organisation, via the DELTA Zeeland Fund. DELTA also wanted to raise its profile by providing substantial support for a small number of major events as principal sponsor. DELTA was the principal sponsor of three large Zeeland events in 2010: the DELTA Tour Zeeland cycling event, including the DELTA Ride for the Roses, the Film by the Sea film festival and the DELTAWEEK sailing event. By acting as principal sponsor, DELTA wanted to demonstrate its involvement and its willingness to invest in that role. In return, DELTA demanded that it be given some input into the programming of the event. 23 Sponsorship of the three events also gave DELTA an opportunity to meet clients there by inviting major business customers to opening ceremonies or competitions and giving domestic customers a chance to experience the events. After evaluating the events, DELTA decided in 2010 that 2011 would be the last year it would be principal sponsor of the DELTA Tour. This decision was communicated to the organisers in good time to enable them to consider alternatives. The company will continue to sponsor DELTA Ride for the Roses in 2011. A new event which DELTA will sponsor in 2011 is the annual Concert at Sea, held at Brouwersdam. Support of a quite different order is provided via the DELTA Zeeland Fund, whose object is to promote the vitality of the Zeeland community. A contribution to the fund of EUR 500,000 was earmarked for 2010. As with DELTA’s role as principal sponsor, this fund was born of a desire to streamline DELTA’s fragmented sponsorship policy. DELTA initiates projects, but does not involve itself in organisation or resource allocation. Of the seven members of the fund’s Board of Trustees, only one has a link with DELTA. The other six, including chairman Cees van Liere, come from all parts of Zeeland and have expertise in at least one of the four spheres of interest: sport and leisure, nature and environment, health and welfare and art and culture. The maximum grant is EUR 25,000 and support is limited to three years. To qualify, the application must relate to an innovative initiative that serves the Zeeland community. A detailed description of all the criteria can be found at www.deltazeelandfonds.nl. DELTA Zeeland Fund received some 200 applications in 2010, of which over one-third were accepted. Because DELTA operates a fairly restrictive acceptance policy, the quality of the projects has improved. Before a formal application is submitted, a quick scan can be performed on the website to indicate whether a project meets the basic criteria. Applications are assessed by the Board of Trustees independently, without consulting DELTA. When it became apparent from applicants’ responses that the DELTA Zeeland Fund did not have a high enough profile, the fund launched the TogetherZeeland project in November 2010 to give more active support to the civil society. A linked competition was organised under the slogan ‘Help! I have a good idea’, with a cash prize of EUR 50,000. The prize was presented to the winner at the Inspiration meeting on 23 March 2011. 24 A festival of film for, by and with young people ‘In conjunction with DELTA, we developed a programme designed mainly for young people. All Zeeland children in primary and secondary education can take part in the educational programme. They have a choice of films appropriate to their age and suitable for Film by the Sea. DELTA sponsors their bus travel. We also hold the DELTA Shorts competition for short films made by young people from all over the Netherlands, for a cash prize of EUR 1,000 – the DELTA Young Talent Award. That part of our programme is continuing to grow in both quality and quantity. It’s turning into a big event. We had close to 30 entries in 2010, of which 17 were selected. And we are of course delighted with the DELTA pavilion, a fine venue that we can use for many activities, now the festival is getting too big to fit into the cinema.’’ Leo Hannewijk, Director of Film by the Sea Festival www.filmbythesea.nl All proceeds to KWF ‘The DELTA Ride for the Roses is a way of contributing actively to the work of the Dutch Cancer Society (KWF). Cycling through the beautiful Zeeland countryside keeps you fit while helping an important good cause. Thanks to the sponsorship provided by DELTA, which bears all the organisation costs, all the money raised can go to KWF. In 2010, that was EUR 66,416. The DELTA Ride for the Roses is a growing success in the Zeeland cycle touring calendar. Last year, 3,400 cyclists took part, as against 2,800 the year before. This year we’re hoping for 5,000.’’ Kees Bal, Chairman of DELTA Ride for the Roses www.deltaridefortheroses.nl The perfect match ‘We organised the fortieth DELTAWEEK sailing event in 2010, with DELTA as our principal sponsor for the second year. We’re a perfect match. DELTA has added fresh momentum to DELTAWEEK, as we saw in 2010 in a growing number of entries. As a sailing event with a strong Zeeland character, local links are important. That’s also what DELTA stands for. That was evident last year during the Netherlands-Brazil World Cup match, which we watched on a big screen in the marquee, and the successful concert by singer Jeroen van der Boom. We plan to keep growing in 2011.’’ Gijs Pleyte, DELTAWEEK Executive Committee member www.deltaweek.nl 25 High fliers in Zeeland ‘On Saturday, 5 June, we took a group of chronically sick children flying for the first time. Around 75 children with their parents, carers, brothers and sisters came to Zeeland Airport at Arnemuiden. Once in the air, we let them pilot the plane themselves. The day was a great success. It was a DELTA staff member who told us about the DELTA Zeeland Fund while we were making preparations and our application was accepted. After evaluating the event, DELTA Zeeland Fund informed us that they wanted to help again in 2011. DELTA staff will help us with the organisation on a voluntary basis. It will be a great day.’’ Daan de Meester, General Coordinator, Stichting Hoogvliegers www.stichtinghoogvliegers.nl Extra boost for sporting talent ‘The Zeeland Talent Fund was set up several years ago in conjunction with DELTA to reduce the fragmentation of sports sponsorship. Via the Zeeland Talent Fund, people who have achieved a given status in their sport, as measured against national criteria, can apply for extra financial support, for example to fund training or purchase better equipment. It’s attracting a lot of interest. The number of talented individuals receiving support has grown from 20 in 2007 to almost a hundred in 2010. Fortunately, the DELTA Zeeland Fund helped us set up the Zeeland Talent Fund properly. It’s now part of the Zeeland Olympic Network for top athletes.’ Marja Noordhoek, Director of SportZeeland www.olympischnetwerkzeeland.nl Soccer for all ‘The Borsele Sloepoort Cup has included a tournament for G soccer teams since September 2010. In the Dutch name, ‘G’ stands for ‘integrated’, which means teams of young people who can’t play regular soccer because of some mental or physical disability. The tournament was a great success. No fewer than 16 teams from Zeeland, West Brabant, the Rotterdam area and Belgium took part, playing on the SV Nieuwdorp pitches. Everyone enjoyed it. It was really impressive. The DELTA Zeeland Fund was enthusiastic about this tournament, which was the first of its kind in Zeeland, and provided financial support. The fund has already promised to support us in 2011!’’ Peter de Vos, Competition Coordinator, SV Nieuwdorp and Borsele Sloepoort Cup 26 7.2 Investing in education too How do you keep educational provision in Zeeland up to standard when the population is shrinking? Would companies be able to attract suitable staff if there were no longer adequate access to education in our province? Or would they move to a region that is better provided? Government, education and business are working together to avoid being caught in such a downward spiral. DELTA is participating in various initiatives. ‘In education too, what’s good for Zeeland is good for us.’ ‘There is clearly a labour shortage in Zeeland. It’s not always easy to recruit the right people,’ says Paul van Raay, DELTA’s HRM Director. ‘By helping to deliver good and varied education, we can ease the problem, so that’s what we’re doing. It’s not for nothing that our business strategy is entitled ‘Good for Zeeland’. We believe it’s important to keep education up to standard in the province. That will benefit the region as a whole, as well as serving our own interest.’ Rotterdam’s back garden, Antwerp’s front garden, Education provision in Zeeland is under pressure from a combination of population ageing and falling population numbers. An active policy is needed to maintain standards of healthcare, education and general welfare. As Rotterdam’s front garden and Antwerp’s back garden, the Zeeland region had plenty of potential. By investing and promoting cooperation with Flanders, the tide can be turned. At the request of the Ministry of Education, Taskforce Zeeland issued a report on education provision in Zeeland, with recommendations, in August 2010. More information can be found at: www.onderwijsarbeidsmarkt.nl. DELTA invests over half a million euros a year in various education projects, mostly at the professional education level. DELTA works inter alia with the Zeeland Regional Training Centre, the Westerschelde Regional Training Centre, Hogeschool Zeeland, the Roosevelt Academy and the Delft University of Technology. Van Raay briefly explains why DELTA is supporting education in Zeeland. ‘Education is core social function and is a factor that affects the attractiveness of a region, which is why we believe it is important to invest over a broad front, from senior secondary vocational (MBO) level to university. The emphasis is on technical vocational education because of the nature of our business.’ As well as joint educational projects, DELTA also provides opportunities for training and professionalisation in the form of internships and work experience. Each year, dozens of senior secondary vocational education (MBO), higher professional education (HBO) and university students spend time at DELTA as interns, working on research projects and other tasks, and many young people gain work experience at DELTA which improves their opportunities on the labour market. Van Raay: ‘We also provide comprehensive professional development opportunities for our own staff. Through DELTALENT, our internal training department, facilities are provided for staff to continue their personal development. Every year, our management trainee programme turns recent graduates into all-round professionals.’ 27 Energy professionals, from MBO to university DELTA is working with the Zeeland Regional Training Centre, Hogeschool Zeeland and Delft University of Technology to develop a course for energy professionals. The course will provide a progressive line of study which will enable students to pursue an education programme that starts with MBO and ends at university. The course, which will start in September 2011, will produce professionals who will be able to deploy their expertise in fuels, energy markets, process technology and commercial management within many departments of an energy company. Green economy The object of Bio Base Europe is to promote a green economy. With fossil fuels becoming more scarce, we need to look at alternatives for plastics and traditional fuels, for example. Bio Base Europe has launched a project that includes a training centre for process operators in green bio-based industry. The building will be ready in 2011. The total project will cost EUR 21 million, which has been provided by government, the education sector and industry, including DELTA. Small-scale top education DELTA sponsors the Roosevelt Academy and has a seat on the Board of Trustees of Stichting Roosevelt Academy Fund. The academy, which is located in the heart of Middelburg, operates on a small scale, offering courses in English for 600 students. The Roosevelt Academy is part of the University of Utrecht and offers a wide range of bachelor degree courses (liberal arts and sciences). Nuclear technology There are several companies in Zeeland working in nuclear technology and there are plans to build a new nuclear power station in the province, so demand for technicians with expertise in this field will increase. For that reason, business and education have joined forces to develop secondary (minor) courses at all levels, from MBO to university. Having completed the course, these young professionals will be eligible for recruitment not just by DELTA, but also by EPZ, COVRA (the Dutch Central Organisation for Radioactive Waste) and Veiligheidsregio Zeeland (the Zeeland regional safety authority). Technology Truck Generating energy by dancing or tracking using a smartphone: anything’s possible in the Technology Truck, a mobile demonstration facility for secondary school students to stimulate their interest in technical subjects. DELTA provides financial support for the Technology Centre that organises these and other activities. Climate trolley Learning through playing: for young children, that’s the best way to get the sustainability message across. In Schouwen-Duiveland, primary school pupils can take part in a ‘climate race’, a race to control global warming played in the DELTA Climate Forest at Ecoscope. DELTA funds the trolleys holding the materials used in the game. Via the ‘Sun at School’ project, DELTA is also funding solar panels for primary schools, which not only generate some of the school’s power requirements but can also be used in lessons on renewable energy. 28 7.3 ‘DELTA is really important to Zeeland’ What do shareholders think about DELTA being publicly owned? Do they approve of the company’s multi-utility approach? How do they really feel about nuclear energy? Municipal and provincial officers give their views on ‘their’ DELTA below. Municipality of Vlissingen ‘DELTA is at the centre of the Zeeland community – as a supplier, an employer, a knowledge centre and, at the social level, a sponsor of cultural and community activities. The company charts its own course and the multi-utility strategy helps it stay on it. The challenge is to maintain that course in the future.’ ‘There’s bound to be some tension between a public authority and a commercial enterprise, because we have different responsibilities. But the transparent way DELTA runs its business gives me confidence in its policies. That includes the plans for a new nuclear power station. I think it’s good that these plans are being made, because we need nuclear power if we are to achieve energy sustainability. The important thing is to draw up the business case for a new power station.’ Jacques Suurmond, alderman Municipality of North Beveland ‘I agree with the course DELTA has chosen. It’s significant that DELTA is withdrawing from the solar cell business and shifting the emphasis to waste management and energy. Waste management is a stable business and I’m pleased that DELTA is putting its money on nuclear energy. Size is important – you have to be big enough to carry weight at the international level – so I’m glad DELTA is developing activities elsewhere.’ ‘I think it’s important that the company plays an active role in the Zeeland community and I know it is appreciated. We are kept well informed about the company’s activities at a general level, and it’s general information I have to rely on to do my job. So it’s important that the new Supervisory Board oversees policy with a commercial eye and keeps the business on a healthy course.’ Henny van Kooten, mayor 29 Municipality of Schouwen Duiveland ‘DELTA is no longer exclusively Zeeland-focused, because the company is also pursuing its multi-utility strategy outside the province, but it has lost none of its Zeeland common sense. I see the write-downs on the solar cell and biodiesel businesses as evidence of that common-sense approach. It was a tough decision, but it’s good that DELTA is focusing on its core businesses: energy, waste and water. ‘Whether it is big enough at its present size, only time will tell. I know that Zeeland people are proud that DELTA has its roots in the province and the company’s engagement with the community is one of its strengths.’ Ad Verseput, alderman Municipality of Hulst ‘DELTA is our company and we have to cherish it. It’s quite obvious to me that DELTA’s multi-utility strategy is the key to continuity: energy alone is not enough. If only for the employment it provides, the expertise it possesses and the policy of community involvement it pursues through sponsorship, it’s important that the company remains viable in this form and that public shareholdership is preserved. We don’t have to follow the same path as other places in the Netherlands if it’s not in Zeeland’s interest.’ ‘I’m in favour of a second nuclear power station. Hulst lies between Doel and Borsele, and we’re at home with nuclear energy. I see nuclear energy as the best option while renewable sources are still reliant on grants and I’m confident that COVRA’s waste storage facilities are safe.’ Jan-Frans Mulder, mayor Province of Zeeland ‘DELTA is really important to Zeeland, not just because it creates employment but also because it’s a client of many businesses in this region. Through its involvement in education and its cultural and sports sponsorship, DELTA demonstrates its ties to the region and that’s important. For Zeelanders, DELTA means convenience: one supplier for many services. You don’t get that anywhere else – it’s what makes DELTA unique.’ ‘The multi-utility concept is a strong card in DELTA’s hand, but it does potentially involve risk because it means operating on several fronts simultaneously, and that makes heavy demands on the organisation and management. The plans for a new nuclear power station are crucially important to DELTA’s future. I’m in favour, provided a convincing business case can be made. The events in Japan have to be taken very seriously, because safety is paramount.’ Cees van Beveren, executive councillor 30 Municipality of Terneuzen ‘I think DELTA will have a good future based on its multi-utility strategy. That doesn’t mean our municipal council will not continue to monitor the business closely. Debates on public shareholdership and dividend policy will continue to be part of that. I think the company has become more transparent over the past five years and the shareholders are taking a more professional approach to ‘their’ DELTA. It used to be more a matter of unquestioning loyalty. The shareholders have always taken a constructive approach, but it’s now increasingly in the form of constructive criticism. That kind of stance benefits both the company and our region.’ Jaap Bos, alderman Municipality of Goedereede ‘DELTA is very clearly ‘one of us’. There are close ties between the company and the shareholders, and I like that. DELTA is accessible and has invested in a good information system. Last year, our council visited Middelburg and the new Sloe power station. Visits like that are opportunities for dialogue and provide useful information.’ ‘The multi-utility strategy is a little unusual, but I think it suits our region. It emphasises once again that DELTA exists to serve the people, both as a provider of several services and as an employer and sponsor of community activities.’ Peter Feller, alderman Municipality of Goes ‘DELTA is a large company that’s important to Zeeland in general and Goes in particular. We recently welcomed DELTA Netwerkbedrijf to our municipality. DELTA Infra already had a base here.’ ‘A company has to make a profit and must always focus on the bottom line. While I agree with DELTA’s decision to withdraw from the unprofitable solar cell and biodiesel businesses, that decision has opened up a debate within the municipality on the course DELTA is pursuing. Our job is to monitor the company’s progress and explain its business strategy to the people of Goes. I think it’s good that the shareholders are working together more and keeping the company under constructive scrutiny.’ Loes Meeuwisse, alderman 31 8 Corporate governance Enterprise, integrity, respect, supervision, transparent reporting and other forms of accountability are the main pillars of DELTA’s corporate governance policy. The company fully respects society’s interests. DELTA complies with the Corporate Governance Code for companies listed in the Netherlands even though some of the provisions are not directly applicable to it. It has adopted the Code’s best-practice provisions in so far as they apply to DELTA. Because it is a public limited company which has registered shares in issue, the provisions relating to anti-takeover measures and the like are not applicable to it. Structure, policy and compliance DELTA N.V. is a large company within the meaning of Section 154, Book 2, of the Netherlands Civil Code. The consequences that the Civil Code attaches to this status are not entirely appropriate to DELTA’s governance structure. The involvement of the General Meeting of Shareholders and the Supervisory Board in the company’s operations is laid down in the Articles of Association and various regulations. These documents also stipulate when proposals by the Executive Board to invest in, acquire or dispose of all or part of a business require additional approval from either the Supervisory Board or the General Meeting. The prior approval of the Supervisory Board is required if a proposed decision involves more than EUR 5 million and the prior approval of DELTA’s shareholders is required for investment decisions and similar decisions involving more than EUR 55 million. Executive Board The powers and responsibilities of DELTA’s Executive Board are defined in the Executive Board Regulations. These regulations allocate duties to the four members of the Executive Board, define internal representative powers, regulate decision-making within the Executive Board and implement the rules arising from the Dutch Corporate Governance Code. The latter includes rules on conflicts of interest among members of the Executive Board. In relation to internal representative powers, the Executive Board has drawn up rules on the granting of power of attorney that came into force following their approval by the Supervisory Board in 2008 and define the various powers granted to staff. Supervisory Board DELTA’s Supervisory Board oversees the company’s overall performance, including compliance with the policy rules and results achieved by the Executive Board, its financial position, its risk profile and its financial reporting. The Supervisory Board also acts as a sounding-board for the Executive Board. To fulfill its role effectively, the Supervisory Board’s profile must be consistent with that of the company. The profile drawn up by the Supervisory Board in 2010 describes the qualities required of members and candidates, without prejudice to the expanded powers of nomination of the Central Works Council. In consultation with a delegation from the General Meeting, the new chairman of the Supervisory Board, who took office in June 2010, initiated and completed the process of appointing an almost entirely new Supervisory Board, which took office on 1 January 2011. The composition of the Supervisory Board complies with the Code in terms of independence, age diversity, background and expertise, but gender diversity remains a matter of concern. The responsibilities and powers, the internal decision-making procedures and the role of the chairman of the Supervisory Board are laid down in the Supervisory Board Regulations. The regulations also lay down such matters as periodic evaluation of the Supervisory Board’s own performance in accordance with the provisions of the Code. In addition to the Supervisory Board Regulations, regulations have been drawn up for the Supervisory Board’s Audit Committee and Strategy Committee. It was decided in 2010 to wind up this latter committee when the newly appointed Supervisory Board took office. The Audit Committee’s tasks include oversight of the risks to which the company is willing to be exposed and of financial and tax matters. Risk management and risk policy are regular items on the agendas of the Audit Committee and the full Supervisory Board. 32 Shareholders The role of DELTA’s shareholders and the powers of the General Meeting of Shareholders are laid down in the Articles of Association. DELTA’s shareholders are committed and enthusiastic, due partly to their being public-sector entities (all being municipalities or provincial authorities). In accordance with the Code, DELTA’s shareholders may in principle act in their own interests subject to the legal requirements of reasonableness and fairness. Owing to the wide-ranging powers enjoyed by DELTA’s General Meeting of Shareholders under the Articles of Association, the way in which shareholders exercise their voting rights has a significant influence on the company’s performance. In a broader context, the Frijns Committee found the same situation at a large number of other companies in the Netherlands and recommended the adoption of a policy of bilateral contact between a company and its shareholders. At DELTA, that policy takes the form of agreements on periodic informal meetings between the Executive Board and the shareholders. Dividend The Executive Board, the Supervisory Board and the shareholders have agreed on a dividend policy for the 2011 and 2012 financial years in the form of a workable long-tem vision that is acceptable to all concerned. Works Council In the context of the Articles of Association, regulations and other arrangements, the relationship with the Works Council and Central Works Council of the DELTA group should not go unmentioned. It is a relationship based on mutual respect, as reflected in the structured consultation between the Executive Board/company and the Works Council and Central Works Council on the basis of agreement on the matters under discussion and the facilities of the members of the Works Council, the Central Works Council and the European Works Council, which was created in 2009. At division level, there is structured consultation with divisional works councils. Compliance To complement the activities of the compliance officer, DELTA has introduced a whistleblower scheme, as approved by the Supervisory Board, to enable employees to inform the Executive Board and/or a confidential contact of suspected misconduct without prejudicing their own position. 