Annual - Elia/media/files/Elia/publications-2/annual-report/Annual... · Foreword*Boulevard de...

A responsible company serving its customers and the community in Belgium and Germany

Annual Report 2011

www.eliagroup.eu www.elia.be www.50hertz.com

EXECUTIVE REPORTForeword* 2Profile and values 4Key events 2011* 6Prospects and challenges 2012* 12The Elia share in 2011 14

ECONOMIC REPORTGrid operation 24Infrastructure 28Investments 29The Elia grid in Belgium 30The 50Hertz Transmission grid in Germany 33Grid maintenance 34Market operation 36Preventive management of critical grid situations 40Preparing for the future: research and development* 43

ENVIRONMENTAL REPORTEnvironmental objectives and indicators 50

SOCIAL REPORTStaff policy 64Knowledge management 68Employee safety and welfare 70Corporate social responsibility 74Stakeholder relations 77

CORPORATE GOVERNANCE STATEMENT Composition of management bodies* 84Significant events in 2011* 87Remuneration of the Board of Directors and Management Committee* 92Features of the internal control and risk management systems* 96Description of the risks and uncertainties facing the company* 101

FINANCIAL REPORT Consolidated financial statements IFRS* 108Notes to the consolidated financial statements* 113Joint auditors’ report on the consolidated financial statements 154Regulatory framework and tariffs* 156Information about the parent company* 160

GRI Index 161Reporting parameters 163

*These chapters form the annual report cf. article 119 of the Belgian company code.

APERe Association for the promotion of renewable energies

BBEMG Belgian BioElectroMagnetic Group

BREEAM BRE Environmental Assessment Method

BRUGEL Brussels Electricty and Gas Regulation

CREG Commission for Electricity and Gas Regulation

CWAPE Commission Wallonne pour l’Energie

IBGE Brussels Institute for Environmental Management

ICEDD Institut de Conseil et d’Etudes pour le Développement Durable

ICNIRP International Commission on Non-Ionizing Radiation Protection

OVAM Openbare Vlaamse Afvalstoffenmaatschappij

SYNERGRID Federation of Belgian System Operator for Electricity and Gas

VREG Vlaamse Reguleringsinstantie voor de Electriciteits- en Gasmarkt(Flemish Commission for Electricity and Gas Control)

CORESO Technical Coordination Service Center within the Central Western European region

CWE Central Western Europe

ENTSO-E European Network of Transmission System Operators for Electricity

ITVC Interim Tight Volume Coupling

ARP Access responsible party

EMF Electric and Magnetic Fields

GIS Gas insulated Switchgear

PCB’s Polychlorinated biphenyls

RUE Rational Use of Energy

kWh Kilowatt hour

MW Megawatt

MWh Megawatt hour (=1.000 kWh)

gWh Gigawatt hour (=1.000 MWh)

kV Kilovolt (=1.000 Volts)

Table of contentList of abbreviations

Head office EliaBoulevard de l’Empereur 20, B-1000 BrusselsT +32 2 546 70 11 - F +32 2 546 70 [email protected]

ContactsLise Mulpas, T +32 2 546 73 75Axelle Pollet, T +32 2 546 75 11

Concept and editorial staffElia, department Communication

Graphic design and coordinationwww.witvrouwen.be

IllustrationsRenaud Collin

Photos EliaAlain Schroeder, Antonio Caliaro, Benjamin Miesse, Danny Gys, Eric Figon, Eric Herchaft, Guy Van Hooveld, Michel Vanden Eeckhoudt, Olivier Polet, Wim Beddegenoodts, Photothèque Elia

Photos 50HertzJan Pauls, Andreas Teich, EnBW

EditorJacques Vandermeiren

Ce document est également disponible en français.Dit document is ook beschikbaar in het Nederlands.Dieses Dokument ist auch auf Deutsch verfügbar.

Avril 2012

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Annual Report 2011































kWh Kilowatt hour

MW Megawatt














April 2012

EL

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1

Lower Saxony

Schleswig-Holstein

Mecklenburg-Western-Pomerania

Brandenburg

Berlin

Saxony

Saxony-Anhalt

Hesse

Hamburg

Thuringia

Bavaria

PSE OperatorPoland

Energinet.dk Denmark

Denmark

TenneT

TenneT

C EPSCzech Republic

Güstrow

Gera

LeipzigHalle

Erfurt

Eisenach

Rostock

Schwerin

DresdenWeimar

Potsdam

Cottbus

Chemnitz

Zwickau

Jena

Magdeburg

Frankfurt (Oder)

Neu-brandenburg

110

380+220

220

110

Ourthe

Vesdre

Meuse

Sambre

Echelle Schaal

0 10 20 30 km

1 : 1 000 000Situation au

stand op 1-1-2012

Institut Géographique National Nationaal Geografisch Instituut

5˚50'4˚30'2˚40' E. Greenwich 2˚50' 3˚00' 3˚10' 3˚20' 3˚30' 3˚40' 3˚50' 4˚00' 4˚10' 4˚20' 4˚40' 4˚50' 5˚00' 5˚10' 5˚20' 5˚30' 5˚40' 6˚00' 6˚10' 6˚20' 6˚30' 6˚40' 6˚50'

50˚00'

50˚00'

3˚50' 5˚40'49˚40'

49˚30'

49˚30'49˚40'

49˚50'

49˚50'

50˚10'

50˚10'

50˚30'

50˚20'

50˚20'50˚30'

50˚50'

50˚40'

50˚40'50˚50'

51˚00'

51˚00'

51˚20'

51˚10'

51˚10'51˚20'

51˚30'

2˚30' E. Greenwich 2˚40' 2˚50' 3˚00' 3˚10' 3˚20' 3˚30' 3˚40' 4˚00' 4˚10' 4˚20' 4˚30' 4˚40' 4˚50' 5˚00' 5˚10' 5˚20' 5˚30' 5˚50' 6˚00' 6˚10' 6˚20' 6˚30' 6˚40 ˚50' 7˚00'

51˚30'

6˚

Vesdre

Our

Eau

E scaut

G ileppe

Alzette

Moselle

S emois

V ierre

S ûre

Meu

se

Lesse

Ourthe

d’H

eure

S ambreAmblève

Warche

Holzwarche

Amel

Dendre

Dijle

Dyle M

euse Wes

er

IJ zer

S cheldeLeie

Dender

R upel

Demer

G rote Nete

Maas

Maas

(1)

(2)

E lia déc line toute responsabilité concernant les données relatives aux ins tallations appartenantà des tiers .E lia wijs t alle verantwoordelijkheid af voor wat betreft data i.v.m. ins tallaties van derden.

S ont représentées toutes les unités pour lesquelles un contrat C IPU a été conc lu avec E lia.S taan op de kaart alle productie-eenheden waarvoor met E lia een C IPU contrac t is afges loten.(C IPU = C ontrac t for Injec tion of P roduction Units ).

COURS D’EAU

R ivières et canaux

WATERLOPEN

R ivieren en kanalen

PRODUCTIE EENHEDEN (2)

220-150kV

70kV

UNITES DE PRODUCTION (2)

centrale nuc léaire

centrale hydraulique

centrale de pompage

exis tant

en projet

380kV

centrale thermique

parc d'éoliennes

centrale thermique en projet

avec injec tion de production

S TATIONS

thermis che centrale in ontwerp

waterkrachtcentrale

pompcentrale

POS TES

windmolenpark

bes taand

in ontwerp

380kV

220-150kV

70kV

MERCATOR

MOLENB EEK

Herbaimont

met productie injec tie

kerncentrale

thermis che centrale

ONDERGRONDSE KABELS

70kV

en cons truction ou en projet

2e terne en cons truction ou en projet 2de draads tel in aanbouw of in ontwerp

câbles en parallèle

câble appartenant à un tiers (1) kabel eigendom van een derde (1)

lignes à 2 ternes detens ions différentes

tens ion d’exploitation inférieureà la tens ion de cons truction

Tableau des compos itions deslignes à plus de 2 ternes :

3 91 x 150 + 2 x 70 (3 x 150)

2 x 150 (2 x 380 + 2 x 150)

2 x 150 (4 x 150)

CABLES SOUTERRAINS

380kV

220kV

150kV

2 4 x 150 8 3 x 70

ligne appartenant à un tiers (1)

S amens tellingtabel van de lijnenmet meer dan 2 draads tellen:

15 3 x 150 (4 x 150)

14 1 x 220 + 2 x 70

Nombre de ternes

ins tallés

1

1

2

(avec numéro de référence dansle tableau des compos itions )

4 1 x 150 + 3 x 70 (4 x 150)

56

2 x 150 + 2 x 70 (4 x 150)

