Financial Results

Prospects for 2009

TenneT's income from regulated activities is expected to increase further in 2009 to a level in excess of EUR 600 million, primarily as a result of the transfer of the management and operation of the 110 kV and 150 kV grids previously managed by Delta, Essent and Nuon.

TenneT also intends to gain ownership of these grids, insofar as they are not subject to Cross Border Lease agreements. So far, TenneT has reached agreement with Essent on this matter, and in the course of 2009, we expect to come to an understanding with Nuon and Delta concerning the transfer of the relevant grid assets. The transfer of the ownership of these grids means that TenneT will no longer have to pay management fees to the grid owners. This is offset by the fact that TenneT will then have to bear the capital costs (depreciation charges and finance expenses) for these grids.

TenneT expects the operating income in 2009 to be lower than in the year under review. This is a direct consequence of the Method Decision for the fourth regulatory period announced by the Office of Energy Regulation of the Netherlands Competition Authority in September 2008. As a result of this Method Decision and the 2009 Tariff Decision arising from it, the permitted regulated income from the 110 kV and 150 kV grids in 2009 will be insufficient to cover the management costs incurred by TenneT in this respect. This has prompted TenneT to lodge appeals or objections against these decisions. TenneT considers it unlikely that any ruling will be issued in these procedures in 2009. Consequently, TenneT's revenue will not be affected until later years. With a view to this Method Decision, TenneT created a provision in 2008 which in 2009 will mitigate the effects mentioned without fully eliminating them.

Due to the extensive investment programme currently being carried out by TenneT, both the depreciation charges and the interest expenses will grow considerably in 2009. Under the current regulatory system, compensation for these rising expenses cannot be obtained until later years (through future tariffs). This so-called 'lag effect' will have a negative impact on TenneT's profit in 2009. We are currently holding talks with the Ministry of Economic Affairs concerning possible changes to the regulatory system, so that TenneT will have a realistic chance of achieving the regulated return in the coming years, when investments levels will exceed depreciation and amortisation expenses.

At this time, the international economic crisis does not appear to be affecting the need for TenneT's investment programme for 2009, which will consist mainly of investments in the expansion and upgrade of the 380 kV grid in the Randstad conurbation, and in the undersea BritNed cable linking the Netherlands to the UK.

TenneT expects its financing requirement to increase as a result of this extensive investment programme. TenneT aims to diversify its sources of funding in order to meet this requirement. In close consultation with the shareholder, we are also looking at ways to ensure that TenneT's balance sheet will continue to display a healthy financial position while the necessary investment programme is being carried out.

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