33 Contacts with external stakeholders In view of the company’s importance and position, DELTA regularly publishes its results and announces important events by means of press releases and publications on its website. Regulations DELTA has introduced several sets of regulations that define the frameworks within which the corporate bodies are to function or elaborate upon the rules applicable within DELTA. The regulations are reviewed from time to time and amended as necessary. These regulations are:  the Articles of Association  the Executive Board Regulations and the Supervisory Board Regulations  the Code of Conduct  the procedure for dealing with suspected misconduct (‘whistleblower scheme’) The following have also been posted on the website:  the retirement rota for the members of the Supervisory Board  the Supervisory Board Regulations. Risks and risk management DELTA is active in a variety of markets and is exposed to many different risks. Some of these risks arise from the portfolio mix and operational decisions. These include organisational risks, safety and liability risks, strategic risks and technical risks. Some of these risks are external, including political and regulatory risks, market risks and social risks. These risks are inherent in DELTA’s activities and strategic choices and therefore form part of the company’s risk profile. DELTA seeks to identify these risks at an early stage and take steps to control them. In 2010, DELTA continued to refine the risk management structure created in 2009, in which risks are identified and evaluated and control measures are defined. This enables DELTA to make deliberate choices as to which risks it is willing to accept itself and which can better be borne by others. To assist in defining and implementing risk management measures, risks are systematically identified and categorised using the COSO (Committee of Sponsoring Organizations of the Treadway Commission) framework. To assist them in executing this process, which was further developed in 2010, the operational divisions are supported by a number of corporate staff departments specialising in compliance, internal audit, corporate risk management, HSE, strategic decision support and financial control. To comply with quality standards, DELTA works in accordance with various ISO and VCA certificates. Cost reduction was a constant priority in 2010, to ensure that DELTA continued to meet the creditworthiness requirements imposed on it by the financial markets and energy markets. The DNWB business unit will continue to form part of the DELTA group for the coming year, which will further strengthen the company’s financial position. The composition of the total portfolio of products and activities was evaluated and optimised in 2010 and, on the basis of that exercise, it was decided to unwind DELTA’s interest in the solar energy segment. DELTA’s position on the retail markets for energy and multimedia services remained stable in the past year. Reflecting these factors, DELTA’s financial and operational risk profile improved in 2010. A large number of infrastructure works are executed within DELTA. The safety risk is mitigated by strict working procedures and quality management systems and periodic audits. DELTA’s Executive Board and the management actively support the staff’s efforts to keep the working environment safe. 34 Three formal meetings were held in 2010 with the management of all the divisions to discuss the operational risks, paying particular attention to the identification of risks and the actions taken by management to control them. The risk management structure and organisation within the divisions were also discussed. DELTA is protected against property damage, financial loss and liability claims by an extensive insurance package. The risks identified by the divisions are an important element of the internal audit department’s periodic audits of the quality management system and the risk management, control and compliance procedures. The internal audit function is independent of the operating activities and provides additional assurance as to the management, effectiveness and efficiency of the operations. A separate compliance function ensures that DELTA acts in accordance with the primary and secondary legislation and that legal risks are identified and controlled as far as possible. DELTA’s activities are closely related to government regulatory measures and grants and are subject to primary and secondary legislation. DELTA recognises the risks arising from these activities on the dividing line between public and private. This market risk is controlled as far as possible through active participation in the public debate and the close ties DELTA has with its public shareholders. DELTA trades actively on the international gas and electricity markets, on which prices fluctuate widely. Owing to the low rate of economic growth, sales volume is also an uncertain factor. There is also a risk of trading counterparties and producers failing to fulfil their obligations to DELTA. To control these risks effectively, the Risk Management Committee (RMC) again worked closely with the OTS (Origination, Trade and Supply) business unit in 2010. The RMC, which is chaired by the CEO, ensures that DELTA’s energy trading activities remain within the defined risk margins. In control statement DELTA’s Executive Board is responsible for the implementation and effective operation of DELTA’s internal risk management and control system. This system is designed to provide management with timely information on DELTA’s progress towards its strategic, operational and financial goals, to ensure the reliability of its financial reporting and to ensure that DELTA acts in accordance with applicable primary and secondary legislation. Risk management is based in part on the COSO Enterprise Risk Management Integrated Framework (COSO-ERM). 35 Risk taking is inextricably linked to DELTA’s business and the implementation of its strategy. DELTA’s risk management system enables it to control and actively monitor business risks and to take appropriate action where necessary. Given DELTA’s importance to society, high standards are required of its services, particularly with regard to their quality and safety. These demands are laid down in several laws and DELTA invests heavily in processes and systems to comply with them. The core elements are:  quality systems relating to delivery of the various services and the underlying processes;  crisis management organisation, procedures, training courses and training evaluation;  regular campaigns to raise staff awareness of safety;  periodic risk analyses and risk reports for the Executive Board and management team;  project risk management;  code of conduct and house rules;  whistleblower scheme;  staff selection policy (including certificates of conduct);  accounting manual including the planning and control cycle and month-end and year-end account closing procedures;  treasury policy and risk policy document;  description of the accounting organisation and internal control system for key financial processes;  rules governing internal authorisation and external representative authority. These requirements are disseminated widely among DELTA staff to ensure compliance. Internal audits are performed during the year to check that the control systems are functioning properly. For the audit of the annual financial statements, the external auditor reviews the internal control measures for financial reporting in so far as it is efficient to do so within the scope of the audit. The external auditor reports its findings to the Executive Board, the Audit Committee and the Supervisory Board. The risk of errors, wrong decisions and unforeseen circumstances is mitigated wherever possible, but there can be no guarantee that all risk is eliminated. DELTA may be exposed to risks that are not yet known or that are not yet considered significant. No internal risk management and control system can provide absolute assurance as to the achievement of corporate goals nor can all inaccuracies, losses, fraud and breaches of laws and regulations be entirely prevented. The Executive Board reports on and accounts for the effective operation of the internal risk management and control system to the Audit Committee and the Supervisory Board. On the basis of its evaluation in accordance with the Dutch Corporate Governance Code, DELTA’s Executive Board is of the opinion that, with regard to financial reporting risks, the internal risk management and control system functioned effectively in 2010 and provided reasonable assurance that the financial statements for 2010 do not contain material inaccuracies. DELTA’s Executive Board will continue to strengthen and professionalise the internal risk management and control system in 2011. 36 9 Report of the Supervisory Board The Supervisory Board reports here on its activities in 2010 and on how it has performed its supervisory and advisory task. Composition and profile Having served as a member of the Supervisory Board for 17 years, Jaap Hennekeij stood down as chairman of the Supervisory Board on 21 June. He was succeeded by the undersigned, who had been an adviser to the Board since March. At the end of 2009 it was decided to set the procedure in train to appoint a new Supervisory Board with effect from 1 January 2011. This was necessary in light of a number of changes which had taken place in the energy sector in recent years and the significant changes which DELTA had undergone in several respects. These included:  the liberalisation of the energy market;  DELTA’s international expansion (Indaver, foreign energy projects and industrial water projects);  the increasing complexity of projects (solar, second nuclear power station);  the evolving energy market in North West Europe. There have also been changes in governance, with public authorities playing a more remote role since announcing that they wished to focus on their responsibilities as shareholders and move away from their supervisory role. In consultation with the shareholders, a new profile for Supervisory Board members was formulated which no longer requires public authority representation. As the new chairman of the Supervisory Board, I should like to take this opportunity to thank the members of the previous board for their hard work and commitment and the way in which they, under the chairmanship of Jaap Hennekeij, performed their task. In what was an eventful time for DELTA, they worked as a team, safeguarding the interests of the company and stakeholders as effectively as possible. Once again, I offer my gratitude and respect to all those members, and the chairman in particular. There were no other changes in the composition of the Supervisory Board in 2010. On 13 December, the shareholders approved the proposal for a new Supervisory Board, including the remuneration of the new members. As from 1 January 2011, DELTA’s Supervisory Board consists of:  Mr. D. van Doorn (chairman);  Mr. J. Bout;  Mr. R. Frohn;  Mr. J. G. van der Werf;  Mr. B.P.T. de Wit. 37 Meetings and other activities of the Supervisory Board The Supervisory Board met on eight occasions in 2010 in the presence of the Executive Board. The matters discussed at these meetings included:  the appointment of a new Supervisory Board and its composition and membership;  strategy and short-term and long-term policy;  financial matters, including the quarterly reports, the financial statements and the group plan, and the company’s operational and financial goals;  acquisitions, investments and disposals; one important item on the agenda was the Executive Board’s decision to withdraw from solar cell production activities in the broad sense; other items included the second nuclear power station, investments in environmental services subsidiary Indaver and the insolvency of Biovalue;  dividend policy, investment policy and funding policy, risk management and corporate governance;  developments in connection with the Independent Network Management Act and discussions with the shareholders on developments at Evides. The Supervisory Board also met several times in the absence of the Executive Board. The main topics of discussion at those meetings were the appointment of a new Supervisory Board and its role at the top of the DELTA organisation. Committees (composition, meetings and matters discussed): The Supervisory Board was assisted by following committees in 2010: Audit Committee  The Audit Committee met on seven occasions during the year. The following issues were discussed: the management letter, group plan, quarterly reports, half-yearly report, financial statements, financial results of projects and investments, risk management, IFRS, solar activities, Biovalue and a number of disposal and investment proposals. The Audit Committee consisted of Messrs C. Izeboud, C.H.J. van der Luijt (chairman) and G.K. van der Peijl. The committee’s meetings were also attended by Messrs P.G. Boerma, F. Verhagen, H. Snijders (secretary) and W. de Leeuw (Deloitte).  Remuneration Committee. The Remuneration Committee met on four occasions in 2010 and discussed the following matters: remuneration policy for and remuneration of the Executive Board, remuneration policy for the Supervisory Board, employment contracts of the members of the Executive Board, targets for the Executive Board and DELTA-related supervisory directorships. The Remuneration Committee consisted of Messrs E.J. Gelok and J.I. Hennekeij (chairman) and Mrs C.J.M. ter Bekke-Heijboer. Mr Hennekeij was succeeded in June by Mr D. van Doorn. Mr H. van Stel (DELTA) acted as secretary to the Remuneration Committee.  Strategy Committee. The Strategy Committee consisted of Messrs J.G. van der Werf (chairman), M.J. Wiersma and W.C.T.F. de Zeeuw.  Coordination Committee. This committee consisted of Messrs J.I. Hennekeij (chairman), J.G. van der Werf and C. Izeboud. The committee acted as a sounding-board for the Executive Board. As from 1 January 2011, there is only an Audit Committee and a Remuneration Committee. Other matters are discussed directly by the Supervisory Board. 38 Composition of the Executive Board In 2010, the Executive Board consisted of Messrs P.G. Boerma (Chief Executive Officer), A.S. Louter (Chief Operating Officer), J.J. Rieter (Chief Commercial Officer) and F. Verhagen (Chief Financial Officer). Financial statements The Supervisory Board has reviewed the 2010 annual report, financial statements and notes thereto as prepared by the Executive Board. It has also taken cognisance of the management letter, the audit findings and the auditors’ report issued by Deloitte Accountants. Based upon this information, the Supervisory Board has approved the 2010 financial statements and recommends that they be adopted by the General Meeting of Shareholders without reservation. A word of thanks The Supervisory Board thanks DELTA’s staff for their hard work and commitment in the past year. It was a year that started with the commissioning of the Sloe power station. Sadly, we had to announce in the course of the year that the investments in Biovalue in Groningen and solar cell production notably in Limburg had not delivered the desired and expected results. The write-downs represented substantial losses, but were necessary to place DELTA in a better position for the future. The first priority is to focus on DELTA’s core activities. On behalf of the Supervisory Board of DELTA N.V. Ir. D. van Doorn, Chairman 39 10 Members of the Supervisory Board, Executive Board, Corporate Leader Group and Works Councils SUPERVISORY BOARD 2010 J.I. (Jaap) Hennekeij (1948), chairman Nationality: Dutch First appointment: 1993 as a member and 1995 as chairman Current term: until 21 June 2010 Profession/principal position: Project consultant/former member of the Zeeland Provincial Executive Other positions: chairman of the Advisory Council of Rothuizen van Doorn ‘t Hooft, Goes, architects and urban planners; chairman of Coöperatieve Producentenorganisatie DELTA Zuid, Breskens; chairman of Stichting Zeelandboek; member of the Board of Steunfonds voor de Zeeuwse musea D. (Daan) van Doorn (1948), chairman Nationality: Dutch First appointment: 21 June 2010 Profession/principal position: former chairman of the Executive Board of VION Food Group Current term: until 20 June 2014 Other positions: member of the Supervisory Board of Brunel International, chairman of the Wageningen University Fundraising Committee, chairman of the Science Group Advisory Council of Wageningen University, chairman of Producentenorganisatie Nederlandse Mosselcultuur, chairman of the Van Doorn Committee E.J. (Jaap) Gelok (1951), secretary Nationality: Dutch First appointment: 2002 Current term: until 31 December 2010 Profession/principal position: Mayor of Borsele Other positions: member of Aanpassings- en Inrichtingscommissie Borsele; chairman of Stichting Zeeuwse Schaapskudde; chairman of the Supervisory Board of Sportfondsen Borsele; chairman of Facilitair Bureau Brandweer Goes/Borsele; chairman of Klankbordgroep RMPK; chairman of the Board of Trustees of ROC Zeeland; chairman of the Supervisory Board of Woongoed Middelburg; former Mayor of the Municipality of Strijen C.J.M. (Conja) ter Bekke-Heijboer (1959) Nationality: Dutch First appointment: 2006 Current term: until 31 December 2010 Profession/principal position: Self-employed management consultant with Mens Mentis Consultancy Other positions: member of the Board of Trustees of Lievensberg Hospital; member of the Board of Stichting Leergeld Bergen op Zoom 40 C. (Kees) Izeboud (1946) Nationality: Dutch First appointment: 2002 Current term: until 31 December 2010 Profession/principal position: Self-employed management consultant; Professor of the Faculty of Economics and Business Administration at Amsterdam Free University Other positions: member of the Supervisory Board of ING Nederland N.V.; chairman of the Supervisory Board of Kruidenier Groep B.V.; member of the Board of Trustees of Hivos; member of the Board of Trustees of Hivos-Triodos Fund; vice-chairman of the Board of Trustees of Zorgstroom; chairman of the Board of Trustees of Omroep Zeeland; chairman of the Board of Trustees of Film by the Sea; member of the Board of Trustees of Hogeschool Zeeland C.H.J. (Kees) van der Luijt (1964) Nationality: Dutch First appointment: 2005 Current term: until 31 December 2010 Profession/principal position: : owner-director of RentmeesterGilde, managing partner in Nexyz, former member of the Management Board and Chief Financial Officer of Inter Access Group Other positions: supervisory director of Vidomes housing association; member of the Supervisory Board of Deventer Hospital, consultant to Arendhorst Informatica Opleidingen G.K. (Govert) van der Peijl (1939) Nationality: Dutch First appointment: 2000 Current term: until 31 December 2010 Profession/principal position: former chairman of the Management Board of De Hoop Terneuzen B.V. Other positions: supervisory director of Holding De Vier Ambachten; member of the Board of Trustees of Stichting voor Regionale Zorgverlening (SVRZ); chairman of the Management Board of Ready Beton Hasselt; chairman of the Management Board of Minera Antwerpen; member of the Supervisory Board of Transport Mij. Terneuzen; member of the Supervisory Board of De Hoop Terneuzen J.G. (Johan) van der Werf (1952), vice-chairman Nationality: Dutch First appointment: 2001 Current term: until 3 June 2012 Profession/principal position: former chairman of the Management Board of AEGON N.V. Other positions: chairman of the Supervisory Board of Ordina; vice-chairman of the Board of Trustees of UMC Utrecht; vice-chairman of the Board of Trustees of Zevenwouden; member of the Supervisory Board of De Lotto; member of the Supervisory Board of ONVZ N.V.; member of the Board of Pensioenfonds Cultuur; member of Advisory Council of Sociale Verzekeringsbank; member of the Coordination Committee of KwaliteitsInstituut Zorg (Ministry of Health, Welfare and Sport), vicechairman of the Board of Trustees of Nederlands Dans Theater; chairman of the Board of Right to Play Mr. M.J. (Marten) Wiersma (1949) Nationality: Dutch First appointment: 2007 Current term: until 31 December 2010 Profession/principal position: member of the Zeeland Provincial Executive Other positions: member of the Board of Zeeland Seaports (ZSP) 41 W.C.T.F. (Friso) de Zeeuw (1952) Nationality: Dutch First appointment: 2001 Current term: until 31 December 2010 Profession/principal position: General Manager of Nieuwe Markten Bouwfonds Ontwikkeling B.V. Other positions: honorary professor of Area Development at Delft University of Technology; member of the Board of Neprom; member of the Supervisory Board of Movares; member of the Supervisory Board of Spring Architecten BV; member of the Board of Instituut voor Bouwrecht (IBR); member of the Board of Trustees of Instituut voor de Bouw (EIB); member of the Board of Trustees of Connekt mobility innovation network; chairman of Stichting DDR-collectie; chairman of Meezingkoor Waterland SUPERVISORY BOARD as from 1 January 2011 In addition to Messrs Van Doorn and Van der Werf, the Supervisory Board consists of: J. (Jan) Bout (1946) Nationality: Dutch First appointment: 1 January 2011 Current term: until 31 December 2014 Profession/principal position: former chairman of the Executive Board of Royal Haskoning Other positions: member of the Board of Trustees of Deltares, member of Stichting Kasteel De Haar, member of the Executive Committee of Ubbo Emmius Fund, member of the Supervisory Board of Koninklijke Haskoning Groep BV (as from 1 July) R.J. (Rob) Frohn (1960) Nationality: Dutch First appointment: 1 January 2011 Current term: until 31 December 2013 Profession/principal position: AkzoNobel board member with responsibility for Specialty Chemicals Other positions: non-executive director of Nutreco N.V., member of the board of CEFIC (European Chemical Industry Council), member of the board of Hogeschool Arnhem en Nijmegen (HAN) B.P.T. (Peter) de Wit (1949) Nationality: Dutch First appointment: 1 January 2011 Current term: until 31 December 2014 Profession/principal position: President of Shell Nederland B.V. Other positions: member of the Supervisory Board of GasTerra, member of the Executive Committee of VNO-NCW, member of the Executive Committee of VNCI, member of the Executive Committee of VNPI, chairman of the Netherlands National Committee of the World Petroleum Congress, chairman of Stichting Christiaan Huygensprijs, member of the Executive Committee of Avond van Wetenschap en Maatschappij, member of the Sponsor Committee of Rotterdamse Schouwburg, member of the Executive Committee of Vereniging de Wittenburg, member of the advisory council of Clingendael Energy Programme, member of the Executive Committee of Apeldoorn British-Dutch Dialogue Conference, member of the strategic advisory council of TNO (Industrie en Techniek), member of the CCS (Carbon Capture & Storage) taskforce 42 EXECUTIVE BOARD P.G. (Peter) Boerma (1954), Chief Executive Officer Nationality: Dutch First appointment: 1 March 2006 Other positions: member of the Executive Board of Energie-Nederland, member of the Executive Committee of Brabants-Zeeland Werkgeversvereniging Zeeland, chairman of the Board of Trustees of Zeeland Bibliotheek, chairman of the Board of Trustees of Emergis A.S. (Ad) Louter (1963), Chief Operating Officer Nationality: Dutch First appointment: 1 May 2008 Other positions: member of the advisory council of Nyenrode Energy Academy, member of the Lean Manufacturing advisory board, member of Innovatienetwerk Zeeland F. (Frank) Verhagen (1961), Chief Financial Officer Nationality: Dutch First appointment: 1 February 2009 J.J. (Jaap) Rieter (1962), Chief Commercial Officer Nationality: Dutch First appointment: 1 November 2009 43 CORPORATE LEADER GROUP This group comprises the Executive Board plus: Director of Origination, Trade and Supply G. (Guido) Custers (1966) Director of the Infrastructure Division E. (Erik) Duim (1952) Director of the Comfort Division P.P.C. (Pascal) de Klerk (1967) Director of the Environmental Division P. (Peter) Louwman (1960) Chief Executive Officer of Indaver R. (Ronny) Ansoms (1951) Managing Director of Solland Solar H.J.M. (Henk) Roelofs (1957) (from April) Director of Human Resource Management P.B. (Paul) van Raay (1951) General Counsel C. (Colin) Lustenhouwer (1955) Strategic Decision Support Manager V.C.L.M. (Veronique) Heins (1967) Customer Service Centre Manager H.J.M. (Harriëtte) Hesselmans (1959) Business Excellence Manager M.A. (Michel) van Neutigem (1960) Business Information Services Manager (until 1 July) J.J.D.M. (Jos) Pielage (1951) Processes and Systems Manager (as from 1 July) R. (Ronald) Franckaert (1955) Corporate Affairs Manager F.A.M. (Frank) van den Heuvel (1965) Corporate Communication Manager M. (Mirjam) van Zuilen (1958) Deputy Director of Finance and Control H.S.C. (Harry) Snijders (1948) 44 CENTRAL WORKS COUNCIL Executive Committee J.M. (Hans) de Feijter (1949) Staff Services/SSCs Works Council (chairman) Mr. A. (Bram) Nonnekes (1952) Energy Division Works Council (secretary) C. (Kees) Joosse (1956) Staff Services/SSCs Works Council (deputy secretary) H.A.M. (Harrie) Martens (1955) Infrastructure Division Works Council (vice-chairman) Other members K. (Karin) Aspeslagh (1968) until September 2010 Environmental Division Works Council M.P. (Pepijn) van den Berg (1974) until September 2010 CSC Works Council L. (Leen) Boer (1955) Infrastructure Division Works Council B. (Bart) van Houte (1956) Comfort Division Works Council M. (Maurice) de Jong (1968) Solland Solar Works Council J.G.T. (Theo) Nieuwburg (1958) Infrastructure Division Works Council B. (Bur) van Nugteren (1971) until September 2010 Environmental Division Works Council E.Y.M. (Etiënne) Poppe (1958) Environmental Division Works Council, from September IR Works Council A. (Axel) Schäfer (1964) Solland Solar Works Council L. (Leon) Fondse from September 2010 Comfort Division Works Council 45 EUROPEAN WORKS COUNCIL J.M. (Hans) de Feijter, DELTA N.V. Netherlands Central Works Council (chairman) L. (Leen) Boer, DELTA N.V. Netherlands Central Works Council A. (Bram) Nonnekes, DELTA N.V. Netherlands Central Works Council C. (Kees) Joosse, DELTA N.V. Netherlands Central Works Council A. (Axel) Schäfer, Solland Solar Works Council E. (Eric) Demaertelaere, Indaver Belgium Works Council G. (Guy) Smits, Indaver Belgium Works Council (secretary) R. (Rainer) Martens, SAV Germany Works Council R. (Rudi) Wachtel, SAV Germany Works Council Employer’s delegation: P.G. (Peter) Boerma, Chief Executive Officer, DELTA N.V. P.B. (Paul) van Raay, Director of HRM, DELTA N.V. 46 Financial Statements 2010 47 Contents Consolidated financial statements Consolidated balance sheet as at 31 December 2010 Consolidated income statement Consolidated statement of comprehensive income Consolidated statement of changes in equity Consolidated cash flow statement Accounting policies Notes to the consolidated balance sheet Notes to the consolidated income statement Notes to the consolidated cash flow statement Segment information Consolidated companies Non-consolidated companies 49 50 51 52 53 54 70 103 113 114 117 119 Company financial statements Company balance sheet as at 31 December 2010 Company income statement Notes to the company financial statements Notes to the company balance sheet 122 123 124 125 Other information Profit appropriation Auditors’ report DELTA financial figures, consolidated DELTA key figures 134 135 137 138 48 Consolidated balance sheet as at 31 December 2010 (before profit appropriation) (EUR 1,000) Notes 31-12-2010 31-12-2009 Non-current assets Intangible assets 1 419.949 514.878 Property, plant and equipment 2 977.407 1.032.810 joint ventures, associates and other investments Loans to joint ventures, associates, etc. Other financial assets Deferred tax assets Derivatives Financial assets 3 4 4 4 5 521.563 13.775 22.295 91.056 51.574 700.263 548.271 15.797 54.468 88.580 179.316 886.432 2.097.619 2.434.120 Total non-current assets Current assets Inventories 6 14.975 33.040 Trade receivables Current tax assets Work in progress for third parties Other receivables Derivatives Total receivables 7 7 7 7 5 310.179 61.065 0 43.791 219.470 634.505 339.778 35.067 2.070 87.745 272.655 737.315 Assets held for sale 24 3.964 0 653.444 770.355 49.410 59.137 Total assets 2.800.473 3.263.612 Shareholders’ equity Profit for the year Equity attributable to shareholders of DELTA N.V. 1.307.601 1.129.814 1.251.014 7.091 1.258.105 Non-controlling interests Group equity 53.270 1.183.084 54.369 1.312.474 Total current assets Cash 8 (177.787) Provisions Pension liabilities Long-term debt Deferred tax liabilities Deferred revenue Other non-current liabilities Derivatives Non-current liabilities 9 9 10 11 11 11 5 95.504 21.874 451.007 62.688 68.843 161.460 31.209 892.585 92.538 20.936 438.256 60.454 69.944 154.975 186.827 1.023.930 Trade payables Current tax liabilities Deferred revenue Work in progress for third parties Other liabilities Bank borrowings Derivatives Current liabilities 12 12 12 227.303 109.796 12.268 964 114.467 65.329 164.677 694.804 283.491 96.307 14.950 0 101.657 96.074 334.728 927.207 Liabilities held for sale 24 30.000 0 724.804 927.207 2.800.473 3.263.612 Current liabilities Total equity and liabilities 12 12 5 49 Consolidated income statement (EUR 1,000) Ref. no. 2010 2009R Revenue 13 2,073,051 1,869,441 Cost of sales 14 (1,454,047) (1,294,902) 619,004 574,539 Gross operating margin Other gains and losses (third parties) 15 28,618 34,019 Fair value gains and losses on the trading portfolio 16 3,248 33,912 650,870 642,470 249,759 197,958 125,490 12,811 586,018 226,288 195,778 111,948 8,080 542,094 64,852 100,376 62,993 66,492 127,845 166,868 (21,863) (26,875) 105,982 139,993 (16,383) (21,559) 89,599 118,434 (265,393) (108,300) (175,794) 10,134 1,993 3,043 (177,787) 7,091 Gross margin Third-party services Staff costs Depreciation, amortisation and impairment Other operating expenses Total net operating expenses 17 18 19 20 Earnings from operations Share in results of joint ventures and associates 21 Operating result Net finance income (expense) 22 Profit before tax Corporate income tax 23 Profit after tax from continuing operations Profit after tax from discontinued operations Profit for the year 24 Attributable to: Non-controlling interests Shareholders of DELTA N.V. DELTA decided in 2010 to sell off its solar energy activities. DELTA Biovalue B.V. was also declared insolvent in 2010. The financial implications, including trading results of the activities concerned in 2010, are presented as profit after tax from discontinued operations. The comparative figures for 2009 have been restated accordingly (as indicated by the suffix ‘R’: 2009R). 50 Consolidated statement of comprehensive income (EUR 1,000) Ref. no. 2010 Profit after tax for the year 2009R 10,134 (175,794) Other comprehensive income: 5 Effective portion of gains and losses on cash flow hedges Energy derivatives Reclassification - adjustments 82,857 51,735 Interest rate derivatives Reclassification - adjustments (4,001) 8,386 (69,137) 35,612 134,592 (33,525) (8,396) 6,117 4,385 (35,205) Corporate income tax (2,279) 9,204 103,772 Share of other comprehensive income of joint ventures and associates Share of other comprehensive income of joint ventures and associates Reclassification - adjustments Corporate income tax (26,600) (4,475) (18,163) (4,475) Translation reserve differences Translation reserve differences Reclassification - adjustments (18,163) (60) (13) (3) (73) (3) Corporate income tax (73) Other movements Other movements Reclassification - adjustments (3) 33 - 7 (244) 33 (237) Corporate income tax Other comprehensive income from available-for-sale financial assets 33 (237) 520 (12) Total other comprehensive income 99,777 (45,014) Total comprehensive income (76,017) (34,880) Non-controlling interests 2,274 2,511 Shareholders of DELTA N.V. (78,291) (37,391) Total comprehensive income attributable to: The share in the other comprehensive income of joint ventures and associates relates almost entirely to movements in the hedge reserves of joint ventures. Comprehensive income is recognised in the statement of changes in equity. The total of comprehensive income in 2009, however, is not reconcilable with the statement of changes in equity because (in accordance with IFRS) the comparative figures in the income statement for 2009 have been restated for discontinued operations whereas the comparative figures in the 2009 balance sheet have not been similarly restated. 