1 x 150 + 1 x 70 (2 x 150 + 1 x 70)10 16 3 x 150 + 1 x 70 (4 x 150)

1112

1718

4 x 70

3 x 150

3 x 220

1 x 380 + 2 x 150 (2 x 380 + 2 x 150)

380kV

220kV

parallele kabels2

150kV

70kV

3dP

prévus

1

2

2

> 2

1 2 x 150 + 1 x 70 (3 x 150)

Aanta l draads tellen

voorzien uitgerus t

(met referentienummer inde samens tellings tabel)

1 1

2 1

2 2

> 2

lijn met 2 draads tellenvan vers chillende spanningen

uitbatings spanning lagerdan de cons tructiespanning

7 133 x 380 (4 x 380) 1 x 70 (4 x 150)

150 + 70

70(150)

4

in aanbouw of in ontwerp

lijn eigendom van een derde (1)3dP

St-AMAND

PERONNESC S MARC INELLE

Marchienne

F . DE FER

70(150)

Mais ières150 + 70

MAR CHE -LEZ-EC AUS S INNES

PETROCHIM

LA C ROYER E

La Louvière

BOEL HFBOEL TC C

GOS S EL IE S

AMER CŒ UR

Liberchies

K eumiée

150 + 70

B AUDOUR

AIRL IQUIDE

TER TR E

E louges

PETIT MARAIS

GHLIN

C iplyP âturages

J EMAPPES

B ous su

Mons

70(150)

70(150)

150+70

150 + 30

150 + 70

30(150)

70(150)

70(150)

16

1 : 150 000

C . S t-GHIS LAINOBOURG

HARMIGNIE S

VILLE /HAINE

TR IVIE R E S

B INCHE

BOELLL

BOELFOUR

150+70 150 + 70

150 +70

150 + 70

70(150)

E s tinnes

GOUY

BAS COUP

DAMPR EMY

MONC EAU

P iéton(S NC B )

Fontainel’E vêque

MALFALIS E

CAR ALFOC

70(150)

70(150)15

0+70

2Anderlues

220 +

150

C ENTR ALEMAR C INELLE

2

3dP

3dP

70(150)

FLEURUS

MONTIGNIE S

TERGNEE

AUVELAIS

FAR C IENNES

B LANCHIS S ER IEC harleroi

G illy

LA PR AYEPONT-DE -LOUP

Heppigniessud

J umet

(30)70+30(150)

70(150)

5

LA PR AYEFOUR

70(150)

J EMEPPE -S OLVAY

Fos ses - la-Ville

S ambre

CHAMP -DE -COUR R IER E

FE LUY

COURCELLES

BUIS S ER ET

S eneffe70(

150)

12

2

CENTRALESENEFFE

S ombreffe

Marbais(S NC B )

C has sart

Gembloux

Wilrijk

S CHELLE

MHO

WOMMELGEM

MOR TS EL

B AS F

K ETENIS S E

OORDER EN

150+36

9

NOORDLAND

2

Degus saMonsanto

S t. -Niklaas

HE IMOLEN

Temse

MERCATOR

150+

70

WALGOED

S CHELLE DOR P

Hoboken

Aartselaar K ontich

WAAR LOOS7

L IE R

LINT

B EVER EN

S t. -PAUWELS

L ILLO

BAYER

F INA

EKER EN7e HAVENDOK

MER KS EMSCHELDELAAN

KALLO

ZUR ENBORG

BUR CHT

ZWIJ NDR ECHT

C . ZWIJ NDR ECHT

OeverB elliards tr.

Hoveniers tr.Tabakves t

Moons tr.B erchem (NMB S )

150+36

2

3

DAMPLE IN2

PETROL

2

NOORDERDOKKEN (NMB S )

E S S O

2

2

Wilrijk IS VAG

3dP

3dP

BRABO

3

OELEGEM

Botermelk

ZANDVLIET

DOEL

380+

150

25

2

4

3dP

S OLVAY1 : 150 000

ZANDVLIE TPOWER

1 : 150 000

Hermalles /Huy

3dP

MARCHIN

TIHANGE

C ROIX-CHABOT

BOISL ' IMAGE

J emeppe

P rofondval

Ehein

R amet Vesdre

S aives

Hollogne

3dP CHER ATTE

150+70

S ocolie

B ERNEAU

NAVAGNE

GRAMME

Hte S AR TE

C LERMONT

Amps in-Neuville

Abée-S c ry

Les S pagnes

3dP

3dP

RIMIERE

Poulseur

E sneux

R ivage(S NC B )

Ourthe

Anthisnes

70 (150)

3dP

3dP

3dP

3dP

AWIR S

Ivoz

Fooz

Voroux(S NC B )

380+150

3dP

3dP

LA TROQUE

S ER AINGROMS ÉE

B R ES S OUX

J UP ILLE

CHER TAL

Ans

Alleur

G lain

Vottem

FNVottem

Montegnée

Tilleur

OugréeS c les s in

S art-T ilman

C . Angleur

F lémalleLE VAL

(C . S ER AING )

G rivegnée

C hênée

Magotteaux

B E LLAIR E

Mons in

FN

Hers tal

70(150

)

70(15

0)

70 (150)70(220)

220+15

0

8

17

14

16

16

164

3

150+70

Pouplin

Ferblatil

Inc in. Hers tal

R OMS ÉE-S NC B

Kuborn

3dP

3dP

3dP

LIXHE

C B R

Visé(S NC B )

Meu

se

13

2

70(150)

70(150)

70(150)

30(150)

70(150)

70(150)

70(150)

70(150)

70(150)

70(150)

70+30(150)

70(150)

70(150)

70(150

)

2

3

70 (150)

70(150

)

70(15

0)

70 (150)70(220)

8

13

3dP

3dP

70(150)

2

12(70)

70(15

0) 70kV 70kV

11

70 (150)

70 (220)

3dP

3dP

70(150)

70(150)

3dP

70(150)

2

70(220)

3dP

70(150)

70(150)

70(150)2

2

10(70)

15 (70)3dP

3dP

3dP

3dP

3dP

70(150)

70(150)

2

2

70(150)

2

70(150

)

3dP

3dP

3dP

3dP 3d

P

3dP

3dP

3dP

3dP

3dP

3dP

3dP

3dP

2

70 (150)

3dP

3dP

3dP

LIGNES AER IENNES

Tens ion d’exploitation

BOVENGRONDSE LIJNEN

Uitbatings spanning

150 + 70

150 + 70

150+70

150 + 30

150 + 70

16

150+70 150 + 70

150 +70

150 + 70

150+70

2

2 5

12

2

150+36

9

2

150+

70

150+36

2

2

2

2

3

25

2

4

150+70

16

16

164

3

150+70

15 0 +36

150+701

150+

70

150+70

150+36

150+70

150+ 70

150+ 70

70+

150

150+70

212

2

3dP

150 +

70

150+70

150 + 70

150+70

2

2

2

34

150

+70

150+70

2

150+70

150+70

2

3dP

150 + 70

1

32 2

2

150(380)16

15 2

150kV 150kV

6

3

2

2

2

3dP

22

2

2 2

2

3dP

LIGNES AER IENNES


BOVENGRONDSE LIJNEN

Uitbatings spanning

220 +

150

220+15

0

17

14

2

220+150

220+150

220+ 150

220kV 220kV

LIGNES AER IENNES


BOVENGRONDSE LIJNEN

Uitbatings spanning

7

380+

150

380+150

(2x38

0)

18

380+

150

L IGNES AER IENNES


BOVENGRONDSE LIJNEN

380+22

0

380+22

0(2x38

0)

380+22

0

380+220

380 +

150

27

380kV

Uitbatings spanning

380kV

2

380+15

0

380 + 150

S oignies

Fourmies

Fays - les -Veneurs

B onnert

Hatrival

C hiny Villers -s /S emois

MomigniesHatrival-S NC B

Pâturages

Froidchapelle

Lobbes-S NC B

HanzinelleC iney

B uis sonville

C iney-S NC B

S oy S ankt-Vith[S aint-Vith]

C arrièredu Milieu

Ath(S NC B )

B aulers

B raine- le-C omte-S NC B

S auvenière

Gembloux

S tatte(S NC B )

C roix-C habot

Wanze

Pepins terG ileppe

Vesdre

B evercé

B as -Warneton[Neerwaas ten]

S t. -Denijs -B oekel

Geraardsbergen

Kes sel- lo

Leuven(NMB S )

Heverlee

Ga s thuisberg

Lummen

Maasmechelen

B ornem

S t. -NiklaasHerenthout

Langveld

Gerdingen

R ijkevorsel

Arlon

Differd.Arbed

B elv. Arbed

S chif.

