Financial Results

Profit    

TenneT realised an operating profit of EUR 80.9 million in the year under review, an increase of nearly 15 percent compared to 2007, when the operating profit amounted to EUR 70.4 million. At EUR 50.7 million, the group's net profit was down 4.5 percent on 2007 levels. Besides lower profits from participating interests, higher net finance expenses are the main cause of the reduction in net profit.

Under the Independent Grid Administration Act, TenneT was appointed as the administrator of all Dutch high-voltage grids with a voltage level of 110 kV and higher with effect from 1 January 2008. This means that TenneT is now the administrator of the entire transmission grid (110 to 380 kV), with the exception of grids covered by Cross Border Lease agreements.

In the course of 2008, TenneT took over the operation of the 110 kV and 150 kV grids managed by Delta and Essent Netwerk up to 1 January 2008. In the course of 2009, TenneT will also take over the operation of Nuon's 110 kV and 150 kV grids, with the exception of the grids in the Randmeren area, for which a Cross Border Lease agreement was previously concluded. For the time being, TenneT has decided not to take over the management of the grids currently operated by Eneco, as these grids are also covered by a Cross Border Lease agreement.

The operating profit in 2008 was negatively affected by several exceptional items, some of which were directly connected to the transfer of responsibility for the management of the 110 kV and 150 kV transmission grids. These exceptional items included non-recurring costs incurred by TenneT in order to take over the various management activities, and compensation for management activities that were still carried out by regional grid operators in 2008. These costs were insufficiently covered by TenneT's regulated tariff revenues.

In September 2008, the Office of Energy Regulation of the Netherlands Competition Authority announced its Method Decision for the fourth regulatory period (2008 to 2010 inclusive). One consequence of this Method Decision is that the permitted regulated income from the 110 kV and 150 kV grids for which TenneT assumed responsibility as of 1 January 2008 will be insufficient to cover the management costs incurred by TenneT in this respect. This has prompted TenneT to lodge an appeal with the Netherlands Trade and Industry Appeals Tribunal and to create a provision for loss-incurring activities. The size of this provision is based on several scenarios with regard to the outcome of the appeal case, as well as the expected developments of costs and income during the period of TenneT's designation as the administrator of the grids concerned.

These exceptional expenses are offset by several items of exceptional income, in particular the release of a reserve created in previous years in connection with arbitration proceedings instituted by a regional grid operator. This concerned the height of the management fees payable by TenneT for a 380 kV connection owned by the operator. TenneT also realised a non-recurring benefit (book profit) on a property transaction.

On balance, these exceptional items have reduced the operating profit by EUR 12.4 million. This was partially compensated by the fact that the purchasing expenses for energy and capacity were fully recognised in revenue in 2008 (this was only partially the case in 2007 and in previous years).