51 Consolidated statement of changes in equity (EUR 1,000) Carrying amount as at 31 December 2008 Transaction between shareholders Profit appropriation for 2008 Payment of dividend Movement concerning capitalised development costs Transfer to liabilities due to put options Total comprehensive income Carrying amount as at 31 December 2009 Profit appropriation for 2009 Payment of dividend Movement concerning capitalised development costs Other movements Transfer to liabilities due to put options Total comprehensive income Carrying amount as at 31 December 2010 Total 1.432.968 (31.944) (50.458) - Pa i d-up ca pi tal Statutory res erve Hedge res erve Other res erves 6.937 92.899 (35.508) 1.199.422 - - (3.316) - (34.776) - (9.329) (10.499) - (18.712) 110.245 (50.458) - - - 10.499 - - - - - (18.163) (26.128) (61.636) (191) 54.908 - - 40.581 - (33.490) - - - (50.000) - 587 (1.005) - (3.373) - (76.017) - 1.183.084 6.937 (587) 1.005 (4.475) 91.432 1.250.805 - 68.302 - 6.937 - 100.916 Noncontrol l i ng i nteres ts - 1.312.474 (50.000) Una ppropri a t ed profi t (100.916) (13.232) (3.316) 7.091 2.615 7.091 54.369 (7.091) - - - - - - - (3.373) 103.473 498 (177.787) 2.274 41.837 1.167.395 (177.787) 53.270 The statutory reserve relates in part to undistributed profit from non-controlling interests. The statutory reserve and the hedge reserve are not freely distributable. The transfer to liabilities in respect of put options relates to the non-controlling interests in Indaver. A put option has been issued to the shareholders with the remaining 25% of the shares of Indaver in their possession. This put option has been included in non-current liabilities. The non-controlling interests in the equity of DELTA mainly concerns the non-controlling interest of NEIF (NIBC European Infrastructure Fund) in the German waste processing company SAV. 52 Consolidated cash flow statement (in EUR 1,000) From operating activities Earnings from operations Proceeds from activities sold off Fair value gains and losses on the trading portfolio Adjustment for deferred income Depreciation, amortisation and impairment Movement in provisions Movement in inventories Movement in trade receivables Movement in trade payables Movement in other receivables/payables Other movements From operating activities Cash flows arising from dividends received from joint ventures and associates Cash flows from finance income and expense Cash flows from taxes on profits Cash flow from operating activities From investing activities Acquisition and disposal of intangible assets and property, plant and equipment (after deduction of cash acquired) Acquisition of investments in subsidiaries and associates and interests in joint ventures (after deduction of cash disposed) Disposal of investments in subsidiaries and associates and interests in joint ventures Movement in other financial assets Cash flow from investing activities From financing activities Movement in bank borrowings Movement in long-term liabilities Dividend payments Cash flow from financing activities 2010 2009 (234.221) (3.248) (3.783) 382.251 17.834 10.728 25.167 (49.028) 17.450 (2.907) 160.243 (29.235) 51.535 (33.912) 9.847 191.243 (11.730) (2.001) 39.207 118.524 (10.636) (2.347) 320.495 65.712 (24.283) (19.802) 181.870 30.423 (29.500) 4.716 326.134 (141.417) (124.791) (14.307) (58.920) 10.435 4.162 (141.127) 206.083 22.372 (30.745) 30.275 (50.000) (50.470) (8.317) (285.619) (50.458) (344.394) Cash flow during the year (9.727) 4.112 Cash as at 1 January 59.137 55.025 Cash as at 31 December 49.410 59.137 - - 49.410 59.137 Exchange differences Net cash in the consolidated balance sheet The cash flow statement is based on income and expenses and changes in the balance sheet before elimination of assets held for sale and discontinued operations. As a consequence, direct reconciliation with the balance sheet is not possible, since neither the assets held for sale nor the discontinued activities are included in the consolidated balance sheet as at year-end 2010. Nor is there an obvious reconciliation with the income statement since adjustments have been made in the income statement for all results relating to the assets held for sale and the discontinued operations. 53 Accounting policies DELTA N.V.is a public limited liability company formed under Dutch law, and is the parent company of a number of subsidiaries active in:  electricity generation and the transportation and supply of energy, environmental services concerned with waste management and industrial cleaning,  provision of cable services for both analogue and digital television as well as for internet and digital telephony over cable,  development and production of sustainable energy in the field of wind and solar,  water activities. The group also has interests in a number of joint ventures and various investments in associates. The shareholders of DELTA N.V. are the Province of Zeeland, the municipalities of Zeeland, certain municipalities of South Holland and North Brabant and the Provinces of South Holland and North Brabant. DELTA N.V. has its registered office, pursuant to its Articles of Association, at Poelendaelesingel 10, Middelburg. The following changes occurred in the consolidation in 2010: 1. At the beginning of 2010, Indaver N.V. sold its 98.36% interest in Indaver Polska for an amount of EUR 0.6 million. 2. DELTA Caribbean B.V. was wound up in March 2010 without any financial consequences for income. 3. With effect from 7 July 2010, DELTA Infra B.V. has held 50% of the share capital of the joint venture v.o.f. Diepp. 4. On 8 November 2010, the investment of Sunergy Investco B.V. in the share capital of RGS Development B.V. was expanded from 35% to 100% for a symbolic amount of EUR 1. 5. On 14 December 2010, DELTA Biovalue B.V. and its subsidiaries were declared insolvent. 6. On 15 December 2010, DELTA Energy B.V. acquired the entire share capital of Limo Energie B.V. and Litro Energie B.V. The transfer of ownership of these special purpose companies (connected with sale-and-leaseback contracts entered into with Rabobank in the past) did not involve any payment. 7. PVNED B.V. (in which DELTA Energy B.V. has a 50% interest) changed its name on 30 December 2010 to PVNED Holding B.V., with PVNED B.V. immediately afterwards being incorporated as a wholly-owned subsidiary. In addition to the acquisitions and disposals in 2010, there were various changes under common control: 1. The shares of DNWB B.V. were transferred by DELTA N.V. to Zeeuwse Netwerkholding N.V. on 8 April 2010. 2. On 29 April 2010, the 20% interest in AZN Holding B.V. was transferred by DELTA N.V. to DELTA Milieu B.V. 3. The shares of DELTA Milieu Industriële Reiniging B.V. were transferred by DELTA Milieu B.V. to DELTA N.V. on 1 July 2010. 4. The shares of DELTA Milieu B.V. were transferred by DELTA N.V. to Indaver N.V. on 31 August 2010. The functional currency is the euro. Unless otherwise stated, all amounts are presented in thousands of Euro’s. 54 As required by IFRS rules, the balance sheet, the income statement and the cash flow statement have been prepared, taking into account the decision to sell off the solar energy activities and to discontinue the biodiesel activities.  This means that the amounts of the relevant assets and liabilities recognised in the balance sheet as at year-end 2010 have been measured at the estimated net selling price or amount required to settle the liabilities and presented as assets/liabilities held for sale.  In the income statement, all financial consequences, including normal trading results for 2010, have been presented as profit after tax from discontinued operations, with the corresponding financial information for 2009 presented on the same basis as in 2010 to facilitate comparison.  In the cash flow statement, all cash inflows and outflows directly relating to operations in 2010 (including the cash flows from operating activities of Solland, Sunergy en Biovalue) are recognised. DELTA N.V. has availed itself of the option in Part 9, Book 2, of the Netherlands Civil Code to prepare the company financial statements in accordance with the IFRS accounting policies used in the consolidated financial statements with the exception of the equity-accounted subsidiaries, joint ventures and associates. The company income statement is presented in summarised form in accordance with article 402, Title 9, Book 2, of the Netherlands Civil Code. The Supervisory Board signed these 2010 financial statements on 11 April 2011 and released them for publication. The Supervisory Board will present the financial statements to the General Meeting of Shareholders for adoption on 27 June 2011. 1. Compliance with IFRS and summary of changes in IFRS measurement rules The company’s consolidated financial statements have been drawn up in compliance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and the interpretations published by IFRS Interpretations Committee (formerly IFRIC) of the IASB, as endorsed by the European Commission (EC) up to year-end 2010. In comparison with the previous financial year, the following new standards or supplements/improvements have been issued by the IASB and approved by the European Commission for adoption within the European Union. Changes not yet approved by the European Commission are not included in the following summary. 1.1 DELTA applied the following standards and improvements in its financial statements for 2010: Amended standards, applied early 1) Revision of IFRS 3 Business Combinations. The revised version of IFRS 3 Business Combinations applies with effect from 1 January 2010. The main changes relate to the treatment of acquisitions for items such as cost, goodwill and purchase in parts and sale of joint ventures and associates with or without retention of control. In the case of earlier application, IAS 27 (Revised) must be applied at the same time. DELTA applied the revised version of IFRS 3 early, in 2009. 55 2) Revision of IAS 27 Consolidated and Separate Financial Statements. The revised version of IAS 27 Consolidated and Separate Financial Statements also applies with effect from 1 January 2010. This revision relates to the disposal of part of an interest held in a subsidiary, joint venture or associate. Since the revised version of IFRS 3 was applied early, in 2009, the revised version of IAS 27 was also applied early, in 2009. Amended standards, applicable with effect from 1 January 2010 3) IFRS 1, First-Time Adoption of International Financial Reporting Standards The revised version of IFRS 1, with improved structure, has made the standard easier to use and easier to amend in future. The existing requirements remain unchanged and the new structure does not therefore have any impact on the 2010 financial statements. 4) Amendment of IFRS 1, Additional Exemptions for First-Time Adopters. The amendments permit entities with oil and gas operations adopting IFRS for the first time to use deemed cost for the carrying amounts of oil and gas assets as determined under previous GAAP. Entities deciding to avail themselves of this exemption are required to recognise provisions for dismantling of assets, site restoration and similar liabilities in connection with oil and gas assets in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, accounting for them in retained profits. These changes in IFRS 1 also cover the reassessment of whether an arrangement contains a lease. DELTA does not have any oil and gas exploration activities so there is no impact on the 2010 financial statements. 5) Amendment of IFRS 2, Share-Based Payments. The amendment of IFRS 2 clarifies the accounting for share-based payments where a supplier of goods or services is paid in cash and liability is accepted by another entity in the group (group cash-settled share-based payments).No share-based payments have been made by DELTA. 6) Amendment of IAS 39, Financial Instruments: Recognition and Measurement: exposures qualifying for hedge accounting. The amendment clarifies the way in which hedge accounting should be applied to the inflation portion of financial instruments and to option contracts used as hedging instruments. In 2010, several interest rate derivative contracts were concluded qualifying as option contracts to which the exception referred to in IAS 39, para. 74, applies. The change in the fair value is accounted for in the hedge reserve with the change in the time value recognised through profit or loss. 7) Annual improvements (published by the IASB in May 2008): One of these annual improvements (published in 2008) became applicable on 1 January 2010 and involves the type of change which results in changes in financial reporting affecting presentation, recognition and measurement. This concerns an amendment of IFRS 5 (Improvement 2008) NonCurrent Assets Held for Sale and Discontinued Operations. It states that all the requirements of IFRS 5 also relate to the sale of entities regardless of whether the entity will retain a non-controlling interest in its former subsidiary after the sale. In 2009 and 2010, no entities were sold in which DELTA retained a non-controlling interest. 56 8) Annual improvements (published by the IASB in April 2009): Most of the changes concern clarifications or corrections of existing IFRSs or changes as a consequence of previous amendments. Such changes are not discussed here. The changes in IFRS 8, IAS 17, IAS 36 and IAS 39 concerned changes in the existing requirements or supplementary guidelines for the application of these standards.  The amendment of IFRS 8, Operating Segments, makes it clear that recognition of an asset of a segment must only be made in financial reporting if the carrying amount of that asset is regularly reported to the most senior operating decision-making officer. Previously, reporting was mandatory. The segment information in the financial statements of DELTA N.V. remains unchanged in this regard and the amendment therefore does not have any effect on the 2010 financial statements.  The amendment of IAS 17, Leases, has resulted in reclassification of an operating lease as a finance lease, giving rise to the recognition as at year-end 2010 of a carrying amount of EUR 14.7 million in property, plant and equipment and a non-current liability of EUR 15.6 million, with an expense of EUR 0.6 million recognised in the income statement for 2010.  The amendment of IAS 36, Impairment of Assets, concerns the allocation of goodwill acquired in a business combination in relation to IFRS 8 Operating Segments. The IFRS 8change has not affected DELTA’s operating segments and the amendment therefore does not have any effect on the 2010 financial statements.  One of the amendments of IAS 39, Financial Instruments: Recognition and Measurement, concerns the scope of the standard in relation to business combinations. IAS 39 does not apply to all contracts of a forward or future nature between an acquiring entity and a selling shareholder to buy or sell an agreed entity which will result in a business combination at an acquisition date in the future. The future period of such a contract must not be longer than the reasonable length of time that is normally required to obtain all necessary clearances and to complete the transaction. This concerns forward contracts resulting in a business combination at a future acquisition date. DELTA does not have any such contracts so there is no impact on the 2010 financial statements.  Another of the amendments of IAS 39, Financial Instruments: Recognition and Measurement, concerns the application of hedge accounting for transactions between segments. The change makes it clear that the application of hedge accounting to transactions between entities in the same group is only permitted in the individual or separate financial statements of those entities and not in the consolidated financial statements of the group. To date, hedge accounting has not been used in connection with any transactions between entities and/or segments forming part of the DELTA group, so that this change does not affect the 2010 financial statements at all.  Another of the amendments of IAS 39, Financial Instruments: Recognition and Measurement, concerns the accounting treatment of hedging transactions in realised and unrealised income. This is a clarification of the way in which hedges should be accounted for. As such, it does not have any effect on the 2010 financial statements.  A final amendment of IAS 39, Financial Instruments: Recognition and Measurement, concerns a change in the way in which the standard should be applied in relation to embedded derivatives connected with prepayment options contracted with lenders. DELTA does not have any such contracts, so there is no effect on the 2010 financial statements. 57 New interpretations, applicable with effect from 1 January 2010 9) IFRIC 12, Service Concession Arrangements This interpretation clarifies the way in which the regulations contained in the IFRSs already approved by the Interpretations Committee should be applied to services rendered under concession arrangements. IFRIC 12 clarifies how an operator should account for infrastructure provided as a service under a concession arrangement. Clarification is also given concerning the distinction between the different stages of the service provided under a concession arrangement (construction phase / operating phase)and the way in which income and expenses should be accounted for. DELTA does not have any concession arrangements relating to infrastructure, so there is no impact on the 2010 financial statements. 10) IFRIC 15, Agreements for the Construction of Real Estate This interpretation makes it clear whether income from the construction of real estate should be recognised in the financial statements and, specifically, whether a construction contract falls within the scope of IAS 11, Construction Contracts, or IAS 18, Revenue. Neither DELTA nor any of its subsidiaries is affected by IFRIC 15. 11) IFRIC 16, Hedges of the Net Investment in a Foreign Operation. This interpretation clarifies how the requirements of IAS 21, Changes in Foreign Exchange Rates, and IAS 39, Financial Instruments: Recognition and Measurement, should be applied in cases where an entity hedges the currency risk on its net investment in a foreign operation. DELTA does not have any hedging instruments relating to net investments in foreign operations in currencies other than the euro, so there is no impact on the 2010 financial statements. 12) IFRIC 17, Distributions of Non-Cash Assets to Owners IFRIC 17 is an interpretation providing greater clarity and guidelines regarding the accounting treatment of distributions of non-cash assets to owners of an entity. DELTA has hitherto only paid cash dividends. 13) IFRIC 18, Transfers of Assets from Customers IFRIC 18 is an interpretation providing greater clarity and guidance regarding the accounting treatment of transfers of items of property, plant and equipment from customers or of monetary contributions for the construction or acquisition of property, plant and equipment. The interpretation lays down standards for accounting for the acquisition of assets or monetary contributions from customers that are required in order to connect a customer to a network or to enable that customer to obtain goods or services. Transfers of assets are a rarity. As a consequence of this interpretation, there has only been a change in the presentation of the received contributions. Instead of deducting contributions from third parties from the carrying amounts of the assets concerned, they have been recognised as liabilities with retroactive effect from 1 January 2009, taking the view that they represent deferred revenue. In the income statement, therefore, there has been a transfer from depreciation to revenue. 58 1.2 The following standards and improvements have not yet been applied by DELTA in the 2010 financial statements (application officially required with effect from 1 January 2011): 14) Amendments of IFRS 1 and IFRS 7, concerning limited exemptions from the obligation to disclose comparative information as required by IFRS 7, with respect to first-time adoption of IFRS. The change is intended to make it possible for entities applying IFRS for the first time to avail themselves of the relief provided by IFRS 7, Financial Instruments: Disclosures, with regard to comparative information for carrying amounts at fair value and for liquidity risk if the comparative periods concerned end before 31 December 2009. 15) IAS 24 revised, Related Party Disclosures. The purpose of the changes is to simplify the definition of related parties and at the same time remove internal inconsistencies. Some relief is also provided for state-controlled entities with regard to the amount of information they are required to disclose concerning related parties. 16) Amendment of IAS 32, Financial Instruments: Presentation and Classification of Rights Issues. This amendment clarifies the way in which certain rights issues should be accounted for when the issued instruments are denominated in a currency other than the functional currency of the issuer. 17) Amendment of IFRIC 14, The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. The amendment is aimed at correcting an unintended consequence of IFRIC 14 that, when an entity which is subject to a minimum funding ratio requirement makes an advance payment of future contributions, the entity making such a prepayment would be required in certain circumstances to recognise an expense. In cases where there is a minimum funding requirement for a defined benefit plan, the amendments to IFRIC 14 make it obligatory to treat a prepayment, like any other prepayment, as an asset. 18) IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments. The purpose of this interpretation is to provide accounting guidance when an entity renegotiates the terms of its debt with the result that the liability is extinguished in whole or in part by the debtor issuing its own equity instruments to the creditor. Failure to apply these new and/or amended standards early does not, in the opinion of the Executive Board, adversely affect the view which is presented of DELTA’s financial position. 2. General 2.1 Government grants Government grants are recognised as soon as it is reasonably certain that the conditions for obtaining the subsidy are or will be met and that the grants have been or will be received. On capitalisation of investment projects, grants received and contributions to construction costs are deducted from the cost of the assets. Operating subsidies are generally deducted from the procurement costs. Subsidies in the form of tax breaks are taken into account when calculating the tax amount. 59 2.2 Estimates and assumptions The preparation of financial statements entails the use of estimates and assumptions based on past experience and on factors considered acceptable in the management’s judgement. These estimates mainly relate to the revenues from supplying and transporting electricity and gas to the domestic and small-business market, owing to staggered meter readings, and also to the deferred tax assets and to the amount of the provisions. They affect the figures in the financial statements, which may vary from the actual figures. The effects of changes in estimates are recognised prospectively through profit or loss. Changes in estimates can also lead to adjustments in assets and liabilities or in components of equity. Such changes in estimates are recognised in the period in which they occur. 2.3 Impairment of assets During the year, assessments are made for indications that assets may be impaired. If indicated, an estimate is made of the asset’s recoverable amount, which is equal to the higher of fair value less costs to sell and value in use. If the fair value less costs to sell will result in an unavoidable loss, the carrying amount is written down accordingly. Value in use represents the present value of estimated future cash flows, based on internal business plans approved by management, discounted using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset. Annual impairment tests are performed for recognised goodwill. Impairment losses are recognised if the carrying amount of an asset or the cash-generating unit to which the asset belongs exceeds the recoverable amount. Impairment of assets attributed to cashgenerating units is first deducted from the carrying amount of the goodwill attributed to the cashgenerating units (or groups of units) and then, pro rata, from the carrying amount of the other assets of the unit or group of units. The carrying amount of the assets concerned is never less than their individual recoverable amount. An impairment loss is reversed if it is established that there has been a change in the basis on which the recoverable amount was previously determined, but only to the extent that the carrying amount of the asset after such reversal does not exceed the carrying amount of the asset, less depreciation, if no impairment had occurred. Impairment of goodwill is not reversed. Impairment losses and reversals thereof are recognised through profit or loss. 2.4 Segment information Further information is provided by business segment. Segmentation reflects DELTA’s management and internal reporting structure. Supplies between segments are settled at market rates. 2.5 Foreign currencies Assets and liabilities denominated in foreign currencies are translated into euros at the exchange rates prevailing at year-end. Differences resulting from movements in exchange rates are recognised in profit or loss except where they relate to the net investment in foreign entities, in which case they are recognised in equity as part of other comprehensive income. Income and expenses denominated in foreign currencies are translated into euros at the exchange rates prevailing at the time of the transaction. 60 3. Basis of consolidation The consolidated financial statements comprise the financial information of DELTA N.V. and its subsidiaries. Subsidiaries are legal entities and partnerships in which DELTA controls the operating and financial policy decisions. Existing and potential voting rights that can currently be exercised or converted are taken into account in assessing control. The existence of other agreements that allow DELTA N.V. to govern the operating and financial policy are also taken into account. Subsidiaries are included in the consolidation from the date on which control is obtained. Consolidation is discontinued with effect from the date on which control no longer exists. Subsidiaries are fully consolidated, with 100% of equity and results included in the consolidation. If DELTA’s interest in a subsidiary is less than 100%, the non-controlling interests are recognised separately in the balance sheet and the income statement. The non-controlling interest associated with put options is reclassified under current or non-current liabilities. The exercise of put options is treated as part of the acquisition cost, ultimately affecting the amount of goodwill. Put options are therefore treated as contingent consideration/earn-out arrangements in accordance with IFRS 3. An increase in a non-controlling interest and changes in the value of a put option are recognised directly in equity. Acquisitions are accounted for by means of the purchase method. Subsidiaries’ accounting policies are changed where necessary to ensure consistency with the policies applied by DELTA. 4. Basis of recognition and measurement of assets and liabilities The financial statements have been prepared using the historical cost convention, except for measurement of the carrying amount of derivatives (financial instruments), which is based on fair value. All transactions in financial instruments are accounted for on the transaction date. 4.1 Intangible assets Intangible assets comprise goodwill arising on acquisition, development costs, software, customer records and acquired transport rights. Goodwill The goodwill represents the positive difference between the acquisition cost of subsidiaries and the fair value of the acquisition.Goodwill paid on the acquisition of subsidiaries is recognised as an intangible asset. Goodwill paid on the acquisition of an interest in a joint venture or an investment in an associate is included in the cost of the relevant investments. If the cost is lower than the fair value of the identifiable assets, liabilities and contingent liabilities acquired (negative goodwill), the difference is recognised directly as income. The carrying amount of goodwill comprises the historical cost less the accumulated impairment. Goodwill is not amortised. Annual impairment tests are performed to determine any impairment of goodwill. For the purposes of these tests, goodwill is allocated to cash-generating units. If a transaction qualifies as a transaction between owners, the difference between acquisition cost and fair value is recognised in equity. Development costs Development expenditure is measured at historical cost and amortised over a period of 10 years according to the pattern of the additional cash flows generated by the acquired process knowledge. Software Capitalised software is carried at historical cost less amortisation. In principle, straight-line amortisation is applied over a five-year period. The useful life is assessed annually. Any adjustments are accounted for prospectively. 