Arlon-S NC B

Monceau-en-Ardennes

Orgeo

R ecogne

Neufchâteau

Vierre

Longlier (S NC B )

Marbehan(S NC B )

R espelt

S olre-S t-Géry

C himay

C lermont

Thy- le-C hâteau

C ouvin

R omedenne

Pondrôme

Dinant

S ommière

Has tière

Herbaimont

Hogne(S NC B ) Marche-en-

Famenne

C harneuxOn

Forrières(S NC B )

C ierreux

Quevaucamps

Harchies

E louges

Thumaid e

Lobbes

C iply

Lens

Gerpinnes

Andenne

F lorée

S art-B ernard(S NC B )

G rands -Malades

Dorinne

Yvoir(S NC B )

Warnant

Namur

Marche- les -Dames

Waret

Leuze

B ois -de-Villers

S t-S ervais

Wierde

Namur-S NC B

F loriffoux

C omblain

B omalMiécret

Trois -Ponts

B ronrome

S paTuron

Heid-de-Goreux

Pepins ter-S NC B

Amel

[B utgenbach]

S tephanshof

B ütgenbach

[Amblève]

B landain

B ekaert

K ortrijk-NMB S

KortrijkOos t

R onse

Tournai

[R enaix]

Tournai-S NC B

Deux-Acren

R onquières

Enghien (S N C B )

B raine- le-C .

Hoves

Mes lin

Herfelingen

Appelterre

[Edingen (NMB S )]

C ourt-S t-É t.

Ottignies (S NC B )

C eroux

B aulers-S NC B

S t. -Truiden

Landen

J odoigne

G latigny

Ais che-en-R efail

Hannut

Landen-NMB S

Orsmaal

Tongeren

B orgloon

Ivoz

FoozS aivesMons in

S tembert

Welkenraedt (S NC B )

Les P lenes ses

Henri-C hapelle

Montzen(S NC B )

S oiron

Noordschote

Gavere

Zottegem

B aas rode

Welle E s seneDenderleeuw

(NMB S )

Hamme

Temse

Amylum

Oudegem

Willebroek

Tis selt

Duffel

Muizen

M echelen-NMB S

Geel/Oevel

Halen

K ersbeek

Aars chotDorenberg

Pellenberg

Dowchemical

Hechtel

Opglabbeek

B ilzen

Paals teens tr.

Has selt

(NMB S )

Alken

Maaseik

B ekaert

Lanaken

Zelzate TJ

Nijlen

K almthout

B recht

Turnhout

R avels

HerentalsOlen

Koekhoven

S t. -Huibrechts -L ille

OverpeltInfrax

HE IMOLEN HEZE

PETIT MARAIS

LATOUR

DOTTIGNIE S[DOTTENIJ S ] B AS S E -WAVR E

S CHIFFLANGE

ES CH-S UR-ALZETTE

HE INS CH

B ER TR ANGE

ROOS T

VIR EUX

BAS TOGNE

THUILL IE S

MAR COUR T

ANTOING

AIR L IQ.

NIVE LLE S

C LAB ECQ

OIS QUER CQ

C LERMONTLE VAL(C . S ER AING )

CHER TAL

S TADEN

IEPER NOORD

WES TROZEB EKE S t. -B AAFS -VIJ VE

WOR TEGEM

MOEN

TIE LT

DES S E LGEM

R ELEGEM

TER L INDEN

KOB B EGEM

MOLENB EEK

DILB EEK

Q. DEMETS K .

ZUID/MIDI

B UIZINGEN

HELIPOR TCHAR LES -QUINT

WIJ GMAAL

S APP I

HERDER EN

S L IJ K ENS

S IDMAR

KEER KEN

PAP IER FAB R IEK

GENT R ECHTEROEVER

C . KNIPPEGROEN

MALDER EN

BUR CHT

ZWIJ NDR ECHT

WALGOED

B ER INGEN

BALEN

BAS F

MALLE

MEER

ROUVROY

S t-MARDS t-MARD-S NC B

HER S ER ANGE

OXYLUX

LANDR ES

B ELVAL

MONT S t.MAR TIN

HE IS DOR F

LUMES

VILLEROUX

FLEBOUR

VIANDENS .E .O. B AULER

NIEDERS TEDEM

TR IER

J AMIOLLE

NEUVILLEPLATE -TAILLE

CHOOZ

MONT-LEZ-HOUFFALIZE

TER TR E

B AUDOUR

MARCHE -LEZ-ÉC AUS S INNES

PETROCHIMFELUY

GHLINOBOURG

HARMIGNIE S

V/HAINELA C ROYÈR E

BAS COUP

TR IVIÈ R E S

PÉRONNES

B INCHE

CHAMP -DE -COUR R IÈR E


J EMEPPE -S OLVAY

GOS S EL IE S

FLEURUS

AMER CŒ UR

DAMPR EMY

MONC EAU MONTIGNIE S

AUVELAIS

FAR C IENNES

LA PR AYEFOUR

S E ILLE S

Hte S AR TE

B RUME-S NC B

IE PER

MARQUAIN

HAR ELB EK E

HEULE

ZWEVEGEMWEVELGEM

PEKKE

MOUS C RON

KUURNE

MENENWES T

[MOES KROEN]

R UIEN

OUDENAARDE

LIGNETHIEULAIN

WATTINESGAURAIN

E IZE R ING E N

NINOVE WOLUWE -S t-LAMB ER TS t. -LAMB R ECHTS -WOLUWE

WIER TZ

DHANIS

IXE LLE SE LS ENE

FOR ES TVOR S T

LABOR ELEC

St.-GENES IUS -RODE[RHODE-S t-GENÈSE]

COR BAIS

WATER LOO

B RAINE -L ’ALLEUD

BAIS Y -THY

VIEUXGENAPPE

PACHECO TIENEN B RUS TEM

AWIR SLA TROQUE

S ER AING

B R ES S OUXJ UP ILLE

ROMS ÉE

EUPEN

P T-R ECHAIN

GARNS TOCK

B ERNEAU

BATTIC E

F IB ER

ROMS ÉE-S NC B

KOKS IJ DE

B EER S T

ZEDELGEM

P ITTEM

MU IZE L AAR

B EVER EN

RUMB EKE

OOS TROZEB EKE

C . Izegem

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Situation au Stand op 1-1-2012

Grid 50HertzGrid Elia

At a time when the European electric-ity system is evolving at an increas-ingly rapid pace, the Elia Group is fully committed to playing a leading role by harnessing and deploying creativity at all levels, including in international coop-eration, engineering, grid development, system operation, market mechanisms and consultancy.

This approach is based on actively listening to our customers, regulators, the political authorities and other system operators. It underlies a fair balance be-tween profit for shareholders, welfare for people and preservation of the planet - Profit, People, Planet. This difficult and delicate balancing act is the only way to guarantee long-term success in the light of the major investments and innovation that the Elia Group and the power grid industry as a whole must deploy over the next two decades.

1,800The number of Elia Group employees, in Belgium and Germany, working around the clock to ensure the security and quality of the power supply to the public and industry.

There is no longer any doubt whatsoev-er that the energy challenges of the 21st century will give rise to a technological revolution – for power systems – whose scope and consequences will far ex-ceed the impact of market deregulation begun 15 years ago.

The 2011 Annual Report looks at what our 1,800 employees are doing in Belgium and Germany in their ongoing desire to meet the needs of our custom-ers, develop our skills and take initiative. Our goal – yesterday, today and tomor-row – is to help ensure a secure electric-ity supply, improve the competitiveness of our businesses and the welfare of our citizens, and deliver a fair return for our shareholders.

For the third year in a row, this is part of a GRI (Global Reporting Initiative) ap-proach focusing on clarity and transpar-ency.

About this reportThe employees of the Elia Group, which is located in the heart of the European electricity market, work day and night to deliver high-quality electricity to homes, businesses and industries in Belgium and Germany – and to ensure security of supply. Providing this public utility service involves continually ensuring balance between energy produced and consumed, proactively adapting grid infrastructure in order to facilitate the transition to green energy and providing high-quality service at the best cost.

1ELIA GROUP 2011EXECUTIVE REPORT

Against the backdrop of the earthquake in Japan, its terrible aftermath and signs of instability in several Gulf countries, questions – some of them fundamental – have been asked about the energy mix in a number of European countries, including Germany and Belgium. This questioning has been accompanied by increased awareness of the major role played by electricity transmission system operators in ensuring that the development of power generation facili-ties becomes a reality.

The already significant development of variable renewable energies such as wind and solar power sped up as the EU and its Member States’ pledge to combat climate change and global warming, with the ultimate target of zero CO2 emissions, was recently confirmed.