61 Customer contracts Customer contracts are measured at cost and amortised according to the pattern of the additional cash flows generated by the acquired accounts. Transport rights Transport rights are measured at cost and amortised on a straight-line basis over a period of 20 years. The useful life is assessed annually. Any adjustments are accounted for prospectively. 4.2 Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation on a straight-line basis over the estimated useful life, determined on the basis of technical and economic criteria, taking account of the estimated residual value, less any accumulated impairment losses. As required by IFRIC 18, with retroactive effect from 1 January 2009, contributions received from third parties towards the costs of constructing property, plant and equipment are no longer deducted from the carrying amount of the assets concerned but recognised instead as deferred revenue. The amount recognised for property, plant and equipment also includes the net present value of the amount expected to be required for capping landfill sites when no longer in use for landfill. Depreciation reflects the actual landfill capacity used in the reporting period. Changes in residual values as a result of technical and economic developments and the consequences of applying a different discount rate are recognised in the carrying amounts of the assets concerned and recognised in profit or loss in future years through depreciation. In the case of assets which have been fully depreciated, the difference is expensed immediately. Directly attributable external financing expenses for assets (construction period interest) are included in the cost. If assets consist of components with different depreciation periods and residual values, the components are recognised separately. Investments for the replacement of components are capitalised, with simultaneous retirement of the component to be replaced. The estimated useful life and estimated residual value are assessed annually at the time of preparing the business plan. If impairment tests show any impairment, the carrying amount is adjusted accordingly. Property, plant and equipment under construction is stated at the costs incurred as at the balance sheet date, including the costs of materials and services, direct staff costs and an appropriate share of directly attributable overhead costs. In 1999, Indaver entered into a cross-border lease with an American investor for the use of lines 1 and 2 of the incineration plant in Doel. As part of the transaction the company retained legal and beneficial ownership. These assets are accordingly recognised in the consolidated financial statements on the basis of the accounting policies applied for property, plant and equipment. 4.3 Financial assets General A business combination is the bringing together of separate entities or businesses into one reporting entity. A business combination as defined is accounted for by applying the purchase method, which involves the following steps: 1. identifying an acquirer; 2. measuring the cost of the business combination; and 3. allocating, at the acquisition date, the cost of the business combination. The cost of a business combination is the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed and equity instruments issued by the acquirer plus any costs directly attributable to the business combination. 62 Under IFRS 3 (as approved by the EU in 2004), the sum was increased for costs directly attributable to the business combination. Since the revision of IFRS 3 (applicable with effect from 2009), the costs directly attributable to the acquisition are no longer recognised as cost of the business combination but are recognised directly in profit or loss. Goodwill is measured as the value by which the cost of the business combination exceeds the acquirer’s interest in the net fair value of identifiable assets, liabilities and contingent liabilities. Negative goodwill is recognised directly in profit or loss and noncontrolling interests are recognised in equity. Interests in joint ventures, investments in associates and other investments Joint ventures are contractual arrangements whereby DELTA and one or more other parties undertake economic activities that are subject to joint control by all parties. Associates are entities over which DELTA N.V. directly or indirectly has significant influence, but not control. Generally speaking, this refers to entities in which DELTA N.V. can exercise between 20% and 50% of the voting rights. Interests in joint ventures and investments in associates are recognised in the consolidated financial statements using the equity method. According to this method, the investments are initially carried at cost, including goodwill. The share in the profits or losses is recognised in the carrying amount each year and dividend distributions are deducted. Accumulated losses of a joint venture or associate in excess of the carrying amount are not recognised unless DELTA N.V. has an obligation or has made payments to settle such losses. Other investments are investments in entities in which DELTA N.V. has an interest of less than 20%. These are carried in the consolidated financial statements at fair value, unless insufficient information is available, in which case they are carried at cost. Undistributed profits of a joint venture or associate and direct increases in equity at a joint venture or associate whose distributions cannot be received without restriction are added to the statutory reserve as part of other comprehensive income. Loans to other investment entities Loans granted to investees or third parties are carried at face value, i.e. amortised cost. Where necessary, provisions are recognised for bad debts and are deducted from the carrying amount. Deferred tax Financial assets include deferred tax assets resulting from the difference between carrying amounts for reporting purposes and tax bases, as well as deductible tax losses. Deferred tax assets and liabilities are recognised at face value calculated at standard corporate income tax rates enacted or substantially enacted at the end of the reporting period. Deferred tax assets are recognised if it is reasonable to assume that future taxable profits will be available, permitting them to be realised. The recognition of a deferred tax asset is reassessed each year. 4.4 Inventories Construction and maintenance materials are stated at the lower of cost, on the basis of the first-in firstout (FIFO) method, and the net realisable value, less a provision for obsolescence. Impairment losses on inventories are expensed and disclosed separately. 4.5 Receivables Trade receivables are measured at fair value on initial recognition and subsequently carried at amortised cost less impairment. The short time horizon means that amortised cost is the same as the face value of the receivables as a rule. 63 4.6 Construction contracts DELTA applies the percentage of completion method to determine construction contract costs and revenues to be recognised in the income statement for the reporting period. The percentage of completion is based on production measurements. Work in progress on construction contracts is recognised at cost less a provision for expected losses and less invoiced instalments. The profit realised in proportion to the percentage of completion is included in the carrying amount if it can be reliably measured. 4.7 Non-current assets held for sale and discontinued operations DELTA classifies an asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through its continued use. For this to be the case, the asset (or disposal group) must be available for immediate sale in its present condition and its sale must be highly probable and expected to take place within one year. On recognition of a group of assets as being held for probable or definite sale, the liabilities directly associated with those assets will be included in the carrying amount. Immediately after classification as held for sale, the amount of the assets is measured at the lower of carrying amount and fair value less costs to sell and depreciation is discontinued. Any impairment losses are expensed. 4.8 Cash Cash includes not only cash but also cash equivalents that can be converted into cash with no material risk of impairment. Cash is carried at fair value. 4.9 Shareholders’ equity Movements in shareholders’ equity are presented in the consolidated statement of changes in equity. The company’s authorised capital amounts to EUR 9,080,000, divided into 20,000 shares, each with a nominal value of EUR 454. As at 31 December 2009, EUR 6,937,120 was issued and paid up. No changes occurred during 2010. Dividends are recognised as a liability in the period in which they are declared. 4.10 Provisions Provisions are recognised in respect of legal or constructive obligations relating to operations. The provisions are carried at the present value of the expected expenditure. The present value is computed using a discount rate before tax reflecting the current market view of the time value of money. The expected expenditure within one year of the balance sheet date is included in current liabilities. 4.11 Employee benefits Provisions relating to pension obligations and health insurance costs are determined on an actuarial basis. The related liabilities are presented separately in the balance sheet. This is only the case at the subsidiary, Indaver. Indaver provides post-employment benefits for most of its employees. These benefits are paid under defined contribution plans and defined benefit plans involving both pension insurance and unfunded arrangements. The contributions payable under the defined contribution plan are recognised immediately in the income statement. For the defined benefit plan, the cost of each benefit payment is determined separately using the actuarial Projected Unit Credit Method. 64 The company recognises part of the actuarial gains or losses in profit or loss if the accumulated unrecognised gains and losses at the end of the prior reporting period exceeded 10% of: - the present value of the gross amount of the defined benefit obligation at that date; and - the fair value of the plan assets at that date, any surplus or deficit being divided by the expected average remaining working lives of the employees participating in the plan. 4.12 Non-current liabilities Non-current liabilities are measured at amortised cost, applying the effective interest method. Repayment commitments on non-current liabilities due within one year are included in current liabilities. With finance leases (in which all the risks and rewards of ownership are borne by the lessee), both the assets and the liabilities are recognised at fair value on inception of the lease. The assets are depreciated according to the applicable rules for property, plant and equipment. With operating leases (in which all the risks and rewards of ownership are borne by the lessor), the lease payments are recognised in the income statement on a straight-line basis over the lease term. The non-current portion of deferred revenue is classified as a non-current liability. The portion that is released in the next reporting period is included in current liabilities. The portion relating to the current reporting period is included in revenue. 4.13 Put options The put options are recognised at fair value attributable to the put option holder concerned, less any dividends paid. The value is based on the indirect recoverable amount of the appropriate noncontrolling interest, with a bandwidth being employed for the required yield. 65 5. Basis of recognition and measurement of financial instruments 5.1 Measurement of derivatives DELTA trades in contracts for electricity, gas, coal, oil, CO2 certificates and currencies relating to the current year and the three following years. DELTA regards the markets for these commodities to be liquid over this time horizon, reliable prices being available from brokers, markets and suppliers of price information. Fair values for these contracts are calculated on the basis of these published prices; inhouse valuation models are not used. Adjustments are only made to the published prices for the months, quarters or years ahead in order to match the relative periods in the trading systems. DELTA also uses derivatives such as interest rate swaps. The fair value of interest rate swaps is measured on the basis of yield curves, amongst others, provided by brokers and De Nederlandsche Bank. 5.2 Financial instruments DELTA uses financial instruments to manage and optimise normal market risks associated with the company’s energy, currency and interest rate exposures. DELTA applies IAS 32 Financial Instruments: Presentation and IAS 39 Financial instruments: Recognition and Measurement. These standards require derivatives to be measured and recognised at fair value through profit or loss and the trading contracts are accounted for in the income statement on this basis. Definition A derivative is a financial instrument or other contract falling within the scope of IAS 39, with the following three features: the value changes as a result of movements in a particular interest rate, price of a financial instrument, commodity price, exchange rate, index of prices or interest rates or other variable, provided that, in the case of non-financial variables, the variable is not specific to a contract party (also known as the ‘underlying asset’); no or only a minor net initial investment is required in relation to other types of contract that respond in similar ways to movements in market factors; and settlement takes place in the future. Classification and netting Derivatives are classed as current or non-current assets if the fair value represents a gain and as current or non-current liabilities if the fair value represents a loss. Receivables and payables in respect of derivatives for different transactions with the same party are shown net where there is a contractual or legally enforceable right of set-off and DELTA also settles the relevant cash flows on a net basis. Recognition of fair value gains and losses Pursuant to IAS 39, energy commodity contracts (electricity, gas, coal, oil and CO2certificates, as well as the related foreign currency positions) and interest rate swap contracts are regarded as derivatives. IAS 32 required and IAS 39 and IFRS 7 require all derivatives to be measured at fair value from the time of initial recognition. The general principle is that changes in the fair value of derivatives should be recognised through profit or loss. There are, however, two exceptions to this general rule: 1. Accrual accounting: DELTA accounts for commodity contracts intended for its own use on an accruals basis, which means that interim increases in value are not reflected in the results. Such transactions are recognised as purchases or sales at the time of settlement, at the prices obtaining at that time; 2. Hedge accounting: this affords the possibility of limiting the effect of fair value gains and losses on the results by taking account of opposite effects on results due to fair value gains and losses on the hedge and on the hedged position. With hedge accounting, fair value gains and losses on derivatives are recognised (through the statement of comprehensive income) in equity until the hedged position/transaction is settled. 66 Hedge accounting DELTA uses derivatives to hedge price and currency risks arising from energy commodity contracts (electricity, gas, coal and oil) and the risk of fluctuations in cash flows due to interest rate movements is hedged by contracting interest rate swaps. DELTA uses cash flow hedging for this purpose, contracting hedging instruments to offset the exposure to variations in existing and future cash flows that could ultimately affect the results. The hedges are attributed to a specific risk relating to a balance sheet item or a highly probable forecast transaction. The effective portion of the fair value gain or loss is recognised directly in hedge reserves in equity (through the statement of comprehensive income). The ineffective portion of the gain or loss on the hedging instrument is recognised in the income statement. The cumulative amounts recognised in equity are taken to the income statement in the same period as the hedged transaction. Criteria for the application of hedge accounting For hedge accounting to be applied, there are strict rules with regard to documentation and assessment of effectiveness. A derivative can be included in hedge accounting if it complies with the following criteria: 1. at the inception of the hedge there is formal designation and documentation of the hedging relationship and the risk management objective and strategy for undertaking the hedge; 2. for cash flow hedges, a forecast transaction that is the subject of the hedge must be highly probable and must present an exposure to variations in existing or future cash flows that could ultimately affect the results; 3. the effectiveness of the hedge can be reliably measured; 4. the hedge is expected to be highly effective; and 5. the hedge is assessed on an ongoing basis and determined actually to have been highly effective. Assessment of hedge effectiveness DELTA formally assesses whether the derivatives used as hedging instruments have been highly effective in mitigating changes in the fair value or cash flows attributable to the hedged position, both at the inception of the hedge and during its life. To this end, DELTA assesses and determines whether changes in the fair value or cash flows attributable to the hedged position are offset by changes in the fair value or cash flows attributable to the hedge within a range of 80% to 125%. The ineffective portion of a hedging relationship, in a fair value hedge, is the extent to which changes in the fair value of the derivative differ from the changes in the fair value of the hedged position or, in a cash flow hedge, the extent to which changes in the fair value of the derivative exceed the fair value movements in the expected cash flow. Ineffective hedges and gains and losses on components of derivatives that are disregarded in the assessment of the effect tiveness of a hedge are recognised directly in the income statement. DELTA discontinues hedge accounting if the hedging relationship is no longer effective or is no longer expected to remain effective. 67 6. Basis of determination of results In the income statement, all financial consequences, including normal trading results for 2010, have been presented as profit after tax from discontinued operations, with the corresponding financial information for 2009 presented on the same basis as in 2010 to facilitate comparison. 6.1 Revenue Revenue represents income arising directly from the supply of goods and services to third parties, net of any discounts and net of sales taxes, such as VAT and regulating energy tax (REB). Revenue is recognised when the material risks and benefits of ownership of the goods have been transferred to the buyer. Revenue from services is recognised in proportion to the service delivered by the end of the reporting period. Recognition of revenue from transport services and the supply of electricity and gas is based on supplies during the calendar year. Revenue from supplies to domestic and small-business users is partly estimated as meter readings are taken throughout the year. Recognition of revenue from electricity sales is based on the assumption that electricity generated by the group’s own production facilities (including joint ventures) will be supplied to third parties and the electricity supplied to end-users will be procured entirely from third parties. In the case of gas and electricity trading contracts, which do not involve physical delivery, the amounts of purchases and sales are netted off. Revenue from telecommunications covers subscription fees for signal distribution as well as income from internet services and other data transmission services. Income from environmental services and the sustainable energy operations and directly related expenses are allocated to the period in which the services are supplied. Revenue from construction contracts is recognised in the income statement in accordance with the percentage of completion method. 6.2 Net operating expenses Net operating expenses are recognised and measured on the basis of actual performance and according to the accounting policies set out above. The operating expenses are accounted for in the year to which they relate. Gains are recognised in the year in which they are realised; losses are recognised in the year in which they are identified. 6.3 Net finance income (expense) Finance income and expense is attributed to the period to which it relates, in accordance with the effective interest method. DELTA capitalises the costs of external financing (construction period interest) as appropriate. 6.4 Corporate income tax Corporate income tax on the result is calculated by applying the standard current rate to the profit before tax shown in the financial statements, taking account of permanent differences between this result and the tax base result. Within the DELTA N.V. tax group, DELTA uses the no-settlement method, except in the case of transferable tax-loss carryforwards predating the date of inclusion in a tax group. For the network operations, the separate return approach is used because of the special regulatory regime. 68 7. Basis of the cash flow statement The cash flow statement is prepared using the indirect method, based on the actual cash flows, i.e. before the revised presentation of the income statement reflecting the decision to sell off and discontinue certain operations. A distinction is made between operating, investing and financing activities. Although the current portion of the non-current liabilities is recognised in the balance sheet as part of other liabilities (under current liabilities), the corresponding movement in the current portion of the non-current liabilities in the cash flow statement is included in the cash flow from financing activities. Movements in finance income and expenses and tax on profits are by their nature (added interest in the case of provisions) or because of the time horizon (tax assessments) not fully attributable as direct cash flows and the cash flow has been adjusted to take account of these indirectly realised cash flows. 69 Notes to the consolidated balance sheet 1. Intangible assets (EUR 1,000) Total Goodwill R&D Software Customer contracts Transport rights Other 2009 Carrying amount as at 1 January 2009 Investments Amortisation Impairment Disposals PPA Indaver/SAV adjustments Other movements Carrying amount as at 31 December 2009 Accumulated amortisation and impairment Acquisition cost as at 31 December 2009 576.441 447.945 11.211 70.276 17.766 10.563 18.680 14.940 (37.056) (27.100) (339) (13.719) 1.713 (2.254) (8.985) (13.719) 2.129 843 (897) (10.445) - 16.142 (28.008) (1.011) 9 (2.018) (196) (1.301) 200 (5.122) (7.670) (143) 606 514.878 425.116 712 56.913 5.637 9.831 16.671 161.674 13.552 13.102 101.952 19.855 9.477 3.736 676.552 438.668 13.814 158.865 25.492 19.308 20.407 514.878 425.116 712 56.913 5.637 9.831 16.671 18.595 (26.794) (89.028) (358) 472 465 1.719 (85.906) 472 465 - 16.878 (24.591) (851) (358) 1.720 (1.160) - (1.011) - - 419.949 340.147 125 49.710 4.477 8.820 16.671 277.927 99.458 15.405 127.825 21.015 10.488 3.736 697.876 439.605 15.530 177.535 25.492 19.308 20.407 279 - 2010 Carrying amount as at 1 January 2010 Investments Amortisation Impairment Disposals Acquisition of RGS Earn-out (Indaver Ireland) Other movements Carrying amount as at 31 December 2010 Accumulated amortisation and impairment Acquisition cost as at 31 December 2010 Amortisation periods in years Allocation of goodwill to cash-generating units n/a 1.717 (32) (2.271) (1) 5 5 variable 31/12/2010 31/12/2009 Indaver Solland Milieu Kreekraksluis Zeelandnet Sunergy Triqua 326,428 2,486 1,390 9,843 - 325,963 67,923 4,069 1,390 9,843 13,246 2,682 Total goodwill 340,147 425,116 20 variable 70 General A combination of market developments and production developments has led to a reappraisal of the recoverable amount of the operations in the field of sustainable energy. It had already been decided to write off the investment in Biovalue in 2009 and, in 2010, the ongoing reappraisal led to a decision to sell off the solar energy activities. The recognised impairments in 2009 are attributable to the impairment of goodwill paid on the acquisition of Biovalue, the impairment of Biovalue’s intangible assets and the impairment of the fair value of several solar energy customer contracts. Goodwill IFRS requires an impairment test to be performed each year to determine whether the carrying amount of goodwill paid in the past for subsidiaries should be written down. Indaver With regard to Indaver’s activities, impairment calculations were made at the level of its cash flow generating units. The management based cash flow predictions on the business plans for 2011–2013 and in a number of cases on a longer time frame. An infinite series was used as from the end of the time frame. The business plans took account of the then available information relating to market developments. No use was made of extrapolations with growth rates in excess of inflation. The impairment tests were carried out using a specific discount rate for each entity. Allowing for the ratio of debt to equity that is customary in the market and the risk perceptions in each country and sector, a number of scenarios were worked out with regard to the discount rate. The discount rate per entity ranged from 7.9% to 10.6% before tax, account being of tax rates applicable locally. For Indaver, this led to the recognition of impairment totalling EUR 1.6 million on the goodwill paid in the past on the acquisition of associates by DELTA Milieu (DELTA Milieu Composteren). Solland / Sunergy The activities of the solar energy business suffered serious setbacks in 2009, and again in 2010. In response, DELTA took steps in 2009 to strengthen its future position in the solar energy business, renegotiating all contracts with wafer suppliers. Another important development was the development of the Sunweb cell. Despite these efforts, DELTA decided in 2010, in the light of the latest developments and outlook, either to discontinue or to sell off the solar energy activities. All the intangible assets of Solland Solar Holding B.V. and Sunergy B.V. were accordingly written down by the amounts determined by the impairment tests. For further details, see note 24 in the notes to the balance sheet and income statement. Triqua Whereas a few years ago the market still showed an upward trend, it subsequently became obvious that the activities in the field of water treatment and sludge dewatering had been adversely affected by the economic developments. Based on the results of the impairment test, it was therefore decided to write down the carrying amount of the goodwill (EUR 2.7 million). Software In connection with the replacement of several important software applications, partly in connection with the planned unbundling of the network operations and the commercial activities, ICT assets were again phased out and written down in 2010, involving a total amount of EUR 9.5 million. 71 2. Property, plant and equipment (EUR 1,000) Total Land and buildings Plant and equipment Other assets Assets under construction 205.883 714.253 36.238 240.026 6.121 (11.648) (12.977) (106) 10.868 17.485 52.815 (78.020) (21.569) (777) 8.800 187.826 7.579 (7.329) (2.077) (6.874) (506) 45.344 2.059 (225) (56) (197.370) Third-party contributions 2009 Carrying amount as at 1 January 2009 Investments Capitalised financing costs Depreciation Impairment Disposals PPA Indaver/SAV adjustments Other movements 1.015.770 111.859 2.059 (90.605) (34.586) (7.736) 19.668 16.385 Carrying amount as at 31 December 2009 1.032.810 215.626 863.328 27.031 89.778 Carrying amount before deduction of contributions 1.195.763 215.626 863.328 27.031 89.778 1.065.214 171.946 822.274 70.713 281 2.260.977 387.572 1.685.602 97.744 90.059 1.032.810 215.626 863.328 27.031 89.778 131.170 2.112 (97.408) (88.212) (6.797) 9.949 (6.217) 2.215 (12.893) (23.415) (4.605) 1.638 36.095 (86.267) (49.404) (329) 9.949 18.265 2.271 (4.284) (3.652) (424) (6.854) 92.299 2.112 (401) (11.741) (2.102) (15.962) 977.407 178.566 791.637 14.081 153.983 1.138.267 178.566 791.637 14.081 153.983 1.203.936 150.930 998.023 54.582 401 2.342.203 329.496 1.789.660 68.663 154.384 Accumulated depreciation and impairment Acquisition cost as at 31 December 2009 (180.627) 6.617 2.093 21 8.950 (162.946) 2010 Carrying amount as at 1 January 2010 Investments Capitalised financing costs Depreciation Impairment Disposals Change in the consolidation Other movements Carrying amount as at 31 December 2010 Carrying amount before deduction of contributions Accumulated depreciation and impairment Acquisition cost as at 31 December 2010 Depreciation periods in years 10 - 40 7 - 40 5 - 15 (162.946) (1.710) 6.437 663 (3.304) (160.860) n/a The investments in plant and equipment (including assets under construction) mainly relate to the expansion and replacement of electricity and gas network assets (DNWB) and the expansion and upgrading of waste processing plant and equipment (Indaver). Other movements in 2009 includes the reclassification of a finance lease contracted by Indaver as a consequence of the amended reporting standards contained in IAS 17. The impairment is mainly due to the decision to sell off the solar energy activities. The item also includes a write-down on the fair value of land in Cork (EUR 8.4 million), reflecting the state of the economy and property prices in Ireland, plus a write-down of assets of DELTA Industriële Reiniging and MBR, based on a calculation of the value in use deriving from the latest business plans (EUR 1.8 million). Disposals mainly concerns the sale of buildings and land in Terneuzen. The change in the consolidation relates to the acquisition by DELTA Energy B.V. of two special purpose companies from Rabobank (in connection with sale-and-leaseback operations). Other movements includes the residual value of the buildings and land of Biovalue, measured at EUR 1.8 million, which is no longer included under land and buildings. 72 Under IFRIC 18, contributions from third parties connected with the construction of plant and equipment are no longer to be deducted from the carrying amounts of the assets (for which the contribution was received) but recognised as deferred revenue, with retroactive effect from 1 January 2009. This reclassification has been accounted for in other movements. 3. Joint ventures, associates and other investments Total Joint Ventures Associates Other investments Carrying amount as at 1 January 2009 512,274 461,813 41,472 8,989 Investments/Disposals Dividends received Share of profits Other movements 18,791 (30,423) 66,492 (16,969) 6,433 (23,853) 59,614 (18,232) 13,152 (5,095) 5,899 1,247 (794) (1,475) 978 16 Carrying amount as at 31 December 2009 548,271 485,776 54,780 7,715 Carrying amount as at 1 January 2010 548,271 485,776 54,780 7,715 Investments/Disposals Dividends received Repayments of capital Share of profits Impairment Other movements 1,035 (65,711) (13,584) 62,993 (10,755) (687) (61,621) (13,584) 56,693 (1,174) 1,035 (3,669) 5,415 (10,755) 487 (421) 886 0 Carrying amount as at 31 December 2010 521,563 466,090 47,294 8,179 (EUR 1,000) The investments concern payments of share premium on the share capital of associates. The repayments of capital relate to repayments of share capital by subsidiaries (Sleco and Sloe Centrale) to their parent companies (Indaver and DELTA Energy). The share in the results of joint ventures, associates and other investees includes the write-down on the fair value of the investment in the landfill company Intercommunale Hooge Maey. The decision to discontinue the solar energy activities by selling the operations in their entirety resulted in the recognition of an impairment loss equal to the carrying amount of the investment in the associates concerned. 73 3.2. Joint ventures Summarised information on the principal joint ventures (based on 100% interest): (EUR 1,000) Financial position Property, plant and equipment 31/12/2010 31/12/2009 1,884,471 1,931,581 Financial assets 164,648 171,679 Current assets 223,985 174,403 Cash and cash equivalents 330,685 376,853 2,603,789 2,654,516 Shareholders’ equity 550,435 586,549 Provisions 521,440 516,101 1,080,082 1,166,360 451,832 385,506 2,603,789 2,654,516 Total income 810,447 744,452 Total expenses 687,863 610,846 Balance 122,584 133,606 Total assets Non-current liabilities Current liabilities Total equity and liabilities Result The above information relates to the principal joint ventures in which DELTA has an interest, viz.: the electricity generators EPZ NV, Elsta BV and Sloe Centrale Holding BV, the water company Evides NV and the waste-to-energy company Sleco-Centrale NV. 74 3.3. Associates Summarised information on the principal associates (based on 100% interest): (EUR 1,000) Financial position Property, plant and equipment Financial assets 31/12/2010 31/12/2009 184,042 338,070 7,259 8,966 Current assets 22,710 30,121 Cash and cash equivalents 65,627 79,318 279,638 456,475 Shareholders’ equity 86,956 110,883 Provisions 11,458 7,281 144,560 159,223 36,664 179,088 279,638 456,475 Total assets Non-current liabilities Current liabilities Total equity and liabilities Result Total income 110,372 141,751 Total expenses 95,168 117,815 Balance 15,204 23,936 This information relates to the principal associates in which DELTA has an interest, viz.: landfill company Intercommunale Hooge Maey and waste incinerator AZN. 75 3.4 Other investments Other investments includes the investments in NV KEMA, Synergia Capital Partners BV, Sustainable Energy Technology (SET) Fund CV, Business Park Terneuzen (BPT) BV, Vlar Papier NV, GRL GlasRecycling NV and IVVO CvbA. The interests in Decu Beheer BV (60%) and Decu CV (60%) are also classed as other investments as DELTA is unable to influence the operating processes at all. 3.5 Transactions with related parties Sales (in EUR 1,000) Elsta B.V en Co C.V. Elsta B.V. N.V. EPZ Sloecentrale Holding B.V. BMC Moerdijk B.V. Zebra Pijpleiding vof Zebra GasNetw erk B.V. IC Hooge Maey cvba Sleco Centrale NV Evides N.V. Total % Interest 2010 24,75% 25,00% 50,00% 50,00% 50,00% 33,33% 33,33% 30,00% 50,00% 50,00% 3.726 42.983 1.174 1.616 1.090 45.702 17.233 113.524 Purchases 2009 2010 2009 Trade receivables Trade payables Loans granted 31-12-2010 31-12-2009 31-12-2010 31-12-2009 31-12-2010 31-12-2009 Interest 2010 2009 1.016 32.851 31.194 27.021 140.709 39.032 5.605 233 178 50.629 - 24.538 125.941 19.291 4.277 4.556 200 28.598 1.816 13.567 348 2.973 185 133 330 2.766 4.428 455 4.202 51 881 333 4.541 6.689 303 3.807 10.135 524 15 118 5.066 4.660 243 4.952 7.726 872 98 113 2.661 157 16.004 (3.300) - 14.912 - (2.471) 1.091 (15) - (61) 8.788 938 - 122.113 263.408 209.218 24.730 17.152 24.628 16.822 12.704 14.912 (1.395) 9.665 3.334 36.188 16.138 1.392 Transactions with related parties are conducted at arm’s length prices. Elsta, EPZ and Sloe operate on the basis of telling agreements (effectively on a cost-plus basis). Sleco also has an internal pricing structure not related to market prices. No provisions for bad debts are recognised with respect to the receivables from related parties since there is no need for such provisions. 76 4. Other financial assets Total Loans to joint ventures and associates etc. Deferred tax asset Other financial assets 352,551 203,808 95,395 53,348 Reversal of current portion 23,029 12,752 - 10,277 New loans 51,074 50,684 - 390 (16,014) - (16,014) - 9,140 - - 9,140 (264,614) (249,295) - (15,319) 9,204 - 9,204 - 36 (1,101) (5) 1,142 (5,561) (1,051) - (4,510) 158,845 15,797 88,580 54,468 (EUR 1,000) Carrying amount as at 1 January 2009 Results Advance payments Repayments Transferred to equity as hedge reserve Other movements Current portion Carrying amount as at 1 January 2010 Change in consolidation (1,785) - (1,785) - Reversal of current portion 5,561 1,051 - 4,510 New loans 2,342 1,914 - 428 Results 3,428 (2,964) 28,282 (21,890) Repayments (14,059) (1,003) - (13,056) Transferred to equity as hedge reserve (35,206) - (35,206) - Other movements 15,628 130 14,783 715 Current portion (4,029) (1,150) - (2,879) Impairment (3,598) - (3,598) - 127,126 13,775 91,056 22,295 Carrying amount as at 31 December 2010 4.1 Loans to joint ventures and associates etc. These concern loans granted to joint ventures, associates and other investees. The loans are carried at face value and an amount of EUR 12.1 million relates to subordinated loans. As at year-end 2010, the weighted average interest rate was 7.3% (2009:6.1%). 77 4.2 Deferred tax asset (EUR 1,000) 31-12-2010 31-12-2009 Intangible assets and property, plant and equipment 53,124 48,075 Provisions 18,580 9,330 Unutilised tax losses 31,923 8,997 (13,027) 22,178 Hedge reserve pursuant to IAS39/derivatives Other Total deferred tax asset 457 91,056 88,580 Deferred tax assets relate to the carrying amounts of intangible assets, property, plant and equipment and provisions. The deferred tax asset relating to intangible assets and property, plant and equipment is partly the result of differences between the tax bases and the reported carrying amounts as at 1 January 1998 (opening balance sheet for tax purposes). Deferred tax assets are also recognised for differences between the tax base and the carrying amounts of intangible assets and property, plant and equipment (including capital allowance schemes) that have arisen since then. A tax asset is also recognised in respect of provisions where the costs for which they were formed cannot be transferred to taxable income until they are actually incurred. A deferred tax asset is recognised at some companies for tax loss carryforwards that can be expected to be set against taxable profits in the years ahead. Talks were being held with the Dutch Tax Administration at the end of the reporting period to reach agreement on the amount of these carryforward losses. The outcome of these talks may lead to changes in the deferred tax asset. The deferred tax assets in respect of tax loss carryforwards are reviewed each year and recognised to the extent that the losses can be expected to be set against future taxable profits. Since 2006, a hedge reserve for unrealised fair value gains and losses on derivatives/trading contracts has also been recognised in compliance with IAS 39/32. A deferred tax asset is also recognised in respect of these unrealised fair value gains and losses .As at the balance sheet date, this hedge reserve was positive (credit), resulting in a reduction in the deferred tax asset. As at year-end 2010, a deferred tax asset amounting to EUR 21.5 million was not recognised in the balance sheet because of uncertainty as to when the related tax loss carryforwards (in the Netherlands and in other countries) might be utilised or the asset might be realised. 4.3 Other financial assets These mainly concern lump sums received in connection with sale-and-leaseback contracts, which have been deposited with the lessor as security. The advance payments which have been made are also shown under this heading. 78 5. Derivatives and risk management DELTA NV trades in contracts for gas, electricity, coal, oil, CO2 certificates and currencies relating to the current year and the three following years. DELTA NV regards the markets for these commodities to be liquid over this time horizon: reliable prices are available for them from brokers, markets and suppliers of price information. Fair values for these contracts are calculated on the basis of these published prices; in-house valuation models are not used. Adjustments are only made to the published prices for the months, quarters or years ahead in order to match the relative periods in the trading systems. The prices for delivery beyond 36 months are arrived at by extrapolation. DELTA has a contractual obligation to settle forward contracts on maturity. To hedge interest rate risks, DELTA makes use of derivatives such as interest rate swaps. The effect of this type of swap contract is to change loans contracted at floating rates into fixed-rate loans. This section covers the following topics: 5.1 Derivatives 5.1.1 Relationships of derivatives in the financial statements 5.1.2 Derivatives position 5.1.3 Changes in the hedge reserve 5.1.4 Hierarchy of financial instruments 5.2 Risk management 5.2.1 Risk management 5.2.2 Market risks 5.2.3 Currency risk 5.2.4 Interest rate risk 5.2.5 Liquidity risk 5.2.6 Credit risk 79 5.1.1 Derivates postion (EUR 1,000) Balance of derivatives Liabilities 2010 Changes in derivatives Assets 2010 Assets 2009 Liabilities 2009 51,575 179,317 219,469 272,655 (53,186) 271,044 451,972 (180,928) Change in 2010, liabilities Change in 2010, assets Derivatives on the balance sheet (see 5.1.2) Non-current assets Current assets (127,742) Non-current liabilities 31,209 186,828 (155,619) 164,676 334,728 (170,052) 195,885 521,556 (325,671) Hedge reserve (see 5.1.3) 41,837 (61,636) 103,473 Deferred tax (see 5.1.3) 13,027 (22,179) 35,206 Non-controlling interest connected with swaps (see 5.1.3) (1,366) (1,665) 299 53,498 (85,480) Current liabilities Other balance sheet items relating to derivatives Sub total - - Purchase of interest rate derivatives by DNWB - 138,978 2,250 2,250 Other reserves (20) 20 19,164 15,916 3,248 Changes in equity through profit or loss 247 Fair value changes in equity through profit or loss Total 247 - - 75,159 (69,584) - 144,743 271,044 451,972 271,044 451,972 (180,928) (180,928) 5.1.2 Derivatives position (EUR 1,000) ASSETS Non-current LIABILITIES Current Non-current NET Current 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 29,844 134,143 151,606 165,242 (10,164) (150,113) (111,135) (249,461) 60,151 (100,189) Electricity 4,604 26,818 26,972 78,289 (10,631) (16,493) (20,691) (20,262) 254 68,352 Coal 5,951 4,461 25,466 11,766 (2,798) (5,916) (18,480) (27,396) 10,139 (17,085) Oil 509 2,901 3,461 6,722 - (220) (871) (2,018) 3,099 7,385 Other 961 1,579 2,001 10,555 (2,195) (4,847) (5,924) (21,825) (5,157) (14,538) Other derivatives Foreign exchange contracts 7,162 9,415 9,963 81 (878) (3,556) (2,406) (5,379) 13,841 561 Interest rate swaps 2,544 - - - (4,543) (5,683) (5,169) (8,387) (7,168) (14,070) 51,575 179,317 219,469 272,655 (31,209) (186,828) (164,676) (334,728) 75,159 (69,584) Commodity contracts Gas Total An amount of EUR 139.0 million (2009: EUR 35.8 million) of the gains and losses on these contracts has been recognised in the hedge reserve. 80 5.1.3. Changes in the hedge reserve The changes in the fair value after tax of the derivatives providing an effective hedge of the risk of changes in future cash flows are included in the hedge reserve. This reserve is not freely distributable. The movements in the hedge reserve over the past two years are presented below. (EUR 1,000) COMMODITY CONTRACTS SWAPS Gas Electricity Coal Oil CO2 Forex Total Interest rate swaps Total (34,614) (10,436) 5,583 16,815 (5,587) - (28,238) (7,270) (35,508) (1,193) (1,193) 2009 Hedge reserve at 01-01-2009 Non-controlling interest Deferred tax 11,848 3,572 (1,911) (5,756) 1,912 - 9,666 3,309 12,975 (46,462) (14,008) 7,494 22,571 (7,499) - (37,904) (11,772) (49,676) (68,235) 15,942 (3,377) (5,440) (5,473) (2,554) (69,137) (8,396) (77,533) 25,789 43,283 (16,216) (17,244) - - 35,612 6,117 41,729 Total changes in 2009 (42,446) 59,225 (19,593) (22,684) (5,473) (2,554) (33,525) (2,279) (35,804) Hedge reserve at 31-12-2009 gross (88,908) 45,217 (12,099) (113) (12,972) (2,554) (71,429) (14,051) (85,480) 22,673 (11,530) 3,085 29 3,308 651 18,215 3,964 22,179 Hedge reserve at 01-01-2009 gross Changes in 2009 Recognised directly in equity Released to income Deferred tax Non-controlling interest Hedge reserve at 31-12-2009 1,665 1,665 (66,235) 33,687 (9,014) (84) (9,664) (1,903) (53,214) (8,422) (61,636) (88,908) 45,217 (12,099) (113) (12,972) (2,554) (71,429) (14,051) (85,480) Recognised directly in equity 73,268 (11,668) 12,335 (21) 2,888 6,054 82,856 (4,001) 78,855 Released to income 76,682 (42,321) 9,801 9 6,061 1,503 51,735 8,386 60,121 Total changes 2010 149,950 (53,989) 22,136 (12) 8,949 7,557 134,591 4,385 138,976 61,042 (8,772) 10,037 (125) (4,023) 5,003 63,162 (9,666) 53,496 (15,260) 2,193 (2,509) 31 1,006 (1,251) (15,790) 2,764 (13,026) 2010 Hedge reserve 01-01-2010 gross Changes in 2010 Hedge reserve 31-12-2010 gross Deferred tax Non-controlling interest Hedge reserve at 31-12-2010 45,783 (6,579) 7,528 (94) (3,017) 3,752 47,373 1,366 1,366 (5,536) 41,837 81 The composition of the hedge reserve in relation to the commodities, on a gross basis, as at year-end 2010 is attributable as follows to the years ahead: Position of commodities hedge reserve, gross (EUR 1,000) COMMODITY CONTRACTS Gas Electricity Coal Oil CO2 Forex Total 2011 37,559 (1,517) 7,235 (847) (2,703) 2,428 42,155 2012 21,608 (5,034) 1,982 723 (868) 2,607 21,018 2013 1,873 (2,221) 820 - (452) (31) (11) Total 61,040 (8,772) 10,037 (124) (4,023) 5,004 63,162 The release from the hedge reserve to profit or loss is recognised in gross operating margin. The timing of the expected cash flows does not always coincide with their recognition in the income statement. This is because of the time lag effect inherent in some hedges. This is the case, for example, with the majority of gas hedges, in that the gas price for the first quarter of a year may be determined by the average oil price over the six months preceding that quarter. The value of the swaps used in such a hedging relationship, settlement of which takes place in the six months preceding the quarter in which delivery is made, is recognised in the hedge reserve up to the beginning of the delivery quarter, with the gain or loss recognised in income in the first quarter of delivery. The maximum time lag on contracts in a hedging relationship is nine months. During the reporting period, there were no hedging relationships that were discontinued because an expected transaction did not go ahead. 5.1.4 Hierarchy of financial instruments The financial instruments, measured at fair value, are classified in accordance with the following hierarchy as required by IFRS 7 Financial Instruments: Disclosures: Level 1: Quoted prices (not adjusted) in active markets for identical assets or liabilities; Level 2: Inputs other than the quoted prices in level 1 that are observable for an asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs). 82 Assets and liabilities measured at fair value (EUR 1,000) FAIR VALUE HIERARCHY Total as at 31 December Level 1: Level 2: Level 3: 2010 2009 2010 2009 2010 2009 2010 2009 271,044 451,971 - - 271,044 451,971 - - 7,795 7,330 - - - - 7,795 7,330 278,839 459,301 - - 271,044 451,971 7,795 7,330 Derivatives 195,885 521,555 - - 195,885 521,555 - - Put options 138,913 135,540 - - - - 138,913 135,540 Total equity and liabilities 334,798 657,095 - - 195,885 521,555 138,913 135,540 Assets Derivatives Equity investments < 20% Total assets Equity and liabilities The fair value of the equity investments (financial instruments) rose by EUR 0.5 million relative to the position as at year-end 2009, as a result of dividends received. The put options are carried at fair value, this being calculated by changing the appropriate measurement of the put option each year against the share in the result and other movements in the equity attributable to the relevant put option holder less any dividend paid. The value is tested against the indirect recoverable amount of the appropriate minority interest, with a bandwidth being employed for the required yield. A change in the liability as at year-end 2010, amounting to EUR 3.4 million, has been charged to income. There were no reclassifications in 2010 from one level of the fair value hierarchy to another. 5.2 Risk management 5.2.1 Risk management DELTA’s risk management policy is designed to limit the consequences of price volatility in the short term and to track current market prices in the long term. The Risk Management Committee, which reports direct to the Executive Board, has adopted a system of procedures and limits for controlling risks. These include risk management procedures and guidelines relating to the company as a whole and procedures and guidelines covering specific areas. The Risk Management Committee is responsible for enforcing the risk management policy. The Corporate Risk Management department is responsible for the operational conduct of the oversight and reports to the Risk Management Committee. DELTA uses financial instruments to mitigate commodity market risks, currency risks, interest rate risks, liquidity risks and credit risks. The parameters governing the use of such derivatives are laid down in the Risk Policy Document and the Treasury Rules. The following paragraphs describe the various types of risk and the way in which DELTA manages the related exposures. 83 5.2.2 Market risks 5.2.2.1 Commodity prices Market risks arise from price movements on the markets on which DELTA buys and sells. These risks are managed systematically, by buying or selling forward, depending on expected price trends. These positions are monitored daily. Trading risks are mitigated by strictly enforcing a system of limits. 5.2.2.2 Value at Risk DELTA uses the Value at Risk (VaR) method to assess market risks on the commodity markets (gas, coal, oil, electricity, emission rights, foreign currencies, transmission capacity, import/export capacity etc.) in which the company operates, based on a number of assumptions for the various changes in market conditions which can occur. The VaR method is an important tool for the assessment of market risks within DELTA. The method identifies the maximum losses likely to be incurred as a result of price changes over a three-day period with a confidence level of 95% (i.e. the maximum loss could exceed the VaR limit in just 5% of cases). The VaR method is an important tool for managing the portfolios within DELTA and the value at risk is therefore calculated and reported each day. The following table was prepared on the basis of these daily reports. Value at Risk (EUR 1,000) Value at Risk 01/01/2010 01/01/2011 Trading portfolio Gas hedge portfolio Sales portfolio Generation & Allocation-portfolio Diversification across portfolios 2,446 1,499 816 14,348 (6,563) 2,275 1,768 747 13,099 (5,383) Total 12,546 12,506 Since portfolios include opposing positions and there is an underlying correlation, the VaR on the total portfolio is smaller than the sum of that on the individual portfolios. For the risk on the General & Allocation portfolio and on the Gas Hedge portfolio, the hedge ratio is the governing factor. This ratio expresses the percentage of already sold capacity relative to the total capacity of the power stations or gas contracts over the trading horizon, respectively. The higher the hedge ratio, the less sensitive the portfolio is to price movements. The hedge ratio is measured and reported daily and should lie between minimum and maximum limits. On 1 January 2011, the hedge ratio for both portfolios was 62%. 5.2.2.3 Cash flow hedges DELTA makes use of financial instruments to minimise fluctuations in expected cash flows as far as possible. In order to minimise the consequences of future movements in gas, fuel and electricity prices and interest and exchange rates, DELTA uses derivatives such as currency forwards, options and swaps. The hedging instruments are derivatives in the commodities traded by DELTA that are concluded to mitigate cash flow, price and currency risks. Hedge accounting is applied to cushion the total change in value of these derivatives. 84 Where permitted, DELTA accounts for these financial instruments and physical purchase and sale contracts in a cash flow hedge in accordance with IAS 39. The item hedged is the future purchase transaction (power stations, LT sourcing) or gas and electricity sales transaction. Cash flow hedges for electricity and fuels (EUR 1,000) AMOUNT AT FAIR VALUE 2009 Gas swaps 2010 2011 2012 2013 and beyond Total Average price Contract value 10,909 13,250 - - 24,159 0.24 84,368 Gas swap (Heren) (27,857) (11,181) - - (39,038) 0.22 (135,503) Gas forwards (64,260) (10,516) (2,703) - (77,479) 0.21 (315,693) 48,191 8,952 (427) - 56,716 62.92 80,326 (15,857) (766) - - (16,623) 72.72 (56,755) Electricity forwards Coal swaps Oil forwards - - - - - - - 2,911 1,054 - - 3,965 476.49 22,650 (11,800) (3,166) (132) - (15,098) 19.14 (45,209) (4,770) (634) (508) - (5,912) 1.14 (193,644) Total (62,533) (3,007) (3,770) - (69,310) 2010 2011 2012 2013 2014 and beyond Total Average price Contract value Gas swaps 1,560 - - - 1,560 0.24 54,880 Gas swap (Heren) 3,903 - - - 3,903 0.22 (60,644) (322,471) Oil swaps CO2 forwards Currency swaps Gas forwards 26,437 14,892 1,297 - 42,626 0.21 Electricity forwards 7,825 (1,234) (2,289) - 4,302 56.24 33,179 Coal swaps 6,491 1,797 747 - 9,035 75.85 (66,194) Oil forwards (196) - - - (196) 563.29 5,971 320 196 - - 516 573.64 (11,139) (3,443) (753) (668) - (4,864) 16.71 (37,675) 1,952 3,496 279 - 5,727 0.97 (194,508) 44,849 18,394 (634) - 62,609 Oil swaps CO2 forwards Currency swaps Total The hedge reserve as discussed in Section 5.2 includes the gains and losses on the underlying derivatives over the period that they were part of a highly effective hedging relationship. The derivatives presented in the analysis of cash flow hedges concern the derivatives that were part of a hedging relationship on the balance sheet date. A mismatch occurs because: - the analysis of cash flow hedges also includes the ineffective portion of the hedging instrument; - the gains and losses on the hedging instrument prior to the inception of a hedging relationship are also included in the analysis of cash flow hedges; - also included in the hedging reserve are the gains and losses on the hedging instruments which were part of a hedging relationship in the past but which were no longer part of such a relationship at year-end. The amounts recognised in the hedge reserve take account of the date on which an instrument was designated as part of a hedging relationship, which may be different from the date of the associated trade. In addition, only the gains and losses in the fair value of the effective portion of the hedging instruments are recognised in the hedge reserve. 85 5.2.3 Currency risk Currency risk concerns the price risk related to exchange rate movements. DELTA’s risk policy is to hedge currency risks on positions assumed in foreign currencies. Currency positions resulting from contracts, including commodity contracts, are reported to the Treasury Department on a daily basis for hedging at group level. Currency risk limits are set periodically in consultation with the Risk Management Committee and monitored by Treasury Front Office. The following exchange rates were used for translating the amounts of items denominated in foreign currencies on the face of the balance sheet: Middle rates US dollar Pound sterling Norwegian kroner 31/12/2009 1.4400 0.8875 8.2850 31/12/2010 1.3375 0.8616 7.8050 5.2.4 Interest rate risk DELTA’s interest rate risk policy is to limit the consequences of interest rate fluctuations. To hedge the risk, DELTA uses financial instruments such as interest rate swaps, whereby variable rate loans are swapped for fixed rate loans. Hedged loans The VaR is not calculated for the interest rate derivatives. DELTA has a number of interest rate swaps. As at balance sheet date, all these contracts were effective hedges. A sensitivity analysis was performed by calculating the effect of increasing and decreasing the current floating rate by 10%. The swaps remained effective. Several of these interest rate derivatives can be classified as option contracts, which qualify for the exemption referred to in IAS 39, paragraph 74. The change in the fair value is accounted for in the hedge reserve, with the change in the time value of money accounted for through profit or loss. The following table shows the effect of a 10% increase and a 10% decrease compared with the carrying amounts as at 31 December 2010. 86 Interest rate exposure sensitivity analysis (EUR 1,000) 10% increase Position as at 31 December 10% decrease Decrease in value relative Value based on to carrying yield curve amount Increase in value relative to carrying amount Value based on yield curve 2010 2009 2010 2009 2010 2009 2010 2009 (7,168) (14,070) (5,656) (12,672) 1,512 1,398 (8,564) (15,525) 2,765 3,983 2,419 3,587 (346) (396) 2,975 4,395 (4,403) (10,087) (3,237) (9,085) 1,166 1,002 (5,589) (11,130) Hedge reserve 5,534 8,422 4,737 7,652 (797) (770) 5,929 9,215 395 Non-controlling interest 1,366 1,665 1,238 1,433 (128) (232) 1,486 1,915 120 250 Total 6,900 10,087 5,975 9,085 (925) (1,002) 7,415 11,130 515 1,043 (246) - (487) - (241) - 425 - 671 - Derivatives Deferred tax on derivatives Total 2010 2009 (1,396) (1,455) 210 412 (1,186) (1,043) Interest rate swaps 793 Gains and losses on swaps Total As at 31 December 2010, the interest rate derivatives position represented a loss. An upward movement of the yield curve reduces this loss. The hedge reserve relating to interest rate swaps as at 31 December 2010 represented a debit in equity. An upward movement of the yield curve reduces the amount of this debit. Unhedged loans If the interest rates on unhedged variable rate loans had been 10% higher or lower at the end of the reporting period and all other variables remain constant, the profit or loss (before non-controlling interests) would have been EUR 275,000 lower or higher respectively. 