However, such renewable energy sources are often located in geographic areas with little or no industry, as in the case of the major offshore wind farms in northern Europe and the large-scale photovoltaic plants to be constructed in southern Europe and North Africa.

Therefore, new transmission facilities must also be built to transmit the power generated by those sources to major consumption centres in the centre of the continent. The variability of the energy sources calls for very high flexibility (in both directions) from other generation facilities, and access to storage facilities. No plans can be made for the develop-

Foreword by the Chairman of the Board of Directors

ment of hydropower plants and, more specifically, pumping stations without first commissioning transmission infra-structure capable of transporting large volumes of electricity all over Europe.

The transition towards these new en-ergy sources also entails the complete transformation of electricity systems and, more specifically, the development and management of power transmission and distribution systems. The grids of the future – whether offshore grids or onshore electricity highways – have yet to be developed, and specific aspects of those grids have yet to be invented, while their management will call for flex-ibility and a capacity for innovation and creativity similar to that underpinning the current electricity systems.

Since its creation in 2001, the Elia Group – now one of the top five electric-ity transmission system operators in Europe – has consciously established itself as a leader. Its two core business-es, in Belgium and Germany, are at the forefront of market development mecha-nisms and play a pioneering role in the large-scale integration of wind power. Owing to its knowledge and expertise, the Group is ideally positioned to benefit from the opportunities that such future developments represent.

The Elia Group’s desire and capacity to achieve its mission for its custom-ers and the community at large can be demonstrated by any number of factors, not least: the extension of Elia’s mission to include the operation of the offshore grid in the North Sea; the stability and visibility provided by the tariffs for the 2012-2015 period, approved by the Belgian regulator; positive changes in the German regulatory framework; and the knowledge garnered by the Group through its participation in the Atlantic Wind Connection project to build the first direct-current offshore grid along the East Coast of the United States.

In this connection and on behalf of the entire Board of Directors, I want to ex-tend my thanks and appreciation for the pioneering work carried out by Daniel Dobbeni at the helm of the Elia Group, culminating in its incorporation in the BEL 20 index in March 2012, and to the Presidency of the European Network of Transmission System Operators for Electricity (ENTSO-E). I would also like to wish the same success to Jacques Vandermeiren, who is due to take over the reins from Daniel Dobbeni in the second half of 2012.

Luc Van NevelChairman of the Board of Directors

2 ELIA GROUP 2011 EXECUTIVE REPORT

The past 10 years at our company have seen a series of major developments, leading to the construction of the Elia Group as we know it today. Indepen-dent, impartial and dedicated to its customers and the community, Elia has two core businesses in Europe and is firmly focused on the progress and op-portunities provided by the development of the European energy mix. The Group derives extra strength from the cultural diversity of both its staff and the envi-ronment in which it operates – a mixture of European, national and regional legislation, proven and prospective technologies, maturity and renewal, and the challenges of the future, which are truly opportunities for each and every one of us.

Since its establishment in June 2001, Elia has developed into a thriving and dynamic company, as evidenced by the following milestones: its appointment as the electricity transmission system operator for Belgium and the entry of Publi-T into our shareholding structure (2002); its acquisition of the engineer-ing company subsequently known as Elia Engineering (2004); its listing on the stock exchange, well received by the markets (2005); the establish-ment of the Belpex power exchange and market coupling between France, Belgium and the Netherlands (2006); the launch of the regional coordination centre Coreso in collaboration with RTE and National Grid (2009); its acquisition of 50Hertz Transmission in cooperation

Foreword by the Chairman of the Management Committee

with its Australian financial partner IFM; the start of market coupling with nine countries (November 2010) using the Cosmos algorithm developed by Belpex and Elia; its acquisition of a stake in the first project to build a direct-current offshore grid along the East Coast of the United States (2011). In addition to these notable achievements, Elia’s tariffs are among the lowest in Europe – proof, if needed, that growth and efficiency can be combined for the benefit of our customers.

All these initiatives are the result of a joint effort by every one of our employ-ees, who work around the clock to ensure the safe and secure operation of the electricity system as well as its development to meet the expectations of our customers and the community. They also reflect our commitment to establishing a genuine internal electricity market which is both competitive and reliable, and our support for energy and climate policies in Europe generally and in Belgium, Germany and their respec-tive regions in particular.

Our day-to-day activities to ensure the safety of individuals and installations include what many consider to be the obvious – a constant and competitively priced power supply of unparalleled quality.

By encouraging our employees and subcontractors to focus on this mission at all times we have, over the years, been able to establish ourselves as a driving force in Europe.

Developing this role is a more impor-tant aim for us now than ever before: over the coming decades, the energy landscape in Europe – and electricity grids in particular – will be completely revolutionised. To help us cope with this change, we intend to learn, innovate, experiment and cooperate. The Atlantic Wind Connection project demonstrates our desire to anticipate change and to get the Elia Group ready for action, for the benefit of our customers and the community at large in the countries where we operate.

Our incorporation in the BEL 20 index in March 2012 represents another oppor-tunity for the Group and also underlines the importance of our role and mission. I am convinced it will provide us with the means for continued growth through the development of high-performance offshore and onshore grids intercon-necting generation and consumption.

Daniel Dobbeni Chairman of the Management

Committee


Elia, the Belgian transmission system operator, holds licences for its 380 kV to 150 kV national grid and for its 70 kV to 30 kV grids in Belgium’s three regions.

50Hertz Transmission, one of Ger-many’s four grid operators and active in the northeast part of the country, is held jointly by Elia (60%) and Industry Fund Management (40%).

The Elia Group is one of the top five transmission system operators in Eu-rope and one of the top 15 in the world. It actively sets an example in terms of its independent outlook, of being a driving force behind the development of the European market, its commitment to ensuring security of supply and con-tributing to the integration of renewable energies.

It operates under the legal entity Elia System Operator, a listed company (with a public float of 52.10%) whose core shareholder is Publi-T, a municipal holding company. It has nearly 1,800 employees and helps ensure security of supply for 30 million consumers in Belgium and Germany.

ProfileThe Elia Group is organised around its two major transmission system operators: Elia in Belgium and 50Hertz Transmission in Germany.

Given its strategic position at the cross-roads between electricity markets in western, eastern and northern Europe, the Elia Group securely manages im-ports, exports and transits of electrical energy over its grids. It also plays a key role in directly and indirectly integrat-ing national markets in the shareholder structure of APX-Belpex-Endex and EPEX (power exchanges), CASC.EU and EMCC (capacity auction offices), Gridlab (a training centre) and Coreso (the regional cross-border flow monitoring centre). The Elia Group provides its cus-tomers and local authorities with a range of consultancy and engineering services driven by in-house skills and expertise for very-high-voltage equipment, IT tools designed specifically for managing grids and market models.

The Elia Group is a driving force in the construction of Europe’s future electric-ity superhighways (both offshore and onshore) and is involved in multiple in-ternational projects. In 2011, it acquired - via its subsidiary Eurogrid International - a shareholding in the Atlantic Wind Connection project to build the first direct current offshore grid off the East Coast of the United States. The exper-tise and skills acquired will be used to

design and develop future offshore grids in the North Sea and the Baltic Sea to connect major wind farms.

The Elia Group follows the rules on corporate governance and the corpo-rate governance codes applicable to listed companies. Its approach incorpo-rates respect for the environment and supports specific sustainable develop-ment policies at European, national and regional level.

Elia System Operator has been quoted on the regulated Brussels Euronext market since June 2005.

Elia Group

Business DevelopmentResearch & Development

Elia Transmission

50Hertz Transmission


This is the mission statement drawn up by Elia in 2008 and intended to give each and every employee in the compa-ny a clear view of our objectives and pri-orities. When reflected in the company’s values, it communicates the framework within which employees exercise and develop their activities within the Group and with respect to the outside world: entrepreneurship, integrity, empathy and responsibility.

Values“We are a team of professionals with the ambition to create shared wins for our customers and the community and to develop the European electricity market in a reliable, sustainable and efficient way.”

Shared company values

Entrepreneurial, ethical, caring and responsible – these values underpin how we conduct our business and meet the Group’s objectives.


Key events 20112011 was marked by a significant number of key events in both Belgium and Germany relating to the markets, the development of our grids, technology and Group management bodies.

13 JANUARY

EXTRAORDINARY GENERAL MEETING

APPROVES EXPANSION OF BOARD OF

DIRECTORS TO 14 DIRECTORS

To better respond to changes in Elia’s activities and its shareholder struc-ture, a proposal was made to expand the Board of Directors from 12 to 14 members at an Extraordinary General Meeting of shareholders. The motion was passed.