5.2.5. Liquidity risk Liquidity risk is the risk that DELTA might not have sufficient funds available to settle its liabilities. DELTA’s capital management policy focuses on centralising cash management and funding and borrowing repayment operations at holding company level as far as possible. A financing plan is prepared each year on the basis of the business plan, giving direction to the activities of the DELTA NV Treasury department. This includes a decision on the ratio between short and long-term borrowings. In order to provide the flexibility required for executing strategic projects, DELTA has standby credit facilities available up to a limit of EUR 500 million, from which an amount of EUR 135 million was drawn down as at year-end 2010. It is also possible to make calls on the capital market in different ways if required. 87 Two businesses within the DELTA group look after their own finances, viz.: 1. The Indaver group manages the liquidity risk by maintaining adequate reserves and ample committed credit facilities and by closely monitoring expected and actual cash flows. The Indaver group has credit facilities totalling EUR 327 million as well as other contracted loans, of which EUR 148.8 million remains to be drawn down. 2. DELTA Netwerkbedrijf has a credit facility of EUR 210 million which was fully utilised as at balance sheet date. DELTA has a corporate credit rating of BBB from Standard & Poor’s. DELTA’s policy is to have access to at least a minimum level of funding equal to EUR 100 million. In order to provide a view of the liquidity risk, the following table presents the contractual maturities of the financial liabilities. Contractual maturities (EUR million) Total < 1 year 1-5 years > 5 years 2009 Trade payables 283.5 283.5 - - Interest-bearing loans 555.7 117.4 363.9 74.4 Derivatives 521.5 334.7 186.8 - Other 446.3 191.6 229.5 25.2 1,807.0 927.2 780.2 99.6 34.0 8.1 21.3 4.6 2010 Trade payables 227.3 227.3 - - Interest-bearing loans 537.1 86.1 235.4 215.6 Derivatives 195.9 164.7 31.2 - Other 539.7 246.8 288.2 4.8 1,500.0 724.8 554.9 220.3 62.0 11.0 38.0 13.0 31 December 2009 Related interest payable 31 December 2010 Related interest payable The contractual maturities of the financial obligations reflect the expected outgoing cash flows relating to the financial commitments entered into as at balance sheet date. 88 5.2.6. Credit risk Credit risk concerns the losses that could arise if a counterparty defaults on a contractual obligation. DELTA has set credit limits for its external counterparties in order to limit the credit risk. An internal rating system sets a credit limit for each external counterparty. This system uses publicly available information on the company concerned or the guarantor (such as financial statements and credit ratings). During the credit crisis the trade with a number of banks was curtailed because the market for Credit Default Swaps estimated their risk to be much higher than the rating agencies. In the case of previous DELTA customers, their payment history is a major factor in agreeing to supply them. DELTA uses various instruments to manage credit risks, including trading on the basis of standard forms of contract and terms of business, trading via exchanges, ensuring a diversified portfolio of customers and requiring guarantees. If the credit rating of an external counterparty or guarantor is not or is no longer investment grade, no additional credit risk is accepted. At the end of the reporting period, the external counterparties had the following range of ratings: 89 6. Inventories 2010 2009 Raw materials Consumables Finished products Goods for resale 9,212 3,501 277 4,371 17,361 8,934 5,723 1,893 17,399 33,949 Less: Provision for obsolescence (2,386) (909) Total inventories 14,975 33,040 (EUR 1,000) In 2009, a proportion of the inventories carried by Biovalue and Solland Solar Energy Holding B.V was written down to a lower net realisable value, less costs to sell, representing a total amount of EUR 19.5 million. In 2010, the amount of inventories carried by Solland was included in the assets held for sale. 7. Receivables (EUR 1,000) Trade receivables Current corporate income tax Other current taxes Total taxes Work in progress for third parties Cash not available on demand Current portion of long-term loans granted Transactions with related parties Other receivables, prepayments and accrued income Total other receivables Total receivables (excluding derivates) 2010 2009 310,179 339,778 15,898 45,167 61,065 1,746 33,321 35,067 0 2,070 2,884 4,029 24,730 26,682 5,561 17,152 12,148 43,791 38,350 87,745 415,035 464,660 The work in progress for third parties is largely made up of work being carried out by Infra, Indaver and Triqua. As at year-end 2009, these activities gave rise to a receivable in EUR 2.0 million. As at yearend 2010, Infra had a liability of EUR 1.0 million in respect of prepayments from clients, which has been included in the current liabilities. The cash not available on demand consists of deposits relating to the trading activities on the Endex energy futures exchange. A provision for possible bad debts totalling EUR 15.2 million (2009: EUR 25.1 million) was recognised in respect of the trade receivables. 90 Movements in the bad debt provision (EUR 1,000) Balance as at 1 January Bad debts written off Added/released Balance as at 31 December 2010 2009 25,082 18,697 (12,144) 2,279 (6,979) 13,364 15,217 25,082 In 2010, there was a clean-up of the customer accounts, resulting in an increase in bad debt write-offs compared with 2009. Aged analysis of trade receivables 2010 (EUR 1,000) Age in days < 30 31-60 61-90 91-120 > 120 288,615 15,403 2,990 2,273 16,115 Total 325,396 Bad debt provision (15,217) Total trade receivables 310,179 The <30 days bracket includes an amount of EUR 89.0 million (2009: EUR 70.3 million) in receivables connected with Endex trading operations. Settlement of these accounts always takes place within one month. Credit risks of material amounts are not expected with respect to the outstanding receivables. 8. Cash Cash includes not only cash but also cash equivalents that can be converted into cash with no material risk of impairment. 2010 2009 (EUR 1, 000) Deposits Bank Giro Cash 28,307 21,103 35,729 23,408 Total cash 49,410 59,137 The amounts placed on deposit become available within three months. 91 9. Provisions (EUR 1,000) Carrying amount as at 1 January 2009 Reversal of current portion of provision Added Interest added Released Total Site reconstruction costs Unprofitable contracts Employee benefits Dismantling costs Other provisions 104,269 59,719 26,098 4,817 2,145 11,490 5,386 1,188 - 932 - 3,266 903 1 435 385 82 - 4,576 2,961 1,121 124 - 370 (6,540) - (6,195) - (399) 54 (12,450) (760) (8,200) (597) - (2,893) 758 (85) (9) 179 - 673 Carrying amounts as at 31 December 2009 96,902 63,024 13,250 5,840 1,828 12,960 Current portion of provisions (4,364) (524) - (851) - (2,989) Carrying amount as at 1 January 2010 92,538 62,500 13,250 4,989 1,828 9,971 2,989 Utilised Other movements Reversal of current portion of provisions 4,364 524 - 851 - 16,260 - 11,900 360 4,000 - 4,220 3,101 663 119 - 337 (4,063) (410) (1,211) (652) - (1,789) (484) (9) 9 (2) (1,828) 1,345 Carrying amount as at 31 December 2010 112,835 65,705 24,611 5,665 4,000 12,854 Current portion of provisions (17,331) (10,157) - (886) (4,000) (2,288) 95,504 55,548 24,611 4,780 - 10,565 Added Interest added Utilised Other movements Carrying amount as at 31 December 2010 The amount of the provisions which it is probable will be utilised within one year, amounting to EUR 17.3 million (2009: EUR 4.4 million), has been included in current liabilities. The companies Solland and Sunergy, whose activities are to be sold off, did not carry any provisions on their balance sheets either at year-end 2009 or 2010. Site restoration costs Indaver has recognised provisions for the capping and aftercare of its current landfill sites. An amount of EUR 13.8 million of these provisions is expected to be utilised over the next five years. The remainder relates to expenditure over a period extending to 59 years. These costs have been estimated by the management using best practices and based on existing technology. The discount rate in respect of 2010 was 4.67% (2009: 4.67%) for the Belgian landfill sites and 5.0% (2009: 5.0%) for the German and Dutch landfill sites. Between now and 2020, an estimated EUR 31.3 million (2010 price levels) will be required for the preparatory aftercare, capping and landscaping of the Derde Merwedehaven landfill site. Utilisation of the provision for this purpose will occur mostly after 2017. In the period up to 2025, an estimated EUR 22.1 million (2010 price levels) will be required for the preparatory aftercare and capping of the Noorden Midden Zeeland landfill site. Utilisation of the provision for this purpose will occur mostly after 2017. The current portion of the provision mainly relates to the Koegorspolder landfill site, which ceased to be used in 2005. 92 Unprofitable contracts This provision has been formed for long-term energy procurement/sales contracts entered into at rates that are no longer competitive. As a result of the liberalisation of the energy market and in view of current developments in market prices, a number of energy procurement/sales contracts have become unprofitable. A provision is recognised to cover the unprofitable part of these contracts. The annual utilisation is recognised in the gross margin. The provisions are reviewed each year in the light of price movements in the electricity and fuel markets. Using a discount rate of 4.5% (2009: 5%), this has led to an addition of approximately EUR 12 million, the limited amount utilised from specific provisions being reflected in the gross margin. Staff costs These provisions have been recognised in order to be able to meet existing future financial obligations. Following the introduction of the new health insurance system on 1 January 2006, the obligations underlying the provision for health care have changed substantially. The statutory health care insurance schemes IZA/IZR, to which DELTA was affiliated with respect to a large proportion of its workforce in the Netherlands, no longer exist. Under these schemes, DELTA was required by law to pay an employer’s contribution towards the healthcare costs of retired as well as existing employees. The change in the law removed the employers’ contribution obligation in respect of retired employees. With a view to social solidarity, the employers’ organisations and trade unions agreed a transitional measure under which, with effect from 2006, employers would contribute EUR 240 per annum per retired employee for a period of ten years. An amount of EUR 1.2 million (2009: EUR 1.3 million) of the provision previously formed therefore continues to be recognised. Under the terms of the collective labour agreement (CLA), DELTA also pays employees long-service benefits. From the date on which an employee joins the company, a provision is recognised for these benefits, based on the number of years of service, expected price and wage inflation (averaging 1.5%) and statistical severance, invalidity and mortality rates. The relevant discount rate is 4.5% (2009: 5%). Retirement benefits DELTA (with the exception of Indaver) has transferred its retirement benefit obligations to pension funds in the Netherlands, primarily ABP. The pension contributions that DELTA pays ABP (and other significant pension funds) are based on expectations regarding inflation and pay rises, the ageing of the workforce, mortality rates and the return on the plan assets. The ABP industry-wide pension fund has stated that there is no consistent and reliable basis for attributing the pension liabilities, plan assets and costs to the individual participating entities. DELTA consequently makes use of the exemption provided by IAS 19 to treat the defined benefit plan as a defined contribution plan. Indaver pension liabilities 93 Indaver pension liabilities (EUR 1,000) (EUR 1,000) 2010 2009 Pension liabilities 21.874 20.936 Total pension liabilities 21.874 20.936 The current portion of the pension liabilities relating to Indaver, amounting to EUR 1.1 million (2009: EUR 1.1 million), has been included in current liabilities. Defined benefit plans: Indaver provides a defined benefit plan for the employees of the Indaver holding company and some subsidiaries that were part of the Indaver group before 31 December 2007. Provision of these benefits involves two separate policies contracted with different insurance companies. Indaver also operates unfunded defined benefit plans for the employees of the SAV group in Germany. Defined contribution plan: Indaver also provides a defined contribution plan for new employees who have joined the holding company and some subsidiaries in Belgium since 1 January 2008, as well as for the employees of Indaver Ireland (wholly-owned subsidiary). 94 Retirement benefit provisions at Indaver Retirement benefit provisions at Indaver (*1,000) (EUR 1,000) 31-12-2010 31-12-2009 Belgium Germany Belgium Germany 21.908 (19.136) 2.772 7.813 115 10.700 13.543 13.543 (2.347) 1.121 12.317 23.116 (17.373) 5.743 4.153 135 10.031 12.273 12.273 (1.604) 1.351 12.020 23.116 12.273 20.294 10.437 1.854 1.200 1.766 1.045 (3.962) 261 (53) (262) (275) 41 (12) 21.908 280 660 (94) 775 (351) 13.543 89 250 (49) (261) (163) 145 23.116 245 610 1.589 (608) 12.273 Opening fair value of plan assets 17.373 - 15.480 - Expected return Actuarial gains and losses Contributions by employer Contributions by employees Expenses paid Premiums paid Benefits paid Settlements Business combinations 965 (215) 1.322 261 (53) (262) (275) (9) 28 19.136 1 Net liability Present value of defined benefit obligation Fair value of plan assets Present value of net obligation Unrecognised past service cost Actuarial gains and losses Defined benefit plan based on simple actuarial calculations Net liability on the face of the balance sheet 2 Movements in present value Opening defined benefit obligation Constributions by employer Interest cost Other Actuarial gains and losses Contributions by employees Costs paid Insurance premiums paid Benefits paid Net transfer in/out Curtailments and settlements Closing defined benefit obligation 3 Movements in fair value Closing fair value of plan assets 858 (57) 1.225 250 (49) (261) (163) - 90 17.373 - 4 Retirement benefit costs Current service cost Interest cost Other Expected return on plan assets Actuarial gains and losses Net benefit expense recognised in staff costs 1.854 1.200 (965) (76) 2.012 280 660 (62) 878 1.766 1.045 5,0% 5,5% 5,5% 4,0% 2,0% (858) (96) 1.856 251 610 861 5 Actuarial valuation assumptions Employee benefit plan obligations Discount rate Expected return Future pay rises Increases in medical expenses 5,0% 5,0% 4,0% 2,0% 1,8% 2,0% 5,5% 2,0% 2,0% 95 Dismantling costs A provision for dismantling costs was recognised in 2009 in respect of the estimated costs (less residual value) for the obligatory removal of production assets on cessation of operations. All of the other movements in provisions in 2010 related to Biovalue. The addition results from an obligation to clear the site, which gives rise to a current liability. Other provisions Other provisions include a provision for the Environmental Action Plan for Industry (BMAP). Remaining liabilities connected with activities undertaken in the past under the Plan are settled out of this provision. Indaver has recognised provisions for the expected cost of cleaning up pollution identified at certain locations. 10. Long-term debt (EUR 1,000) 2010 2009 Carrying amount as at 1 January 459,622 755,645 Loans drawn down 360,198 574,100 - (561) (337,346) (866,357) - (3,205) 482,474 459,622 Current portion (31,467) (21,366) Long-term debt 451,007 438,256 Movements in cross-border leases Repayments Other movements The liabilities represent bank borrowings. The average interest rate on for the debt as at year-end 2010 was 2.3% (2009: 1.7%). EUR 215.8 million of the carrying amount falls due after more than five years. DELTA has a bilateral standby credit facility amounting to EUR 500 million with five banks. No security has been provided for these facilities. DELTA Netwerkbedrijf BV and Indaver have their own credit lines. The intangible assets and property, plant and equipment as well as the receivables, inventories and cash of SAV have been pledged as security for the liabilities of Indaver Deutschland (SAV). 96 11. Other non-current liabilities (EUR 1,000) Deferred tax liabilities 2010 2009 62,688 60,454 Deferred revenue 68,843 69,944 Indaver put option 138,913 135,540 22,547 19,435 292,991 285,373 2010 2009 285,373 264,255 Other non-current liabilities Total other non-current liabilities Movements in other non-current liabilities (EUR 1,000) Carrying amount as at 1 January Released deferred tax liability (recognised in profit or loss) 70 Other movements in deferred tax liabilities Movement in deferred tax position Released deferred revenue (recognised in profit or loss) (9,159) 2,164 5,949 2,234 (3,210) (7,800) (5,554) Deferred revenue (resulting from IFRIC 18) 6,699 15,401 Change in Indaver put option 3,373 3,316 Other movements 3,111 11,165 292,991 285,373 31/12/2010 31/12/2009 Total other non-current liabilities The deferred tax liability is attributable to: (EUR 1,000) The deferred tax liability arises mainly from the acquisitions made by Indaver and, to a lesser extent, from the acquisition of Indaver by DELTA, in connection with the initial recognition at fair value of the intangible assets and property, plant and equipment acquired. The difference between the fair value Intangible assets 4,191 1,447 and the carrying amount is recognised in the balance sheet. These fair value adjustments are not Property, plant and equipment 51,331 58,472 permitted for tax purposes and a deferred tax liability accordingly has to be recognised. The amount of Other 7,165 535 the tax liability decreases at the same rate as the adjustments in fair value are written down (excluding the fair value adjustments on land). Total 62,688 60,454 97 The deferred tax liability is attributable to: (EUR 1,000) 31-12-2010 31-12-2009 4,191 1,447 51,331 58,472 Other 7,165 535 Total 62,688 60,454 Intangible assets Property, plant and equipment Deferred revenue relates to payments already received in respect of waste which still has to be processed by Indaver. The amount of deferred revenue recognised in both 2009 and 2010 was increased to include the contributions received from third parties, in accordance with IFRIC 18. In 2008, DELTA increased its interest in Indaver to 75%. A put option has been issued to the shareholders with the remaining 25% in their possession. This put option (which can be exercised between the end of the fifth year and the end of the seventh year after closing in 2007) is recognised in non-current liabilities and is measured at fair value as at 31 December of any year. 12. Current liabilities 2010 2009 Trade payables 227,303 283,491 Current tax liabilities 109,796 96,307 12,268 14,950 964 0 (EUR 1,000) Deferred revenue Work in progress for third parties Current portion of long-term debt Current portion of provisions Payables to related parties Accruals and deferred income Other current liabilites Bank borrowings Total current liabilities (excluding derivatives) 31,467 17,331 24,628 41,041 21,366 4,365 16,822 59,104 114,467 101,657 65,329 96,074 530,127 592,479 In addition to trade and other payables and accruals and deferred income, current liabilities includes the scheduled repayments on long-term loans and provisions due to be utilised in 2010. The current tax liabilities are largely made up of value added tax payable which will be set against value added tax receivable in the VAT payment which is made in January 2011. Also included in the current tax liabilities are wage tax (PAYE) and social security charges, corporate income tax and energy tax payable. As a consequence of prepayments from clients, construction contracts on behalf of third parties have been included in the current liabilities in both 2009 and 2010. 98 Commitments and contingent liabilities Investment commitments As at 31 December 2010, the company had outstanding financial commitments totalling approximately EUR 76.3 million (2009: EUR 114.3 million) that were not recognised in the balance sheet. These commitments mainly relate to capital projects under construction. Sale-and-leaseback contracts In recent years, DELTA has built several combined heat and power stations and wind farms. Some of these assets are covered by sale-and-leaseback contracts. In December 2010, DELTA purchased a number of installations from Rabobank, resulting in a significant decrease in the total related obligations relative to the position at the end of 2009. As at year-end 2010, the present value of these contractual obligations was EUR 16.8 million, analysed as follows: due within one year: EUR 3.6 million due after more one year but within five years: EUR 10.8 million due after more than five years: EUR 2.4 million Security has been provided in the form of lump-sum deposits totalling approximately EUR 13.9 million. These deposits have been recognised as receivables under financial assets. Cross-border incinerator lease On 17 August 1999, Indaver entered into a cross-border lease with an American investor for the use of lines 1 and 2 of the incineration plant in Doel. The initial lease term was 25.4 years, with an option of a maintenance contract for a further 13 years. Under the terms of the lease, Indaver received an amount of USD 135 million and placed USD 129.4 million on deposit on the date of inception of the contract. On the strength of this deposit, a payment agreement covering the cost of the lease almost entirely was concluded with banks enjoying a high credit rating. In this respect a bank guarantee also had to be given to the American counterparty. It is secured by means of a deposit on a blocked bank account held by Indaver. Collateral and guarantees DELTA has issued and received the following financial collateral to guarantee transactions entered into: Collateral granted Term in years (EUR 1,000) < 1 year > 5 years Total 1,539.6 73,742.8 35,088.6 417.8 82,058.5 117,565.0 63,186.7 44,522.9 83,598.1 191,307.7 > 5 years Total 28,098.1 Other collateral granted Total collateral granted Collateral received Term in years < 1 year Collateral received for associates and joint ventures 1 – 5 years 44,105.1 Collateral granted for associates and joint ventures 1 – 5 years - - - - Other collateral received 22,135.2 88,183.8 130,866.9 241,186.0 Total collateral received 22,135.2 88,183.8 130,866.9 241,186.0 Principal collateral granted DELTA has given guarantees totalling EUR 22.3 million to the Zeeland provincial authority in respect of the financial obligations connected with the capping of the Koegorspolder and Noord- en Midden Zeeland landfill sites. DELTA has also given guarantees totalling EUR 24.6 million to the Zuid-Holland provincial authority for the costs of capping the Derde Merwedehaven landfill site in Dordrecht. 99 Bank guarantees totalling EUR 3.9 million have been granted, mainly relating to the trading activities of DELTA Energy but also to a number of specific activities of Triqua. On the execution by the former management of Solland Solar Energy Holding B.V. of the put option granted, a EUR 3.2 million guarantee was given to the beneficiaries in connection with the then ongoing measurement of the value of the put option. As the operator of landfill sites in Antwerp and Doel, Indaver NV has provided bank guarantees in favour of the Public Waste Agency of Flanders (OVAM) matching the costs of capping and aftercare of these sites, the amount of which is being built up gradually in line with the progress of the landfill activities. A smaller bank guarantee is required for the aftercare period, after final capping of the sites. As at 31 December 2010, these bank guarantees amounted to EUR 21.3 million. Indaver has also issued a number of bank guarantees, totalling EUR 82.2 million, the majority of which relate to the transport and treatment of waste flows (EUR 58.5 million). Indaver has also underwritten the bank loans contracted by the joint venture Sleco Centrale, which totalled EUR 50.0 million as at 31 December 2010. Principal collateral received Of the collateral received, an amount of EUR 50.3 million concerns bank guarantees for specific activities of DELTA Infra, for trading activities of DELTA Energy and in respect of defeasances. Indaver has received bank guarantees from clients and suppliers totalling EUR 84.6 million, mainly relating to turnkey projects in Ireland and Belgium, but also to the activities in Germany. DELTA Energy BV trading portfolio DELTA’s risk management policy aims to actively control the risk exposures connected with production assets and long-term procurement contracts. Positions arising from trading activities are controlled through a strict system of limits, using both financial and energy derivatives, including swaps and options. The sales contracts in the portfolio are related to energy supplies to end-users and trading partners and the associated financial instruments. The value of the sales contracts as at the balance sheet date was EUR 1,107 million (2009: EUR 1,267 million). Procurement contracts in the portfolio relate to the production and purchasing agreements with trading partners and the associated financial instruments. The value of the procurement contracts as at the balance sheet date was EUR 2,746 million (2009: EUR 2,051 million). The value of the financial instruments is determined, in connection with transactions contracted in the physical commodities trade, on the basis of market values. Borssele covenant In 2006, a covenant was contracted with the central government on the extension of the service life of the nuclear power station. As part of the deal, agreements were also reached on the efforts that DELTA (and Essent) would make to address and provide technical and financial support for new renewable energy developments. A limited partnership, Sustainable Energy Technology (SET) Fund CV, was formed for this purpose in 2007, in which DELTA, as a limited partner, holds a 50% interest, amounting to EUR 25.0 million (of which EUR 12.2 million has already been issued), via DELTA Investeringsmaatschappij BV (DIM). In addition to the above agreements connected with the Borssele covenant, there is a provision for Additional Innovative Projects, involving an obligation for DELTA to invest a total of at least EUR 100 million. 100 NEA claim against EPZ In February 2008, NEA made a claim against EPZ for approximately EUR 200 million relating to benefits from the provisions for the core residue and dismantling of the nuclear power plant ensuing from the extension of the plant’s useful life from 2003 to 2033. Up until 2000, NEA’s predecessor, SEP (the Dutch Electricity Generating Board), paid the additions to these provisions within the framework of a cooperation agreement. NEA argues that it is entitled to a major part of the benefit arising from the fact that the provisions will be required much later than 2003. The management of EPZ has rejected the claim. The parties have agreed to settle the dispute by means of an arbitration procedure. The two sides have since put their positions to the arbitrators. Submissions were again made by both parties to this case in 2010. The arbitration board heard the arguments from both sides in a session held on 10 January 2011. The arbitrators are aiming to produce a final or at least interim arbitration decision in April 2011. REB claim In 2009, the Dutch Tax Administration imposed an additional tax assessment on DELTA for payment of regulating energy tax (REB) in respect of 2001 and 2002, whereupon DELTA initiated legal proceedings with the Netherlands Arbitration Institute relating to one of its suppliers at the time in an attempt to recover that supplier’s share of the additional assessment. A decision is expected in May 2011. The exposure lies between zero and EUR 16 million. Long-term waste processing contracts Indaver has entered into various long-term contracts for processing waste. They are covered by payments upfront, which have been recognised in the balance sheet (year-end 2010: EUR 52.8 million; 2009: EUR 59.3 million). In 2010, an amount of EUR 6.5 million of this was recognised as revenue. In some cases, the client has been given a put option conferring the right to sell some of the rights concerned back to Indaver. No liability has been recognised in respect of these put options since exercise of the options is not considered to be a probability. Indaver concession agreements WIPS, a 50% subsidiary of Indaver NV, signed an agreement in 2001 to operate a green waste composting facility owned by the joint municipal waste management association ILvA. The contract runs until 31/12/2015 and all costs connected with the maintenance and operation of the facility during that period will be borne by WIPS. BV Grondbezit AVI Moerdijk - contract for fourth waste incineration line DELTA NV and its affiliated companies have signed a waste supply agreement with BVG to supply 55,000 tonnes of waste each year until the end of 2028. DELTA Network Operator BV DELTA Netwerkbedrijf B.V. (DNWB) has instigated proceedings with the Trade and Industry Appeals Tribunal (BBb) regarding the connection of two wind farms that, if the Tribunal does not decide in favour of DNWB, will lead to additional costs in the order of at least EUR 3.5 million. Unbundling plan - WON The Minister approved the plan to unbundle the company on 2 December 2009. The Minister stated in her decision that DELTA must provide DNWB with additional financial security during the initial period in the form of a further EUR 10 million equity contribution and a EUR 40 million guarantee, to which DNWB will be entitled for five years after the unbundling if it does not satisfy the ratios set out in the Network Operators (Financial Management) Decree. Despite the fact that the unbundling was not put into effect, owing to the ruling by the Court in The Hague in June 2010, the conditions laid down by the Minister were met and the guarantee was provided by DELTA to DNWB. 101 Lawsuit (1) Legal proceedings have been initiated against DELTA by a former non-controlling shareholder in a group company with a claim for compensation for alleged losses from DELTA. The amount of the claim, which is not precisely formulated, is in the range EUR 60 million to EUR 250 million. Lawsuit (2) Legal proceedings have been initiated against DELTA by two former co-shareholders in a group company that are contesting a binding recommendation establishing the value of the shares held by them which they were required to offer to DELTA when they ceased to be members of the executive board of the company concerned and DELTA duly bought the shares from them. The case has been brought before the Court in Amsterdam. The amount of the claim is several tens of millions of euros. 102 Notes to the consolidated income statement 13. Revenue 2010 2009R Electricity supply Gas supply Electricity and gas transport Cable, internet and telecommunications Waste management and environmental services Solar energy Bio-fuels Other revenue 1,073,084 312,273 100,586 71,320 874,595 299,451 124,930 68,675 461,848 0 0 53,940 446,437 0 0 55,353 Total revenue 2,073,051 1,869,441 (EUR 1,000) The revenue from the supply of electricity has increased by EUR 200 million compared with the preceding year. This is partly accounted for by the fact that the Sloe power station was in production throughout 2010 but only started up partway through 2009, coupled with the fact that the output from the other power stations was sold forward at higher prices than in 2009.The revenue from the supply of gas increased by approximately 5%, mainly as a consequence of the cold winter months, both at the start of the year and again in December. Revenues from gas and electricity supplies to domestic and small-business users are partly estimated, as staggered meter readings are taken throughout the year. The revenue from transport services includes a non-recurring amount relating to the Sloe power station construction and start-up phase. Despite stiff price competition, cable and internet services revenue showed slight growth, due to an increase in the number of customers, the diversity of products (analogue and digital television, telephone, data communications and internet) and the consistently high standard of service provided. The revenue from waste logistics and environmental services (consolidated in Indaver since September) shows a slight increase, which is entirely attributable to the capacity utilisation of the incinerators, enabling the effect of the price squeeze due to the state of the economy to be entirely cancelled out. The revenue relating to solar energy products and biofuel has been eliminated; the results are instead accounted for in profit after tax from discontinued operations. 14. Cost of sales Part of the electricity requirement was purchased from the related parties EPZ, the Sloe power station and Elsta, in which DELTA has an equity interest. This electricity is procured on a cost-plus basis. The additional output from the Sloe power station has resulted in a sharp increase in the procurement volume. Greater use of available flexibility as regards gas procurement and the effect of movements in the price of gas meant a slight fall in procurement costs for gas. 15. Other operating income The other operating income is largely made up of payments from third parties for services provided. 103 16. Fair value gains and losses on the trading portfolio DELTA uses derivatives to hedge price and currency risks arising from energy commodity contracts (electricity, gas, coal and oil). DELTA uses cash flow hedging for this purpose, contracting hedging instruments to offset the exposure to variations in existing and future cash flows that could ultimately affect the results. The hedges are attributed to a specific risk relating to a balance sheet item or a highly probable forecast transaction. The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in equity. The cumulative amounts recognised in equity are taken to the income statement in the same period as the hedged transaction. The portion of the gain or loss on the contract portfolio that is not hedged by means of hedging instruments (the non-effective hedges) is recognised in the income statement as a fair value gain or loss. Energy market price movements in 2010 resulted in a net gain on the fair value of the portfolio of contracts amounting to EUR 137.8 million, of which approximately EUR 3.2 million has been recognised in income and approximately EUR 134.6 million has been recognised directly in equity. 17. Third-party services, materials and other external charges 2010 2009R Consumption of materials Third-party work and services Other external charges 51,514 179,874 18,371 38,949 163,265 24,074 Total 249,759 226,288 (EUR 1,000) A large proportion of the external charges is incurred by Indaver. The costs of materials used by Indaver amounted to EUR 46.3 million, costs for third-party services amounted to EUR 88.9 million and other external charges totalled EUR 5.7 million. 104 18. Staff costs 2010 2009R 151,399 23,793 15,862 11,574 202,628 156,159 21,862 14,575 13,816 206,412 (4,670) (10,634) 197,958 195,778 Number of employees (FTEs) as at 31 December FTEs connected with discontinued operations/assets held for sale Number of FTEs related to the above total staff costs 3,197 270 2,927 3,285 259 3,026 Average number of FTEs (related to the above total staff costs) 2,977 3,025 (EUR 1,000) Salaries Social securities contributions Pension charges Other staff costs Staff costs Capitalised staff costs Total staff costs Remuneration of the members of the Executive Board of DELTA N.V. registered as directors with the Chamber of Commerce. The remuneration policy for the members of the company’s Executive Board was adopted by the General Meeting of Shareholders held in June 2005 on the recommendation of the Supervisory Board. The underlying principle of the remuneration policy is that DELTA N.V. should be able to offer a sufficiently competitive remuneration package to attract and retain people with the right expertise and experience. Based on the recommendations of the Remuneration Committee, the Supervisory Board decides the remuneration for the individual Executive Board members each year. The CEO submits a proposal to the Remuneration Committee concerning the amount which should be paid to the other members of the Executive Board. The benchmark for fixing the gross basic salary is the top of the third quartile of directors’ pay in the Netherlands. This means that three-quarters of those in comparable jobs (as graded by Hay) are paid less and one-quarter are paid more. Commencing with the new four-year appointment period for the CEO, which began on 1 March 2010, the basic pay was moderated and the benchmark for the CEO is now taken as the median level, i.e. half of those in comparable jobs are paid less and half are paid more. The variable element in the remuneration provides an incentive for achieving a number of the agreed targets in the current year. The maximum amount of this variable remuneration is 30% of the gross basic annual salary. On-target performance is rewarded by payment of three-quarters of the maximum, i.e. 22.5%. These percentages are roughly half the third-quartile rates payable for comparable jobs. 105 Each year, the targets to be achieved are set by the Remuneration Committee and the CEO (for the other members of the Executive Board) and approved by the Supervisory Board. For 2009 and 2010, the targets were 40% related to overall financial performance (net profit and cash flows), 40% related to the achievement of personal targets and 20% related to personal performance and contribution to the achievement of the group-wide HR objectives. For 2011, these percentages have been revised to 70% for overall financial performance and 30% for the achievement of personal targets. The members of the Executive Board are employed on a permanent basis and are appointed as directors for a period of four years. Their contracts of employment are drafted accordingly and contain a clause providing for termination pay amounting to a maximum of one year’s salary, in conformity with the Dutch Corporate Governance Code. The Executive Board members are also covered by the pension plan applicable to all the company’s employees (administered by Stichting Pensioenfonds ABP). The CEO also receives an additional annual pension payment to make up for the loss of early retirement and retirement benefits which ceased to be payable on joining DELTA N.V. Executive Board pay 2009 (Amounts are presented in Euro’s) Gross basic annual salary Pension contributions by employer Variable remuneration4) Total P.G. Boerma CEO 378,3723) 87,833 67,932 534,137 F. Verhagen1) CFO 183,339 28,905 24,751 236,995 J.J. Rieter2) CCO 30,000 4,764 30,0005) 64,764 A.S. Louter COO 219,996 31,602 29,699 281,297 1) joined DELTA 01.02.2009 joined DELTA 01.11.2009 3) including supplementary payment in 2010 relating to 2009, amounting to EUR 14,330 4) paid in 2010 5) as agreed at time of appointment 2) 2010 (Amounts are presented in Euro’s) Gross basic annual salary Pension contributions by employer Variable remuneration7) Total 6) 7) P.G. Boerma CEO 378,2616) 115,516 493,777 F. Verhagen CFO 220,893 30,842 251,735 J.J. Rieter CCO 193,836 27,589 221,425 A.S. Louter COO 233,640 34,094 267,734 excluding supplementary payment in 2010 relating to 2009, amounting to EUR 14,330 in view of the heavy loss reported for 2010, the members of the Executive Board have decided to waive their variable remuneration for 2010. 106 19. Depreciation, amortisation and impairment 2010 (EUR 1,000) 2009R Intangible assets Amortisation Impairment 26,769 4,265 33,305 - 90,711 10,182 82,978 - (6,437) (4,335) 125,490 111,948 Property, plant and equipment Depreciation Impairment Third-party contributions released (received prior to 2009) Total depreciation, amortisation and impairment The impairment under intangible assets concerns impairment of previously capitalised goodwill in respect of Triqua and DELTA Milieu Composteren. The impairment under property, plant and equipment concerns the write-down to fair value of land in Cork (Ireland) and several smaller writedowns of assets of Industriële Reiniging and MBR. The remaining impairment which is recognised relates to assets held for sale. 20. Other operating expenses (EUR 1,000) Added to provision for bad debts Debt collection costs Other operating expenses Added to other provisions Total other operating expenses 2010 2009R 2,279 2,365 3,807 4,360 4,239 563 2,458 820 12,811 8,080 An amount was added to the provision for bad debts following several business failures. The amount added to other provisions relates to additions to provisions for the obligatory removal of production assets on cessation of operations and for employee benefits. The remuneration of the company’s Supervisory Board members is also disclosed as other operating expenses. 107 Remuneration of the Supervisory Board 2010 As in 2009, the Supervisory Board was made up of the chairman and eight Supervisory Board members in 2010. The members of the Supervisory Board receive fixed directors’ fees (EUR 18,003 per annum). The amount of the basic directors’ fees relates to ordinary membership. Some of the members, however, have more extensive duties in that they sit on one or more of the Committees. For this they receive an additional allowance of 15% of the basic fee for each Committee of which they are a member. The chairman of the Supervisory Board receives a fee of 130% of the basic directors’ fee plus the agreed 15% additional allowance for membership of each of the Committees on which he serves, applied to his basic rate of remuneration. In 2010, each member of the Supervisory Board served on a maximum of two Committees. The total remuneration of the members of the Supervisory Board in 2010 amounted to EUR 215,423, compared with EUR 207,948 in 2009. A newly constituted Supervisory Board took office on 1 January 2011, with five members. Their remuneration has been revised with effect from the same date and currently amounts to annual fees of: Chairman Ordinary member Audit Committee member: Other Committee member: EUR EUR EUR EUR 40,000 25,000 5,000 3,000 These fees will be subject to annual increases with effect from 1 January each year. 21. Share in results of joint ventures and associates (EUR 1,000) 2010 2009R NV EPZ Evides NV Elsta BV IC Hooge Maey Sleco Centrale NV AZN Holding BV Sloe Centrale BV Others 11,898 24,639 5,259 (2,989) 9,514 3,752 4,172 6,748 15,805 22,838 5,732 (1,508) 8,903 4,071 6,471 4,180 Total share in results of joint ventures and associates 62,993 66,492 This concerns the results attributable to DELTA from its interests in joint ventures and investments in associates. The item also includes the impairment losses relating to the write-down of the fair value of the interest in the waste management business Intercommunale Hooge Maey (IHM) as a result of the declining supply of landfill waste and the related decline in profitability. 108 22. Net finance income (expense) (EUR 1,000) External finance income External finance expense Interest added to provisions Purchase of / Interest added to cross-border lease Bank borrowing arrangement fees Exchange differences Other finance income (expense) Capitalised interest Total finance income (expense) 2010 2009R 4,322 (22,350) (4,221) (213) 525 (1,768) (23,705) 13,881 (26,536) (4,575) (5,750) (1,784) (1,491) (620) (26,875) 1,842 - (21,863) (26,875) The interest rate applied for the capitalisation of construction-period interest in 2010 was 2.3% (2009: 1.7%). In 2009, the debt burden was high, partly owing to the upfront financing of the construction of the Sloe power station. This also resulted in a high level of finance income. On completion of the power station in December 2009, the financing which had been provided was converted by Sloecentrale Holding BV into a project loan, resulting in a drastic reduction in both finance income and expense for DELTA. Additionally (in preparation for the unbundling), DNWB converted the intercompany financing provided by DELTA NV into external financing in its own name in 2010. This together with interest rate movements internationally meant a further reduction in DELTA’s financing costs In 2010. 109 23. Corporate income tax (EUR 1,000) Corporate income tax Current corporate income tax liability Movements in deferred tax assets and liabilities Total tax Of which reported under discontinued operations Tax expense recognised in profit or loss Effective tax burden (including discontinued operations) 2010 2009R (8.340) 28.211 19.871 36.254 5.251 (10.493) (5.242) 16.317 (16.383) (21.559) 10,2% 34,0% Current corporate income tax liability The reconciliation of the profit before tax and the actual taxable amount with the resulting tax burden, is as follows: Result before corporate income tax (including discontinued operations) Substantial-holding privilege EIA/MIA schemes Temporary differences connected with the carrying amounts of assets and provisions (incl. VAMIL) Operating expenses recognised in previous years Transferable tax loss carryforwards predating tax group Goodwill Other differences Taxable amount, Netherlands (195.701) (63.548) (229) 15.424 (61.676) (70) 46.898 87.584 372 (15.546) (2.866) 10.985 739 (124.624) (53.010) Standard tax rate in the Netherlands 2010 / 2009 Standard tax rate in the Netherlands as from 2011 25,50% 25,00% 25,50% Tax for the year Adjustment for prior years Tax paid by subsidiaries outside the Netherlands Current corporate income tax liability (1.125) (7.215) (8.340) (2.348) (5.919) (8.267) Movements in deferred tax assets and liabilities The tax income results from differences between the reported profit and the profit calculated for tax purposes plus utilisation of tax loss carryforwards. Applicable tax loss carryforwards Temporary differences Movements in deferred tax for deductible tax losses Movements in deferred tax due to tax loss carryforwards Movements in deferred tax due to change in tax rate in the Netherlands Adjustment for prior years Movements in tax provisions recognised by subsidiaries (including outside the Netherlands) Movements in tax provisions 18.325 9.643 (1.661) (1.359) 13.518 (3.900) (7.977) (712) (203) (75) 3.466 28.211 2.170 3.025 (35.496) 9.204 Consolidated statement of changes in equity Deferred tax assets related to items recognised directly in equity: Fair value gains and losses on hedges Movements in deferred tax on hedges due to change in tax rate in the Netherlands 291 (35.205) 9.204 110 24. Assets held for sale and discontinued operations In November 2010, a decision was taken by the DELTA Executive Board to sell off the group companies Solland and Sunergy. In addition, on 14 December 2010, the business of DELTA Biovalue B.V. and its subsidiaries was declared insolvent. These developments led to the recognition, in the income statement, of all the consequent financial implications as profit after tax from discontinued operations and, in the balance sheet, as asset/liabilities held for sale. The cash flow statement presents the actual cash inflows and outflows directly relating to the operations in 2010. 24.1 Income statement The combined effect of Solland, Sunergy and Biovalue on the income statement is as follows: Profit from discontinued operations (EUR 1,000) 2010 2009R Revenue Other operating income 136,310 371 136,681 97,825 535 98,360 Normal operating expenses Impairment losses/exceptional liabilities Finance expense 153,666 282,352 2,310 226,125 0 3,261 (301,647) (131,026) (36,254) (19,420) (265,393) (111,606) Profit before tax Corporate income tax Profit for the year 24.2 Balance sheet The write-down of assets and liabilities relates to intangible assets, property, plant and equipment, financial assets, working capital components and goodwill paid in the past. The carrying amount of the assets held for sale is presented as a net amount of EUR 4 million in conformity with IFRS 5. This amount is an estimate of the selling price less costs to sell. DELTA has given a commitment on behalf of one subsidiary for 2011, provided that DELTA continues to hold a controlling interest in the company concerned, to make available the required financing needed to continue operations and fund investments. An amount of EUR 30 million has been recognised as a liability in this connection. 111 24.3 Cash flow statement The following amounts have been included in the consolidated cash flow statement of DELTA NV in respect of Solland, Sunergy and Biovalue: (EUR 1,000) 2010 Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities (53,484) (20,239) 0 Cash flow (73,723) The cash flow from operating activities includes amounts connected with the renegotiation of purchase contracts. The cash flow from financing activities is nil because all three subsidiaries are financed by DELTA NV. 112 Notes to the consolidated cash flow statement The cash flow statement is based on the income statement and the balance sheet prior to restructuring, i.e. prior to transfer of assets/liabilities and results to assets held for sale. The cash flow statement has been prepared according to the indirect method. As some items in the income statement and the balance sheet do not generate direct cash flow effects, the cash flow for these items has been neutralised. This essentially concerns three items:    Treatment of derivatives Fair value gains and losses on the trading portfolio lead to current and non-current movements on both the assets and the liabilities sides of the balance sheet. Some of these gains and losses are also included in the operating result and some in the hedge reserve, forming part of group equity. However, none of these movements results directly in cash flow. For this reason, all movements are included in the operating cash flow, with positive and negative movements cancelling each other out. Share in results of joint ventures and associates Only part of DELTA’s share in the result of joint ventures and associates is distributed as dividend. The retained component leads to an increase in the equity of the relevant company and thus to balance sheet adjustments of financial assets recognised by DELTA. Consequently, only the actual dividend receipts are recognised in the cash flow. Corporate income tax The profit after tax takes account not only of the corporate income tax payable on the profit before tax but also of the deferred tax assets and liabilities resulting from the agreement with the Dutch Tax Administration concerning the opening balance sheet for tax purposes in 1998. As the movements in deferred tax do not lead to actual cash flow, the deferred tax assets and liabilities have been eliminated in the cash flow. Cash flow from investing activities includes expansion and replacement expenditure for property, plant and equipment and intangible assets and also equity contributions at joint ventures and associates to a total of EUR 5.2 million. This mainly concerns additional contributions made via Sunergy Investco to RGS Development B.V. and Fesil Sunergy A.S. in order to finance their development activities. Discontinued operations and assets held for sale The cash flow statement is based on results and changes in the balance sheet before elimination of assets held for sale and discontinued operations. Direct reconciliation with the balance sheet is therefore impossible, since both the assets held for sale and the discontinued operations are presented separately in the consolidated balance sheet as at year-end 2010. Reconciliation with the income statement is equally obscure, with profit after tax from discontinued operations/assets held for sale again presented separately. The cash flow from operating activities relating to the assets held for sale and the discontinued operations includes the following amounts: operating result of EUR 269.0 million negative, largely cancelled out by extra depreciation amounting to EUR 226.8 million. Additionally, the cash flow from investing activities includes the total amount of EUR 20.2 million relating to assets held for sale. The net cash inflow has been used to pay the dividend. In 2010, the cash flow was not entirely sufficient and the remainder has been drawn from the balance of cash. 113 Segment information The DELTA Group consists of the following divisions: Energy, Comfort, DNWB, Infrastructure, Waste Management (Environmental), Sustainability, Holding Company Investees and Other Activities. This section discloses information on the same basis as that used for reporting management information. The Energy Division is active throughout the energy chain, from procurement of the required fuels, through electricity generation to supplying energy (gas and electricity) to the wholesale market. The Comfort Division supplies electricity, gas, water and radio and television channels and telephony via cable as well as internet access to consumers and the small-business market. The division is also active in supplying heating equipment on a rental basis (central heating systems) and provides public information, undertakes research and engages in projects relating to renewable energy and energy saving. The network operator (DNWB) looks after the transport of electricity and gas and is responsible for the construction, management and maintenance of the various related networks. The Infrastructure Division (working on behalf of Comfort, DNWB and Evides among other clients) builds, manages and maintains electricity, gas, water, heat and telecommunication networks. The division is also responsible for the installation and management of electricity, gas and water meters and for meter reading. Indaver specialises in all activities in the waste management chain, including waste collection, recycling and processing. The activities with respect to the development and production of sustainable energy mainly relate to various links in the solar energy chain. Since the Executive Board has decided to sell off the entities active in the solar energy chain, the Sustainability segment is no longer presented separately in the following segment information. Information on the subsidiaries Triqua and MBR is disclosed as part of the Holding Company Investees segment. Other Activities includes the activities of the central staff departments, except for the functional staff departments of Waste Management and Sustainability; the costs for these central staff functions are included in the figures for the segments concerned. Transactions between segments are conducted at prices similar to those for transactions with third parties. 114 Segment revenue and operating results (EUR million) Revenue 2010 Energy Comfort DNWB Infrastructure Waste Management Holding Company Investees Other Total Profit 2009R 2010 2009R 67,2 23,4 14,42 2,1 25,6 (3,9) (64,0) 64,9 72,3 21,0 18,0 4,4 26,6 (1,8) (40,2) 100,4 Share in results of joint ventures and associates Finance income and expense Corporate income tax Non-controlling interests Discontinued operations 63,0 (21,9) (16,4) (2,0) (265,4) 66,5 (38,6) (21,6) (3,0) (96,5) Profit after tax (177,8) 7,1 1.230,4 244,1 98,7 36,1 442,4 1,9 19,4 2.073,1 1.031,9 248,4 100,6 39,8 446,4 2,4 1.869,4 EBIT The financial information relating to the discontinued operations and to the assets held for sale (Sustainability segment) has been eliminated from the revenue and operating result (EBIT) figures. Segment assets (EUR million) Assets 31-12-2010 Energy Comfort DNWB Infrastructure Waste Management Holding Company Investees Other Unallocated assets Assets held for sale Total 834,7 117,5 382,0 15,9 1.111,2 65,5 220,2 49,4 4,0 2.800,5 Equity and liabilities 31-12-2009 31-12-2010 31-12-2009 968,3 82,8 379,8 20,8 1.181,6 271,0 300,2 59,1 3.263,6 2.800,5 3.263,6 The assets of the Sustainability segment have been written down to nil due to impairment. The assets held for sale relate to the Sustainability segment. Other segment information (EUR million) Depreciation 2010 Energy Comfort DNWB Infrastructure Waste Management Holding Company Investees Other Total 10,3 9,7 24,5 1,0 37,5 0,4 27,6 111,0 Impairment 2009R 2010 2009R 7,7 9,6 21,5 1,4 46,5 0,3 24,8 111,9 10,0 3,3 1,2 14,4 - The impairment loss recognised in relation to Waste Management mainly relates to the write-down to fair value of land in Cork (Ireland). Impairment has also been recognised in respect of the goodwill capitalised in relation to the Composting business. The impairment shown in respect of Holding Company Investees concerns capitalised goodwill for Triqua and impairment of assets at MBR. Geographical segmentation (EUR million) Revenue by country 2010 Netherlands Belgium UK and Ireland Germany Rest of EU Non-EU 1.737,4 168,6 27,1 131,8 7,9 0,5 Total 2.073,1 The revenue per country is made up entirely of external revenue. The revenue from outside the Netherlands is almost entirely attributable to Indaver. 