17 FEBRUARY

COUPLING OF THE BELGIAN AND

DUTCH INTRADAY MARKETS

Elia and TenneT (the Belgian and Dutch transmission system operators respec-tively) and the Belpex and APX-Endex power exchanges introduced an implicit intraday capacity allocation system at the Belgian-Dutch border. This cross-border intraday market meets a real need on the part of stakeholders who want to continue trading electricity practically up to real time, especially given the integration of a growing share of renewable energy.

22 MARCH

EUROPEAN COMMISSION OETTINGER

CELEBRATES MARKET COUPLING OF

9 COUNTRIES

Four months after the simultaneous launch of price coupling in 5 countries (CWE) and volume coupling with the Scandinavian countries (ITVC) (cover-ing generation capacity of 1,800 TWh and some 60% of European consump-tion), the stakeholders met in Brussels to celebrate this key stage which, as European Energy Commission Oettinger stressed, sets an example for all of Europe. The following stages will involve the transition to the flow-based model and the extension to other countries.

13 APRIL

KING ALBERT II VISITS ELIA

King Albert II visited the Elia site on Avenue de Vilvorde in the presence of Energy Minister Paul Magnette. The King, who is particularly interested in energy issues, visited the National Con-trol Centre and the Edison high-voltage substation where demonstrations were organised for him. He also met with young Elia trainees.

23 APRIL

GRAMME-ACHÊNE 380 KV

CONNECTION RESTORED The Gramme-Achêne 380 kV connection, which was damaged during the devastating storm on 14 July 2010 and temporarily replaced by an emergency line, was restored a few weeks earlier than planned thanks to the committed efforts made by Elia and contractors.


29-30 APRIL

ELIA JOINS FORCES WITH

WETENSCHAPSEXPO SCIENCES

Expo Sciences, organised by Jeunesses Scientifiques de Belgique and Jeugd, Cultuur en Wetenschap, brings together students from around the country. The aim was to make even the youngest schoolchildren more aware of sciences and future careers in science. Elia organised a special competition. The Elia exhibit featured a mock-up, learning materials and expert explanations giving young people a chance to learn about the many activities and career opportunities at Elia.

30 APRIL

ANGELA MERKEL INAUGURATES

BALTIC 1

German Chancellor Angela Merkel inaugurated Germany’s first commercial offshore wind farm. Baltic 1 is located in the Baltic Sea, 16 km from the coastline, and is connected to the 50Hertz grid. It comprises 21 wind turbines with a total capacity of 50 MW. With this project, the Elia Group deployed the expertise – unique in Europe – that will contribute significantly to future developments in the North Sea and Baltic Sea.

10 MAY

TWO NEW DIRECTORS APPROVED

BY ORDINARY GENERAL MEETING

OF SHAREHOLDERS

The Ordinary General Meeting of Shareholders approved the appoint-ment of two new directors, Miriam Maes (independent director) and Steve Stevaert (further to a proposal by core shareholder Publi-T). It also approved the motion to renew the directorships of the 14 directors and the appointment of the auditors.

16 JUNE

GREENING TRANSPORTATION

INFRASTRUCTURE FOR ELECTRIC

VEHICLES LAUNCHED

The Greening Transportation Infra-structure for Electric Vehicles project, sponsored by the European Union via the TEN-T (Trans-European Transport Network) plan, was launched in Co-penhagen. Elia is part of a consortium which includes Austrian TSO Verbund, industrial partners, public services and ONGs. Objective: study the options and conditions for developing the infrastruc-ture needed to support the sustainable use of electric vehicles.

17 JUNE

PILOT PROJECT ON

HIGH-TEMPERATURE CONDUCTORS

IN GÜSTROW

50Hertz began practical experiments on the latest generation of high-temperature conductors used to transmit bigger capacities of current, in the Güstrow high-voltage substation pilot project in Mecklenburg-Pomerania. The results are promising for deploying this technology in the 50Hertz grid in response to rising loads.

JUNE

EUROPEAN BACKING FOR ELIA’S

LIFE+ PROJECT

The European Commission agreed to subsidise for five years the LIFE+ project to manage woodland corridors around high-voltage lines in an environmen-tally sustainable way while respecting biodiversity. This innovative pilot project, which is also supported by the Walloon Region authorities, will be expanded to European scale by sharing knowledge with other European transmission sys-tem operators, i.e. a potential of around 300,000 km of green corridors.

Baltic 1 is the first German offshore wind farm in the Baltic Sea and has been connected to the 50Hertz onshore grid. The farm was officially opened by German Chancellor Angela Merkel.


27 JUNE

INAUGURATION OF THE NEW 50HERTZ

CONTROL CENTRE IN NEUENHAGEN

50Hertz’s entire very-high-voltage grid in northern and eastern Germany is managed from its new, super-modern control centre in Neuenhagen, near Ber-lin. The inauguration of this extremely safe and secure control centre was attended by European Energy Com-missioner Günther H. Oettinger and the State Secretary at the Federal Ministry for Economy and Technology, Jochen Homann.The centre plays a critical role in integrating large volumes of renewable energy.

28 JUNE

DANIEL DOBBENI APPOINTED

CHAIRMAN OF ENTSO-E FOR

A SECOND TWO-YEAR TERM

ENTSO-E, the European Network of Transmission System Operators for Electricity, represents the 41 op-erators of a grid comprising more than 300,000 km of overhead lines in 34 in-terconnected countries and over which electricity flows freely, from Portugal to Bulgaria and from Norway to Italy. The grid forms the foundation for the internal electricity market because it enables supply across Europe, promotes competition between suppliers and it enhances security of supply. ENTSO-E is responsible for drafting grid codes and the Ten-Year Network Development Plan for the Europe-wide transmission system.

22 JULY

PARTICIPATION IN

ATLANTIC WIND CONNECTION

Elia acquired - via Eurogrid International - a shareholding in the Atlantic Wind Connection project to develop the first direct current high-voltage offshore grid off the East Coast of the United States. In so doing, Elia has joined forces with Google, Marubeni, Good Energies and Atlantic Grid Development. Elia also signed a long-term consultancy contract with the project developer.

17 AUGUST

FIRST HELIBORNE OPERATIONS

ON LIVE LINES

Heliborne operations on a live 380 kV line were carried out for the first time in Belgium on the Achêne-Lonny line. The main benefit was that the line could remain in service during the work. This is critically important given the major flows of energy that transit over the Elia grid. The purpose of the pilot project was to assess the feasibility of carrying out other heliborne operations on live lines in the future.

26 AUGUST

PHILIP HEYLEN JOINS ELIA BOARD OF

DIRECTORS

Following the resignation of Johan De Roo, who had sat on the Elia Board of Directors since 2001 on behalf of Publi-T, the Elia Board approved the appointment of Philip Heylen further to a proposal by core shareholder Publi-T. Philipe Heylen is the alderman for cul-ture and tourism for the city of Antwerp.

EU Energy Commissioner Günther H. Oettinger officially opens the new 50Hertz control centre in Neuenhagen. The centre is fitted out with state-of-the-art technology to ensure safe and secure grid management.


LATE AUGUST

VISION OF AN OFFSHORE GRID

IN THE NORTH SEA

Elia published its future vision of the development of an offshore grid in the North Sea. The concept was developed in consultation with the developers of wind farms off the Belgian coast and is based on the step-by-step development of an offshore grid offering benefits comparable to the onshore grid in terms of reliability thanks to its meshed struc-ture, optimised investment and lower number of subsea cables running to the coast and connecting it to the onshore grid.

31 AUGUST

50HERTZ ORGANISES 4th SECURITY

OF SUPPLY CONFERENCE

Nearly 200 representatives of the electricity industry, universities and as-sociations met in Cottbus to attend the conference organised by 50Hertz on measures in order to safeguard security of operation in the light of the evolution of the energy sector, specifically the ongoing development of renewables. The conference was held against the backdrop of the consequences of Ger-many’s moratorium on closing down its nuclear power facilities.

13 SEPTEMBER

PUBLIC CONSULTATION FOR STEVIN

The public consultation on the re-gional land-use plan for the Stevin project (upgrading the 380 kV grid between Zomergem and Zeebrugge) was organised at the initiative of the Flemish government’s Spatial Planning department. The plan was provisionally passed by the Flemish government. Elia will organise information sessions for all towns involved.

22 SEPTEMBER

CREG CONSULTS ON DRAFT

TARIFF METHODOLOGY

CREG launched a consultation on its draft decrees establishing calculation methods and tariff conditions for con-necting to and accessing the grid for transmission purposes.

30 SEPTEMBER

AGREEMENT ON ELEANORE

COOPERATION

3E, Alstom Grid, CG, CMI, DEME Blue Energy, Eurogrid International (in which Elia holds 60% and IFM 40%) and SAG joined forces within the Eleanore project to jointly develop, operate and finance targeted projects in the North Sea, the Baltic Sea, the Celtic Sea and the Irish Sea.

1 OCTOBER

INTERNATIONAL COOPERATION IN

SYSTEM OPERATION AND CONTROL

In October 2011, the Netzregelverbund cooperative venture in grid manage-ment and control was launched with a test involving Danish transmission system operator Energinet.dk. Netzre-gelverbund aims to optimise the use of control energy while avoiding instances of activation in opposite directions in two zones. Following positive results in Germany, the initiative can now be implemented across national borders.

Live maintenance work: this pilot project is paving the way for alternative maintenance methods no longer requiring decommissioning.


14 OCTOBER

RENEWABLE ENERGY SURCHARGE

FORECAST BY GERMAN TSOS

In coordination with German regulator Bundesnetzagentur, 50Hertz and the three other German transmission sys-tem operators published their forecasts for the EEG renewable energy surcharge (as per Germany’s Renewable Energy Sources Act) for 2012. Forecast injec-tions of renewable energy will result in a surcharge of approximately €15 billion for Germany. The surcharge, payable by end consumers to support renew-able energy, will be 3.592 cents/kWh, slightly higher than in 2011 (3.530 cents per kWh).

20 OCTOBER

CONTRACT WITH SAUDI ELECTRICITY

COMPANY

A consortium comprising Elia, RTE International and Tractebel Engineering signed a framework contract with Saudi Electricity Company (SEC) to provide engineering consultancy services for the SEC Transmission division. These services encompass asset manage-ment and asset maintenance services, maintenance practices, asset perfor-mance management practices, grid system analysis practices and training practices.

10 NOVEMBER

RGI IN FAVOUR OF SUSTAINABLE

GRID DEVELOPMENT

System operators and environmental protection associations have joined forces in the Renewables Grid Initiative (of which the Elia Group is a found-ing member) to sustainably upgrade electricity systems in preparation for the wholesale integration of renewable energy. To that end, they jointly submit-ted the “European Grid Declaration on Electricity Network Development and Nature Conservation in Europe” to the European Energy Commissioner.

13 NOVEMBER

FEDERAL DEVELOPMENT PLAN

FOR 2010-2020 APPROVED

The 2010-2020 federal development plan for the transmission system sub-mitted by Elia was approved by Energy Minister Paul Magnette. It was accom-panied by an environmental impact assessment and was subject to a broad public consultation.

17 NOVEMBER

ALBERTO POTOTSCHNIG,

DIRECTOR OF ACER, ATTENDS ELIA

CUSTOMER DAY

Every year, Elia organises a Customer Day where it focuses on informing cus-tomers, enhancing dialogue with them and intensifying exchanges on issues of interest to them. Two discussion panels led to especially valuable exchanges with André Pictoel, head of VREG, Alberto Potoschnig, head of the Agency for the Cooperation of Energy Regula-tors (ACER) and Dominique Woitrin, Technical Director at CREG.


24 NOVEMBER

JACQUES VANDERMEIREN FUTURE

CEO OF ELIA

On 24 November the Elia Board of Directors approved the appointment of Jacques Vandermeiren, Chief Corpo-rate Officer and Vice-Chairman of the Management Committee, as the future general manager and chairman of the Elia Management Committee. In the second half of 2012, Jacques Vander-meiren will succeed Daniel Dobbeni, who will continue to guide and support the Group’s European and international growth.

30 NOVEMBER

50HERTZ FULLY COMPLIES

WITH ENTSO-E COMPLIANCE TEST

Following a two-day Compliance Monitoring audit carried out by ENTSO-E at the 50Hertz control centre to test whether procedures comply with the standards defined in the Operation Handbook of the European Network of Transmission System Operators for Electricity, the German transmission system operator was declared to be 100% compliant. This was the second time 50Hertz passed the test, after be-ing the first TSO to be audited in 2008.

DECEMBER

50HERTZ TIGHTLY CONFINED

FOLLOWING GERMAN MORATORIUM

ON NUCLEAR ENERGY

The German government’s decision to shut down eight nuclear reactors in March 2011 and to gradually phase out the remaining sites over the next 10 years has significant repercussions on the operation of the German and Euro-pean transmission system. The German TSOs, including 50Hertz, were faced with a drastic reduction in their room for manoeuvre, especially during the winter months. All steps had to be taken – enhanced coordination, appropriate operating methods, postponement of maintenance works, market-level work and suspension of generation unit over-hauls – in order to ensure the stability of the transmission system and security of supply.

22 DECEMBER

APPROVAL OF TARIFFS FOR 2012-2015

In Belgium, the Commission for Electric-ity and Gas Regulation (CREG) ap-proved the proposal submitted by Elia in accordance with the CREG rules on electricity transmission tariffs for the period from 2012 to 2015 (inclusive). The tariffs were drawn up following consul-tation between the regulator and Elia in order to send appropriate tariff signals to the market players, for both injection and offtake, and to meet the company’s needs in terms of pursuing its mission.

Alberto Pototschnig, Director of the Agency for the Cooperation of Energy Regulators (ACER), takes part in a discussion panel at the Elia Customer Day.


Prospects and challenges 2012The Elia Group is preparing for the challenges of the future by implementing a series of initiatives relating to both system operation or market integration and the development of new activities or the acquisition of new skills.

Tariffs for 2012-2015

The electricity transmission tariffs for the period from 2012 to 2015 were ap-proved by CREG in late December 2011. They send appropriate tariff signals to the market players, bearing in mind an increase in costs explained by external factors (inflation over four years, drop in income from transmission capac-ity auctions involving neighbouring countries, increase in control energy needs due to the growth in intermittent energy sources). This is accompanied by performance incentives for efficiency and replacement investments for Elia in order to maintain the quality of supply provided to our customers.

Future vision for an offshore grid in the North Sea

The transposition into Belgian law of the ‘third package’ of European directives aimed at developing a single electric-ity market expanded Elia’s scope for involvement into the development of an offshore grid in the North Sea. Elia had anticipated the decision by publishing its vision for developing the first offshore grid in the North Sea offering benefits comparable to the onshore grid in terms of reliability. It also presented a cost/benefit ratio that is more beneficial than individual connections for each wind farm by reducing the number of subsea cables to the coast and enabling better integration with other infrastructure projects off the Belgian coast.

This concept, developed in consulta-tion with the developers of wind farms off the Belgian coast, is currently being discussed with all of the project stakeholders with a view to specifi-cally defining the construction of two offshore platforms and the connection of future wind farms in question as well as the financial and legal framework for this major project at both Belgian and European level.

Ongoing cooperation with Elia subsidiary 50Hertz Transmission

The Group’s priorities for 2012, in col-laboration with financial partner IFM, are to continue the successful cooperation and the exchanges of expertise seen in 2011, intensify bonds between teams, define a joint mission and deploy all efforts to ensure the Elia Group is in the lead group of European TSOs in terms of independence, innovation and com-mitment to building the transmission system of tomorrow.

Elia plans to develop a genuine meshed offshore grid in the North Sea.

Daniel Dobbeni will hand over the reins as CEO of Elia to Jacques Vandermeiren at the end of Q1 2012.


Maintaining grid security: a growing challenge

Rising energy exchanges between transmission systems in different coun-tries following market liberalisation and fluctuating energy flows on transmis-sion grids due to the growing share of renewable energy sources were already major challenges to secure network operation.Efforts to ensure security of supply were further complicated by the drop in generation capacity due to the German government’s decision to shut down its eight oldest nuclear reactors, as well as decisions by Germany, Switzerland and Belgium to decommission their nuclear facilities over the next two decades, while the construction of large produc-tion units is being postponed year after year. The Elia Group is particularly vigi-lant in this respect and helps to coordi-nate the activities of European TSOs. In this respect, it promoted the option of having its own storage and generating resources to cover its reserve energy needs. While this provision was not included in the law passed in December 2011, Elia will continue to defend it.

Integration of the European electricity market

The Elia Group will continue its activities begun in 2006, when Belpex was cre-ated and trilateral market coupling was launched, to create a true European electricity market. The Group’s activities in 2012 will be guided by the implemen-tation of the flow-based mechanism within the North-West regional market, the continued development of cross-border intraday markets and the active contribution to the production of frame-work guidelines from the European Commission.

New interconnections

The Elia Group aims to lead the way in developing infrastructure to ensure se-curity of supply and the competitiveness of European companies. Examples: the interconnection between the grids operated by Elia in Belgium and National Grid in the UK, the direct current inter-connection between the Elia grid and the Amprion grid in Germany to create a pilot project for the development and implementation of future European superhighways, the interconnection with Poland, the enhancement of intercon-nections with countries neighbouring Elia in Belgium and 50Hertz in northern and eastern Germany.