116 Consolidated companies Company Headquarters DELTA's interest 31-12-2010 31-12-2009 Voting rights DELTA Infra BV Middelburg 100% 100% 100% Zeeuwse Netwerkholding NV DELTA Netwerkbedrijf BV DNWB MZL Activa BV Middelburg Middelburg Middelburg 100% 100% n/a 100% 100% 100% 100% 100% DELTA Energy BV DELTA Ficus Holding BV DELTA Pipe BV Deltius BV Windpark Kreekraksluis BV DELTA Caribbean NV DELTA Tolling Sloe BV DELTA Saefthinge NV Limo Energie Nederland BV Litro Energie Nederland BV Middelburg Middelburg Middelburg Ritthem Middelburg Willemstad, Curaçao Middelburg Doel, Belgium Utrecht Utrecht 100% 100% 100% 1) 100% 100% n/a 100% 99,9% 100% 100% 100% 100% 100% 100% 100% 100% 100% 99,9% n/a n/a 100% 100% 100% 100% 100% n/a 100% 99,9% 100,0% 100,0% DELTA Comfort BV DELTA Kabelcomfort Netten BV DELTA Kabelcomfort BV ZeelandNet BV Internetservices Zeeland BV Internetplatform Zeeland BV DELTA Comfort Service BV Middelburg Middelburg Middelburg Kamperland Kamperland Kamperland Middelburg 100% 100% n/a 100% 100% 1) 100% 1) n/a 100% 100% 100% 100% 100% 100% 100% 100% 100% DELTA Industriële Reiniging BV DELTA Milieu Industriële Reiniging NV Bergen op Zoom Belgium 100% 100% 100% 100% 100% 100% DELTA Investerings Maatschappij BV DELTA Onroerend Goed Ontwikkelingsmaatschappij BV Stichting DELTA Zeeland Fonds Middelburg Middelburg Middelburg 100% 100% 100% 100% 100% 100% 100% 100% 100% DELTA Development & Water BV Middelburg DELTA MBR BV Middelburg Triqua BV Wageningen DELTA Biovalue BV (in staat van faillissement) Eemshaven DELTA Biovalue Nederland BV (in staat van faillissement) Eemshaven DELTA Biopat BV (in staat van faillissement) Eemshaven DELTA Solar BV Middelburg Solland Solar Energy Holding BV Heerlen Solland Solar Energy BV Heerlen Solland Solar Real Estate BV Heerlen Solland Solar Cells BV Heerlen Solland Solar Cells GmbH Aachen, Germany 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Sunergy Investco BV Solsic Development Company AS RGS Development BV Solwafer BV 100% 60% 100% 100% 100% 60% 35% 100% 100% 60% 100% 100% Rotterdam Norway Petten Middelburg 1) 1) 1) 1) 1) 1) 1) n/a n/a 100% 100% 100% n/a 1) Shareholding of the parent company in the entity 117 Consolidated companies (continued) Company Headquarters DELTA's interest Voting rights 40543 Indaver NV Belgium Indaver Participaties NV Belgium Indaver Logistics NV Belgium Indaver Medical Services NV Belgium Indaver Italia S.R.L. Italy Indaver Ireland Ltd Ireland Indaver Nederland BV Netherlands Indaver Gevaarlijk Afval BV Netherlands Indaver Personeel BV Netherlands AROC BV Netherlands DELTA Milieu BV Terneuzen Promar BV Terneuzen DELTA Milieu Compost en Biomassa BV Terneuzen DELTA Milieu Biofuels BV Terneuzen DELTA Milieu Groencompost BV Terneuzen DELTA Milieu Composteren BV Terneuzen DELTA Impex BV 's-Gravenpolder Zeeuwse Reinigingsdienst BV Terneuzen DELTA Milieu Verwerking BV Terneuzen DELTA Milieu Recycling BV Terneuzen Perex BV Terneuzen DELTA Milieu Afvalbergingen BV Terneuzen Derde Merwedehaven BV Terneuzen Stortplaats Koegorspolder BV Terneuzen Stortplaats Noord en Midden Zeeland BV Terneuzen DELTA Milieu Verbranding & Handel BV Terneuzen BTC Zoetermeer BV Terneuzen DELTA Milieu Personeel BV Terneuzen Indaver Portugal SA Portugal Indaver Schweiz AG Switzerland Indaver UK Ltd UK Indaver Polska Sp. z o. o. Poland Indaver Deutschland GmbH (was:SAV Beteiligungs GmbH)Germany SAV Zweite Beteiligungs GmbH & Co. KGHIM GmbHGermany AVG Abfall-Verwertungs-Gesellschaft GmbH Germany Gareg Umwelt-Logistik GmbH Germany HIM GmbH Germany Frassur GmbH Umweltschutz-Dienstleistungen Germany Panse Wetzlar Entsorgung GmbH Germany AVA Abwasser- und Verwertungsanlagen GmbH Germany 75% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 99% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% n/a 51% 94,90% 99,74% 100,00% 93,83% 100,00% 100,00% 100,00% 1) 1) 1) 1) 1) 1) 1) 1) 1) 1) 1) 1) 1) 1) 1) 1) 1) 1) 1) 1) 1) 1) 1) 1) 1) 1) 1) 1) 75% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 99% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 98,36% 51% 94,90% 99,74% 100,00% 93,83% 100,00% 100,00% 100,00% 75% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 99% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 0,00% 51% 94,90% 99,74% 100,00% 93,83% 100,00% 100,00% 100,00% 1) Shareholding of the parent company in the entity 118 Non-consolidated companies Company Headquarters Joint Ventures Voting rights DELTA's interest 31-12-2010 DELTA Infra BV vof Diepp Etten-Leur 50% DELTA Energy BV NV EPZ Sloewind BV Windpark Distridam vof PVNed Holding BV PVNed BV BMC Moerdijk BV Sloe Centrale Holding BV Sloe Centrale BV Borssele Middelburg Terneuzen Middelburg Middelburg Moerdijk Vlissingen Vlissingen 50,00% 50,00% 50,00% 50,00% 100,00% 50,00% 50,00% 100,00% DELTA Industriële Reiniging BV Vedis Reiniging BV DELTA Mourik Industrial Services (DEMIS) vof Terneuzen Terneuzen Indaver NV Indaver Relight NV Sleco-Centrale NV Svex NV Wips NV 31-12-2009 n/a 50,0% 50,00% 50,00% 50,00% 50,00% n/a 50,00% 50,00% 100,00% 50,00% 50,00% 50,00% 50,00% 100,00% 50,00% 50,00% 100,00% 50,00% 50,00% 50,00% 50,00% 50,00% 50,00% Belgium Belgium Belgium Belgium n/a 50,00% 50,00% 50,00% 50,00% 50,00% 50,00% 50,00% DELTA Milieu Verbranding & Handel BV Depmer BV Dordrecht 50,00% 50,00% 50,00% DELTA Milieu Afvalbergingen BV Zeeuwgrond BV Nieuwdorp 50,00% 50,00% 50,00% DELTA Milieu Biofuels BV Ecofuels BV Well, Limburg 50,00% 50,00% 50,00% DELTA NV Evides NV Elsta BV Elsta BV & Co CV DELTA/Essent Lighting vof Rotterdam Middelburg Middelburg Goes 50,00% 25,00% 24,75% 50,00% 50,00% 25,00% 24,75% 50,00% 50,00% 25,00% 24,75% 50,00% 1) 1) n/a 50,00% 50,00% 50,00% 1) Shareholding of the parent company in the entity 119 Non-consolidated companies (continued) Company Headquarters DELTA's interest 31-12-2010 Voting rights 31-12-2009 Associates DELTA Netwerkbedrijf BV Zebra GasNetwerk BV Zebra Activa BV Zebra Pijpleiding vof Entrade Pipe BV Zebra Pijpleiding vof Middelburg Middelburg Middelburg Vught Middelburg DELTA Energy BV Windpark Neeltje-Jans BV Windpark Zeeland 1 BV NPG Willebroek NV Veere Vlissingen/Kapelle-Schore Antwerp, Belgium DELTA NV Sunergy Investco BV Fesil Sunergy AS Partners Vliegveld Zeeland BV Zeeland Airport BV Indaver NV IHM cvba Ibogem cvba Intercommunale vereniging Verko NV Ecowest NV Indaver Participaties NV Sita Decontamination Services NV Ecov NV Ivago cvba DELTA Milieu BV AZN Holding BV BV Grondbezit AVI Moerdijk BV Grondbezit AVI Moerdijk II NV AZN 33,33% 100,00% 33,33% 100,00% 66,67% 33,33% 100,00% 33,33% 100,00% 66,67% 40,00% 40,00% 49,00% 40,00% 40,00% 49,00% 40,00% 40,00% 49,00% Norway Middelburg Middelburg 49,00% 1) 45,00% 48,00% 1) 49,00% 45,00% 48,00% 49,00% 45,00% 48,00% Belgium Belgium Belgium Belgium 30,00% 35,12% 39,90% 42,61% 30,00% 35,12% 39,90% 42,61% 30,00% 35,12% 39,90% 42,61% Belgium Belgium Belgium 26,00% 1) 50,00% 1) 50,00% 1) 26,00% 50,00% 50,00% 26,00% 50,00% 50,00% 20,00% 100,00% 100,00% 100,00% n/a 20,00% 20,00% 20,00% 0,2 100,00% 100,00% 100,00% 1,65% 1,65% 1,65% 60,00% 59,76% 60,00% 59,76% 60,00% 59,76% 7,60% 5,00% 7,60% 5,00% 7,60% 5,00% 49,93% 1) 15,00% 49,93% 15,00% 49,93% 15,00% 34,99% 34,96% 50,00% 34,99% 34,96% 50,00% 34,99% 34,96% 50,00% n/a 24,63% n/a 1,50% 3,46% 1,50% 3,46% Wijster Moerdijk Moerdijk 's-Hertogenbosch Others DELTA Netwerkbedrijf BV Energie Data Services Nederland BV DELTA Energy BV Decu Beheer BV Decu CV DELTA NV NV Kema Synergia Capital Partners BV DELTA Investerings Maatschappij BV Sustainable Energy Technology Fund CV Business Park Terneuzen BV Indaver NV GRL Glasrecycling NV Vlar Papier NV Spanin NV Indaver Schweiz AG Sibag AG Ecowest NV IVIO cvba Ivvo cvba 33,33% 100,00% 33,33% 100,00% 66,67% 1) 1) 1) 1) 1,50% 1) 3,46% 1) Shareholding of the parent company in the entity 120 COMPANY FINANCIAL STATEMENTS 2010 . 121 Company balance sheet as at 31 December 2010 (before profit appropriation) Company balance sheet as at 31 December 2010 (before profit appropriation) (EUR 1,000) (EUR 1,000) Notes 31-12-2010 31-12-2009 ASSETS Non-current assets Intangible assets Property, plant and equipment Financial assets Investments in subsidiaries Other investments Receivables from subsidiaries Loans to other investment entities Other loans Deferred tax assets 1 2 3 3 3 3 3 4 28.415 27.510 1.001.826 288.567 29.550 13.342 74.440 42.352 35.489 725.649 289.016 36.876 1.202 26.145 74.959 1.407.725 1.463.650 Current assets Receivables from subsidiaries Receivables from related parties Other receivables 5 113.548 26.781 Cash 1.153.847 1.231.688 473.237 617 56.552 140.329 530.406 1.385 9.294 1.605.365 1.771.388 EQUITY AND LIABILITIES Shareholders' equity Shareholders’ equity Profit for the year 6 6 1.307.601 (177.787) 1.251.014 7.091 1.129.814 1.258.105 Provisions 7 3.372 3.702 Non-current liabilities 8 146.383 314.295 Current liabilities Payables to subsidiaries Payables to related parties Other payables 9 248.637 77.158 130.695 130 64.461 325.795 195.286 1.605.365 1.771.388 122 Company income statement (EUR 1,000) 2010 2009 Profit on parent company activities Share in profits of subsidiaries, joint ventures and associates (7,537) (41,723) (170,250) 48,814 Profit for the year (177,787) 7,091 123 Notes to the company financial statements DELTA NV is the holding company, incorporated under Dutch law, of a number of the subsidiaries active in the generation of electricity, in the transportation and supply of energy and in the provision of environmental and cable services. The functional currency is the euro. Unless otherwise stated, all amounts are presented in thousands of euro’s. DELTA availed itself of the option in Part 9, Book 2, of the Netherlands Civil Code to prepare the company financial statements in accordance with the IFRS accounting policies used in the consolidated financial statements with the exception of the equity-accounted subsidiaries, joint ventures and associates. The company income statement is presented in abridged form in accordance with article 402, Title 9, Book 2, of the Netherlands Civil Code. Accounting policies The investments in the equity of other entities are stated at net asset value, measured in accordance with the IFRS accounting policies applied in the consolidated financial statements, adjusted for the goodwill paid on acquisition and any impairment of goodwill. Also, non-controlling interests are not presented separately, an adjustment instead being made in the carrying amounts of the subsidiaries concerned. For the other accounting policies, reference is made to the notes to the consolidated financial statements. 124 Notes to the company balance sheet 1. Intangible assets (EUR 1,000) Total Software 2009 Carrying amount as at 1 January Investments Amortisation Reclassification/other changes Carrying amount as at 31 December 65,755 65,755 7,831 (26,267) (4,967) 7,831 (26,267) (4,967) 42,352 42,352 42,352 42,352 3,751 (17,101) (587) 3,751 (17,101) (587) 28,415 28,415 2010 Carrying amount as at 1 January Investments Amortisation Reclassification/other changes Carrying amount as at 31 December Amortisation period in years 5 The movement in intangible assets is entirely due to investments in and amortisation of IT software. In connection with the replacement of several important software applications, partly in connection with the planned unbundling of the network operations from the commercial activities, several ICT assets were again decommissioned and written off in 2010. 125 2 Property, plant and equipment Total Land and buildings Plant and equipment Other assets Assets under construction Third-party contributions 48,847 23,197 17,117 3,579 19,827 (14,873) 2,243 (1,079) (426) (14,096) (635) (23) (1,422) (403) (9,078) (1,668) (12,755) 10,827 Carrying amount as at 31 December 35,489 21,117 7,636 1,467 9,315 (4,046) Carrying amount before deduction of contributions 39,535 21,117 7,636 1,467 9,315 Accumulated depreciation and impairment 94,789 23,649 51,815 19,325 Acquisition cost as at 31 December 134,323 44,766 59,450 20,792 9,315 Carrying amount as at 1 January 35,489 21,117 7,636 1,467 9,315 (4,046) Investments Depreciation Disposals Other movements 721 (1,034) (4,605) (3,061) (803) (4,605) 2,547 (713) (231) 326 730 (8,309) (9) 3,088 Carrying amount as at 31 December 27,510 18,256 6,923 1,562 1,736 (967) Carrying amount before deduction of contributions 28,477 18,256 6,923 1,562 1,736 Accumulated depreciation and impairment 96,106 24,735 51,815 19,556 Acquisition cost as at 31 December 124,582 42,991 58,737 21,118 1,736 10 - 40 7 - 40 5 - 15 n/a (EUR 1,000) 2009 Carrying amount as at 1 January Investments Depreciation Disposals Other movements 2,243 (444) 2010 Depreciation periods in years Property, plant and equipment consists chiefly of investments in premises. The disposals relate to the sale of buildings and land in Terneuzen. 126 3. Financial assets (excluding tax assets) (EUR 1,000) Financial assets (excluding tax assets) Total Receivables from other investment entities Other receivables Investments in subsidiaries Other investments Receivables from subsidiaries 1,308,400 756,030 288,518 79,445 150,426 33,980 5,767 - - - - 5,767 Acquisition/grant of loans 32,820 (18,712) 8,907 (5,700) 47,935 390 Share in profits 48,814 20,564 28,249 - - - (262,603) - (18,908) (31,265) (197,159) (15,271) (51,688) (45,262) (6,426) - - - 15,744 15,744 - - - - (18,363) (2,715) (11,323) (5,605) - 1,279 1,078,891 725,649 289,016 36,876 1,202 26,145 (42,276) (42,276) - - - - 1,231 - - - (399) 1,630 28,128 - (10,197) 37,855 450 20 (170,250) (200,570) 30,320 - - - Disposals/repayments/dividends (47,629) 15,452 (20,677) (29,838) (51) (12,515) Movements in hedge reserve 124,866 124,866 - - - - Other movements 360,327 378,705 105 (15,344) (1,202) (1,937) 1,333,285 1,001,826 288,567 29,550 0 13,342 (EUR 1,000) Carrying amount as at 1 January 2009 Reversal of current portion Disposals/repayments/dividends Movements in hedge reserve Payment of share capital Other movements Carrying amount as at 31 December 2009 Movements relating to subsidiaries Reversal of current portion Acquisition/grant of loans Share in profits Carrying amount as at 31 December 2010 The change in subsidiaries largely concerns the sale of DELTA Milieu BV to Indaver. In addition, DELTA NV acquired the shares of DELTA Industriële Reiniging BV from the subsidiary DELTA Milieu BV. The hedge reserve increased in 2010, solely on account of the related deferred tax. The receivables from subsidiaries relate to borrowing by the companies concerned from either DELTA or one of its subsidiaries. The negative amount shown for the investment in Development & Water has been deducted from the receivable from the subsidiary concerned, the effect of this being accounted for in other movements. 127 4. Deferred tax assets The deferred tax assets result from differences between reported carrying amounts and tax bases. Amounts are also recognised in respect of tax loss carryforwards. DELTA also recognises a hedge reserve for unrealised movements in the value of derivatives/trade contracts in accordance with IAS 39/32. 5. Other receivables (EUR 1,000) Trade receivables Current corporate income tax Other current taxes Total current taxes Other receivables, prepayments and accrued income Current portion of long-term loans granted Other receivables Total 2010 2009 5,570 37,811 15,898 20 15,918 1,745 1,745 1,964 3,329 5,293 12,435 4,561 16,996 26,781 56,552 128 6. Statement of changes in equity Total (EUR 1,000) Paid-up capital Statutory reserve Hedge reserve Other reserves Unappropriated profit Carrying amount as at 31 December 2008 1,364,667 6,937 92,899 (35,508) 1,199,422 100,916 Transaction between owners (18,712) - - - (18,712) - Profit appropriation for 2008 (50,458) - (9,329) - 59,787 (100,916) Other movements (18,354) - (18,163) - (191) - Movements in connection with capitalised development costs - - (10,499) - 10,499 - Movement in hedge reserve for energy derivatives (33,525) - - (33,525) - - Movement in hedge reserve for interest rate derivatives (1,807) - - (1,807) - - Add: Corporate income tax effect 9,204 - - 9,204 - - Net profit for 2009 7,091 - - - - 7,091 Carrying amount as at 31 December 2009 1,258,105 6,937 54,908 (61,636) 1,250,805 7,091 Profit appropriation for 2009 (50,000) - 40,581 - (83,490) (7,091) Other movements (3,977) - (3,470) - (507) - Movements in connection with capitalised development costs - - (587) - 587 - Movement in hedge reserve for energy derivatives 134,592 - - 134,592 - - Movement in hedge reserve for interest rate derivatives 4,086 - - 4,086 - - Add: Corporate income tax effect (35,205) - - (35,205) - - Net profit for 2010 (177,787) - - - - (177,787) Carrying amount as at 31 December 2010 1,129,814 6,937 91,432 41,837 1,167,395 (177,787) The statutory reserve comprises the undistributed profits of subsidiaries, joint ventures and associates. It is consequently not freely distributable. The hedge reserve is also not freely distributable inasmuch as it relates to the unrealised fair value gains and losses on the trading portfolio. For an explanation of the changes in equity, reference is made to the consolidated financial statements. In contrast to the consolidated financial statements, minority interests in subsidiaries are deducted directly from the carrying amounts of the investments concerned (equity method). 129 7. Provisions (EUR 1,000) Total BMAP Employee benefits Other provisions Carrying amount as at 1 January 2009 3,867 579 3,289 - Reversal of current portion of provisions Added Interest added Released Utilised Other movements 1,578 275 141 (682) 21 650 928 275 124 - Carrying amount as at 31 December 2009 16 (101) (580) 21 5,200 1,144 4,057 - (1,498) (650) (848) - Carrying amount as at 31 December 2009 3,702 494 3,208 - Reversal of current portion of provisions Added Interest added Released Utilised Other movements 1,498 4,360 122 (776) - 650 848 360 119 (687) - 4,000 - Carrying amount as at 31 December 2010 8,906 1,058 3,848 4,000 (5,534) (650) (884) (4,000) 3,372 408 2,965 - Current portion of provisions Current portion of provisions Carrying amount as at 31 December 2010 3 (89) The provisions mainly concern employee benefits and environmental costs under the BMAP scheme. These provisions have been recognised in order to be able to meet future financial obligations. The BMAP provision relates to a provision in connection with the Environmental Action Plan for Industry (BMAP). The environmental surcharge on electricity and gas supplies charged to certain groups of users in the period 1991–1999 constitutes the basis of this provision. Remaining liabilities connected with activities undertaken in the past under the Plan are settled out of this provision. Following the introduction of the new health insurance system on 1 January 2006, the obligations underlying the provision for health care have changed substantially. An amount of EUR 1.2 million of the provision formed in the past continues to be recognised. Under the terms of the collective labour agreement (CLA), DELTA also pays employees longservice benefits. From the date on which an employee joins the company, a provision is recognised for these benefits, based on the number of years of service, expected price and wage inflation (averaging 1.5%) and statistical severance, invalidity and mortality rates. The relevant discount rate is 4.5% (2009: 5.0%). The addition under other provisions relates to an obligation to clear a site, which gives rise to a current liability. 130 8. Non-current liabilities 2010 2009 Carrying amount as at 1 January 314,295 519,588 Reversal of current portion Loans drawn down Movements in cross-border leases Repayments Movements in interest rate swap Other movements 2,616 115,000 (282,616) (789) 34 9,899 550,000 (420) (760,000) (2,156) - 148,540 316,911 (2,157) (2,616) 146,383 314,295 (EUR 1,000) Repayments due in the current year Long-term debt 9. Other payables 2010 2009 12,382 6,926 Current tax liabilities 4,976 29,199 Derivatives 2,887 5,575 2,157 5,534 44,323 52,014 2,616 1,498 13,946 18,060 4,900 4,700 77,158 64,461 (EUR 1,000) Trade payables Current portion of non-current liabilities Current portion of provisions Accruals and deferred income Total other payables Bank borrowings Carrying amount as at 31 December The other payables include the current portion of the provisions, the current portion repayable on borrowings and outstanding supplier accounts. The current tax liabilities include VAT and energy tax payable. 131 Commitments and contingent liabilities 403 Declarations DELTA NV has filed a statement with the Chamber of Commerce as required by the provisions of Section 403, Book 2, of the Netherlands Civil Code assuming joint and several liability for any debts arising from the legally binding transactions of any of the following subsidiaries as at balance sheet date: DELTA Infra B.V. ZeelandNet B.V. DELTA Energy B.V. DELTA Kabelcomfort Netten B.V. DELTA Pipe B.V. Internetplatform Zeeland B.V. DELTIUS B.V. Internetservice Zeeland B.V. DELTA Ficus Holding B.V. DELTA Netwerkbedrijf B.V. DELTA Tolling Sloe B.V. DELTA Comfort B.V. Given the filing of this statement and the declarations of agreement on the part of the shareholders filed annually with the Chamber of Commerce, these companies are exempt from using the prescribed format in preparing their financial statements. DELTA NV forms a tax group with some of its subsidiaries. On that basis, DELTA NV is jointly and severally liable for the various tax liabilities of those companies. Put options DELTA has issued put options to the non-controlling shareholders of Indaver. For a more detailed discussion, reference is made to the consolidated financial statements. Unbundling plan - WON The Minister approved the plan to unbundle the company on 2 December 2009. The Minister stated in her decision that DELTA must provide DELTA Netwerkbedrijf (DNWB) with additional financial security during the initial period in the form of a further EUR 10 million equity contribution and a EUR 40 million guarantee, to which DNWB will be entitled for five years after the unbundling if it does not satisfy the ratios set out in the Network Operators (Financial Management) Decree. Despite the fact that the unbundling was not put into effect, owing to the ruling by the Court in The Hague in June 2010, the conditions laid down by the Minister were met and the guarantee was provided by DELTA to DNWB. Assets held for sale DELTA has given a commitment on behalf of one subsidiary for 2011, provided that DELTA continues to hold a controlling interest in the company concerned, to make available the required financing needed to continue operations and fund investments. An amount of EUR 30 million has been recognised as a liability in this connection. 132 Audit fees In 2010, DELTA NV has paid the following fees to auditors: (EUR 1,000) Deloitte Accountants B.V. Other members of the Deloitte network in the Netherlands 2010 2009 739 629 Tax advisory services 38 -- 148 -- --- Other non-audit services 124 119 901 896 Audit of the DELTA group financial statements Other audit engagements 2010 2009 Total 2010 2009 739 629 --- 38 -- 148 -- 303 247 427 366 303 247 1.204 1.143 Total Performance-related fees are not paid. The audit of the financial statements of the members of the DELTA group in 2010 related to the closure of the 2009 financial statements (17 sets of accounts in total) and the interim 2010 audit. The increase in the audit charges is attributable to the fact that two invoices for advances relating to the audit of the 2010 financial statements were accounted for in 2010. 133 Profit appropriation Profit appropriation under the Articles of Association. Article 39 of the Articles of Association provides for the appropriation of profits as follows. 1. Any loss reported in the income statement, as included in the adopted financial statements, shall be taken to the general reserve. If the general reserve holds insufficient funds to cover said loss, the remainder of the loss shall be charged to any profits achieved in future years. 2. If the income statement, as included in the adopted financial statements, reports any profit, the Supervisory Board may use this profit to allocate funds to the general reserves. Any profit remaining shall be at the disposal of the General Meeting of Shareholders. 3. The General Meeting has the authority to declare one or more interim dividends and/or make other interim distributions, provided the requirements of Section 2:105, subsection 2, of the Netherlands Civil Code are satisfied on the evidence of an interim statement of financial position as referred to in Section 2:105, subsection 4, of the Netherlands Civil Code. Proposed profit appropriation 2010 2009 (177,787) 7,091 (7,677) (40,581) Profit available for appropriation (185,464) (33,490) Charged/added to the general reserves (235,464) (83,490) 50,000 50,000 (EUR 1,000) Profit after tax for 2009/2008 Charged/added to the statutory reserve Proposed dividend Was signed Middelburg June 27 of 2011 Supervisory Board: Ir. P.G. Boerma, CEO Ir. D. van Doorn, Chairman drs. Ing. J. Bout drs. R. Frohn Drs. F. Verhagen RA, CFO J.G. van der Werf B.P. de Wit, MA 134 Independent auditor’s report To: the shareholders of DELTA N.V. Report on the financial statements We have audited the accompanying financial statements 2010 of DELTA N.V., Middelburg. The financial statements include the consolidated financial statements and the company financial statements. The consolidated financial statements comprise the consolidated balance sheet as at 31 December 2010, the consolidated income statement 2010, the consolidated statements of comprehensive income, changes in equity and cash flow for the year then ended, and notes, comprising a summary of the significant accounting policies and other explanatory information. The company financial statements comprise the company balance sheet as at 31 December 2010 the company income statement for the year then ended and the notes, comprising a summary of the accounting policies and other explanatory information. Management's responsibility Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Dutch Civil Code, and for the preparation of the management board report in accordance with Part 9 of Book 2 of the Dutch Civil Code. Furthermore management is responsible for such internal control as it determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditor's responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 135 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 DELTA N.V. as at December 31, 2010 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 DELTA N.V. as at December 31, 2010 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 annual 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 annual 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. Middelburg, 11 april 2011 Deloitte Accountants B.V. Was signed: W.A. de Leeuw RA 136 DELTA in financial figures, consolidated (EUR million) 2010 2009R 2008 2007 2006 2005 Assets Intangible assets Property, plant and equipment Financial assets Current assets Cash 420 977 700 653 49 2.800 515 1.033 886 770 59 3.264 576 1.016 1.102 886 55 3.635 446 857 794 614 61 2.772 92 502 547 384 196 1.721 48 498 431 379 280 1.636 1.183 96 797 725 2.800 1.312 93 931 927 3.264 1.433 104 1.269 829 3.635 1.433 108 666 565 2.772 1.288 72 59 301 1.721 1.198 101 34 303 1.636 1.073 312 101 71 875 299 125 69 990 387 106 1 63 704 147 113 3 73 623 271 514 113 51 49 462 54 2.073 446 55 1.869 393 118 76 77 2.211 278 91 13 31 1.453 103 1 45 1.093 104 1.454 (3) (29) 586 2.008 1.295 (34) (34) 542 1.769 1.649 13 (42) 518 2.138 1.008 (24) (36) 427 1.375 804 31 223 1.058 539 (4) 203 738 65 63 128 100 66 167 73 47 120 79 60 139 35 70 105 77 68 145 (22) 106 (16) (265) (2) (178) 50 (27) 140 (22) (108) (3) 7 50 (6) 114 (15) 2 (1) 100 50 (15) 124 (4) (4) 116 57 5 110 59 169 68 4 149 (22) 127 50 Equity and liabilities Group equity Provisions Non-current liabilities Current liabilities Revenue Electricity Gas Electricity and gas transport Water/waste water Telecommunications Waste management and environmental services Solar energy Biodiesel Miscellaneous Total revenue 36 816 Expenses Cost of sales Fair value gains and losses on the trading Other operating income Net operating expenses Total operating expenses Earnings from operations Share in results of joint ventures and associates Operating result Net finance income (expense) Profit before tax Corporate income tax Profit from discontinued operations Non-controlling interests Profit after tax Proposed dividend 137 DELTA key figures (EUR million) 2010 2009 Revenue of which: Electricity supply Gas supply Electricity and gas transport Cable, internet and telecommunications Waste management and environmental services Solar energy Biofuels Other revenue 2,073.1 1,967.3 1,073.1 312.3 100.6 71.3 461.8 53.9 874.6 299.5 124.9 68.7 446.4 66.7 31.1 55.4 Finances Gross margin Operating result Profit before tax Profit after tax 650.9 127.8 106.0 (177.8) 630.1 38.5 9.0 7.1 Group equity (excluding dividend) Balance sheet total 1,183.1 2,800.5 1,312.5 3,233.0 Return on investment Return on equity attributable to the shareholders Equity ratio Interest coverage ratio 6.5% -15.7% 42.2% 14.3 2.3% 0.6% 40.6% 13.2 Ratios The comparative key figures for 2009 have not been restated because a restated balance sheet (adjusted for discontinued operations) does not exist. Moreover, it is not possible to calculate ratios based on a restated income statement combined with a balance sheet which has not been restated. The interest coverage ratio, however, can be calculated on the basis of the restated 2009 figures, and works out at 23.1 for 2009. 138 Definition of financial ratios Return on average invested capital (ROIC) Earnings from operations net of exceptional items/fair value gains and losses plus interest income from financial assets and the share in results of joint ventures and associates x 100%, divided by average invested capital. Invested capital The sum of non-current assets and net working capital as at balance sheet date. Return on equity (ROE) Profit attributable to shareholders of DELTA NV, divided by the shareholders’ equity attributable to the equity holders of DELTA NV. Equity ratio Group equity x 100%, divided by the balance-sheet total. Interest coverage ratio Operating result + depreciation/amortisation charges + interest income divided by net external finance income and expense. Annual report 2010 DELTA NV Poelendaelsingel 10 4335 JA Middelburg Netherlands T +31 (0)118 882 000 F + 31 (0)118 882 100 E [email protected] W www.DELTA.nl Entered in the trade register of the Middelburg Chamber of Commerce under number 22031457. 139