International initiatives: Atlantic Wind Connection

Eurogrid International, in which Elia holds a 60% stake, acquired a share-holding in the Atlantic Wind Connection project to develop the first high-voltage direct current offshore grid off the East Coast of the United States, thus joining forces with Google, Marubeni, Good Energies and Atlantic Grid Development. The decision to include the project in the portfolio of PJM (a regional trans-mission organisation) could emerge in 2012-2013, moving the project into the concrete realisation phase.

Transition in the Group leadership

When it approved in November 2011 the appointment of Jacques Vandermeiren, Chief Corporate Officer and Vice-Chair-man of the Management Committee, as the future Chief Executive Officer and Chairman of the Elia Management Com-mittee, the Board of Directors defined the conditions governing the optimum succession for all parties concerned by the success of the Elia Group. Jacques Vandermeiren will, in the second half of 2012, succeed Daniel Dobbeni, who will continue to make his experience available to the company and support the Group’s European and international development, especially within the deci-sion-making bodies of its subsidiaries.

This project involves the construction of the first offshore grid along the East Coast of the United States.


The Elia share in 2011Overall, 2011 was a volatile and negative year for stock market indexes, mainly due to the crisis of confidence in the euro. However, the Elia share has continued to perform well.

Now that the company is resolutely Eu-ropean in scope, the Group’s risk profile improved significantly, contributing to share stability throughout the year. With the exception of a brief upsurge to €32.33 in late May (following the announcement of Germany’s morato-rium on nuclear power stations) and a brief drop to €27 in early August (first peak in the euro crisis), the share acted defensively. It should also be noted that the payment of a dividend of €1.40 on 25 May 2011 did not have an impact on the share price.

The liquidity of the share rose by 64% (from 23,096 shares per day to 37,972 shares per day on average), whereas it had grown by 115% in 2010. This is mainly due to the increase in the public float.

The Elia share ended 2010 at €28.66. The price at the end of 2011 was €29.93, up 4.43%. If the dividend of €1.40 is taken into account, the share price rose 9.32% during the year.

The lowest price in 2011 was €26.50 on 9 August 2011 and the highest price was reached on 31 May at €32.33.

Overall, in 2011 the Elia share outper-formed the BEL 20 index by 23.63%. In fact the BEL 20 was down 19.2%.

0

20

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Volume (’000)Price (€)

DECNOVOCT SEPTAUGJULJUNMAYAPRMARFEBJAN

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PRICE AND EXCHANGE VOLUME TRENDS IN 2011

■ Price ■ Volume


70

75

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JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC

■ Elia ■ Bel20

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75

85

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125

JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC

■ Elia ■ Tema ■ Red Electrica ■ National Grid ■ DJ Utility index

ELIA SHARE TRENDS COMPARED WITH THE BEL20 INDEX IN 2011

ELIA SHARE TRENDS COMPARED WITH ITS PEERS IN EUROPE IN 2011


With the exception of UK system operator National Grid (up 13.2%), Elia’s results were better than those of its listed counterparts: Spain’s Red Electrica (down 6.07%) and Italy’s Terna (down 17.6%). By way of comparison, the electricity sector as a whole was down 19.85% in 2011 (see previous

The Elia share has been performing well compared to other listed system operators since early 2008.

table). The Elia share has been perform-ing well compared to other listed system operators since early 2008.

With 60,355,217 shares issued, the market capitalisation represented €1,806,431,645 at the end of December. In 2011, 9,758,889 Elia shares in all were

Month Volume Closing

price PriceFreefloat turnover

Market capitalisation

(daily average) Highest Lowest Rate In € m

January 27,476 29.17 29.60 28.67 2.12 1,761

February 30,604 28.46 29.20 28.27 2.25 1,718

March 50,698 28.79 29.25 27.72 4.29 1,738

April 19,194 29.95 29.95 28.80 1.34 1,808

May 46,837 32.33 32.33 28.92 3.79 1,951

June 31,733 29.45 31.91 28.54 2,57 1,777

July 17,731 28.50 29.30 28.50 1.37 1,720

August 34,180 30.45 30.45 26.50 2.89 1,834

September 59,516 30.38 30.98 28.60 4.82 1,771

October 66,998 29.35 30.59 29.00 5.18 1,771

November 49,375 29.35 29.81 28.22 4.00 1,771

December 16,642 29.93 29.93 28.30 1.29 1,806

Year-to-date 37,972 29.93 32.33 26.50 35.93 1,806

traded on the Euronext Brussels market, i.e. 35.9% of the freely tradable shares. The table below gives an overview of the monthly statistics for the Elia share on Euronext Brussels in 2011.


Appointment of two liquidity providers for the Elia share

In late 2009 Elia concluded a liquidity provider contract with KBC Securities and Banque Degroof, both of which are officially recognised by NYSE Euronext. These two financial institutions have been continually present in the order book for the Elia share since 1 Decem-ber 2009 and are involved in both sales and purchases.

The Elia share and its codes

SHARE INDEX

On 31 December 2011, Elia’s share was included in the BEL Mid index. Elia’s weight on that date was 7.23%, ranking it fourth in the index.

Elia share on the market

Elia strips on the market

Market Euronext Brussels Euronext Brussels

Index BEL MID -

Ticker ELI ELIS

ISIN BE 0003822393 BE 0005597688

Code Bloomberg ELI BB ELI BB

Reuters code ELI BR ELI BR

A sustainable and socially responsible company

Elia was rated by Vigeo, an extra-financial agency which analyses every company in six areas:

• relations with customers/suppliers;• human rights;• environmental policy;• external social policy;• corporate governance;• human resources.

The Elia share is also included in Kem-pen’s SNS SRI Universe and ASN Bank.

Elia was also certified by ECPI, a rat-ings company specialising in corporate social responsibility (ESG (Environmen-tal, Social & Governance) research) and obtained the ECPI Ethical EMU Equity label.

The Elia share is certified by several institutions for corporate social responsibility.


Transparency regulations and disclosure of interests

Under Belgian legislation on transpar-ency, shareholdings of at least 5% (or a multiple of 5%) must be reported to FSMA and to the company in question. No transparency reports were sent to Elia in 2011.

Shareholder structure

The shareholder structure of Elia System Operator SA as at 31 December 2011 is given above.

Dividend

On 28 February 2012, the Elia Board of Directors decided to propose at the general meeting of shareholders of 15 May 2012, in accordance with the dividend policy and subject to approval of the profit appropriation by the annual general meeting of shareholders, a normal dividend of €88,7 million or €1.47 per share (gross). This gives a net result of €1,1025 per share without VVPR strip and €1,1613 per share with VVPR strip.

SHAREHOLDER STRUCTURE

Shares % Shares % Votings rights

Publi-T 27,383,507 45.37 45.37

Publipart 1,526,756 2.53 2.53

Arco Group 5,306,880 8.79 8.79

Other free float 26,138,074 43.31 43.31

Total 60,355,217 100.00 100.00

The following paying agents will pay out dividends to shareholders: Fortis Bank, ING Belgium, KBC-Bank/CBC Banque and Dexia Bank. Dividend payouts for shares held in a stock account will be settled automatically by the bank or stockbroker. Elia will pay out dividends on registered shares directly to share-holders.


Dividend policy

Elia is obliged by its articles of associa-tion to pay out at least 85% of profit gained, after retaining 5% for the legal reserve. This represents a payout ratio of 81% of recorded profit.

Following the introduction of multi-year tariffs, part of the net profit derived from offsetting decommissioning gains in the tariffs must be reserved under equity. As a result, the overall payout ratio fell slightly but this situation enhanced Elia’s (self-)financing capacity.

Financial calendar

29 february 2012 (8 a.m.) Publication of the 2011 annual resultsEarly April 2012 Availability of the 2011 annual report 15 May 2012 General meeting of shareholders15 May 2012 Interim statement for Q1 2012 Late May 2012 Payment of 2011 dividend (coupon nr. 7) 31 August 2012 (8 a.m.) Publication of half-yearly results for 2012 15 November 2012 Interim statement for Q3 2012

Investors

For any questions regarding the Elia share, please contact:

EliaInvestor Relations DepartmentBoulevard de l’Empereur 20B-1000 BrusselsBelgiumTel.: +32 2 546 72 39Fax: +32 2 546 71 80E-mail: [email protected]

Information about the Group (press releases, annual reports, share prices, disclosures, etc.) can be found on the Elia website www.elia.be in three languages (French, Dutch and English). Elia’s financial newsletter Investor News provides investors with up-to-date in-formation about the company. Just sign up on the website to receive it electroni-cally.


In the face of the challenges posed by changes in the energy mix, the Elia Group – organised around its two TSO activities, Elia Transmission in Belgium and 50Hertz Transmission – is pursuing its role as a leading player in the sector in Europe by taking a raft of initiatives aimed at the integration of electricity markets and of renewable energy sources and at security of supply for its customers and the community.

Economic report

01

21ELIA GROUP 2011 ECONOMIC REPORT

01

Guido CampsDIRECTOR FOR PRICING AND ACCOUNT CONTROL, CREG

Providing incentives for sound business management

“In the case of monopoly companies, i.e. companies with no competition, the regulator ensures that consumers get the best possible service at the best possible price. In other words, it has to see to it that the company’s outlay really suits the consumer. In this context, we believe that the introduction of incentive mechanisms could contribute to sound business management.

“The ‘cost +’ tariff method we are applying is generally accepted by all regulators. The aim of the first incentive mechanism, applied during the 2008-2011 period, was to cut operational ex-penditure (OPEX) based on the premise that monopoly companies naturally tend to overspend.

To that end, a target was set to reduce OPEX and pass on the first €25 million of savings to consumers and the next €25 million to the company.That target was reached, and we can safely say that both parties – the regula-tor and the regulated company – are satisfied.

“For the 2012-2015 tariff period, we will continue to apply the ‘cost +’ method and have retained the first mecha-nism on the same grounds as before. However, we have also added another mechanism, not to cut costs this time, but rather to maximise the expenditure providing the best return for consumers.

“What kind of expenditure, you may ask? Grid infrastructure, has a very long lifespan. It represents the most signifi-cant cost factor in terms of investment, finance, amortisation and maintenance.

With this in mind, we introduced the new incentive to encourage Elia to realise the maintenance investments it undertook to carry out, with a focus on high-quality power supply – and hence on consum-ers’ best interests.

“To round off, I should point out that this mechanism is the result of an agreement between Elia and the regulator.”

We have added another mechanism, not to cut costs this time, but rather to maximise the expenditure providing the best return for consumers. The aim is to encourage Elia to draw up an investment budget for the maintenance it undertook to carry out, with a focus on high-quality power supply – and hence on consumers’ best interests.

22 ELIA 2010 ECONOMIC REPORT

Intraday markets are becoming increasingly important for the technical and economical operation of the electricity system due to the growth in power generation from more variable renewable energy sources.

With some 41% of wind power generation capacity in Germany installed within our control area, 50Hertz can justifiably be considered the ‘European champion’ of integrating renewables. On windy days, more than 9,700 MW of wind are injected into our control area.

“As a power transmission system operator responsible for managing the electricity system in northern and eastern Germany, 50Hertz has unique experience in integrating power gener-ated from renewable energy sources. With some 41% of wind power gen-eration capacity in Germany installed within our control area, 50Hertz can justifiably be considered the ‘European champion’ of integrating renewables.

Exchanges with neighbouring coun-tries are intensifying and constantly changing based on the ever-increasing volumes of renewable energy. On windy days, more than 9,700 MW of wind power – equivalent to the electric-ity generated by nine nuclear power stations – are injected into our control area. When demand in our area is low, this energy (which is given priority in line with European directives) must

be safely transported to south-east Germany. One of the many roles of the control centre is to ensure safe transmission in real time, a task made even more challenging by the gradual closure of nuclear power stations. The number of critical situations on the grid and measures taken to resolve them has grown considerably.”

Hans-Peter ErbringMANAGER RESPONSIBLE FOR OPERATING THE 50HERTZ ELECTRICITY SYSTEM

“Intraday markets are a tool used by market players to buy and sell electric-ity in the space of a given day, ideally at any time and as close as possible to physical delivery. This enables them to balance their generation and consump-tion portfolios at the lowest possible cost, based on (unforeseen) variations due to weather – in the case of wind power, for example – or the breakdown of a particular generation unit. Intraday markets are becoming increasingly important due to the growth in power generation from more variable renew-

able energy sources such as wind or solar power.

The cross-border intergration of Mem-ber States’ electricity market, through the transmission capacities, allows mar-ket players to access larger volumes of electricity at competitive prices with a view to balancing their portfolios.

The Belgian and Dutch intraday markets have been successfully integrated since February 2011. In March 2012, this inte-gration will be extended to all Scandi-

navian countries via the interconnection cable between the Netherlands and Norway. Belgian electricity suppliers will immediately benefit from an integrated intraday market running from Belgium to Finland.

“The integration of intraday markets from the whole of North West Europe is scheduled for late 2012.”

James Matthys-Donnadieu HEAD OF THE EUROPEAN MARKET INTEGRATION DEPARTMENT

23ELIA GROUP 2011 ECONOMIC REPORT

A number of factors are radically chang-ing the centres’ role, leading to a need for increasingly sophisticated tools and skills:

• increasing exchanges of energy between national electrical systems following market liberalisation;

• the variability of energy flows on the transmission systems due to the growing share of energy generated by renewable, and intermittent, sources (especially wind energy and photovoltaic panels);

• the reduction of generation capac-ity following the German govern-ment’s decision in March 2011, in the wake of events at Fukushima, to shut down its eight oldest nuclear reactors (with a generation capacity of some 8,000 MW, or more than two-thirds of total consumption in Belgium);

• Germany, Switzerland and Belgium’s decision to abandon nuclear energy in the next two decades;

Grid operationThe Elia Group’s grids are part of the European continental interconnected system running from Portugal to Bulgaria and from Norway to Italy.The Belgian and German control centres maintain an instantaneous balance between generation and consumption and manage energy flows in close collaboration with the transmission system operators from neighbouring countries.

• the growing share of energy gener-ated by generation units connected to the distribution systems that do not contribute to management of the electrical system;

• the postponement, year after year, of construction of large generation units due to the difficulties involved in obtaining permits and the uncer-tainties associated for example with the financial and economic crisis.

Against this fast-changing backdrop, the Elia Group in cooperation with the operators of the interconnected grids is developing new skills and tools:

• within a few months, 50Hertz and its three fellow German TSOs have used a wide range of means to deal with the reduction in voltage regula-tion tools in certain geographical areas and to increase transmission capacities including, when neces-sary, cancellation of maintenance work, with a view to optimising the stability of the electrical system and security of supply;

• Elia, coordinating with the FPS En-ergy and the Federal Crisis Centre, has set out coordinated measures that will be taken in the event of a power shortage;

• an intraday adjustment mechanism, enabling the market players to align their level of generation with their customers’ consumption throughout the day, was introduced in collabo-ration with Dutch TSO TenneT and the Belgian power exchange Belpex and its Dutch counterpart APX-Endex;

• on the initiative of Elia and the Coreso coordination centre, the phase-shifting transformers of Amprion in Germany, TenneT in the Netherlands and Elia are managed in a coordinated way so as to shore up the commercial capacities allocated to the market players and increase security of supply.

However, these measures, some of which are temporary in nature, are no substitute for the new generation and transmission facilities units required in Belgium and Germany to cover the demand for electricity.

Belgium emerges, year on year, as one of the best countries in Europe in terms of quality of electricity supply.

24 ELIA GROUP 2011 ECONOMIC REPORT

Security of supply

Security of supply in Belgium remained at a high level in 2011. The average number of interruptions on the Elia grid per consumer (Average Interruption Frequency) was 0.0903, equivalent to one interruption per customer every 7.8 years.

The average duration of interruptions was 25 minutes and 44 seconds. Spread across all customers, the

average duration of interruptions was 2 minutes and 19 seconds per customer (Average Interruption Time1), equiva-lent to an average availability of more than 99.999%, which is higher than the average for the last decade. Belgium thereby emerges, year on year, as one of the best countries in Europe in terms of quality of electricity supply.

In Germany, the integration of an even higher proportion of renewable energy was the main challenge for operational security. Special measures, stipulated by German legislation (Article 13 of the Energy Industry Act (EnWG)), had to be applied more frequently because of critical situations due to extensive renew-able generation (wind and photovoltaic energy). At least one of these measures had to be applied for some 213 days of the year. Thanks to close cooperation between 50Hertz Transmission and the other stakeholders in the electricity sys-tem and the expertise of the team at the control centre, no incidents or interrup-tions of supply were recorded in 2011.

2’19’’Spread across all customers, the average duration of interruptions was 2 minutes and 19 seconds per customer (Average Interruption Time).

Consumption

Electricity consumption as recorded on Elia’s transmission system is a good indicator of economic life. It has been scrutinised very closely since the start of the economic crisis in October 2008, not only by the Elia Group, but also by external observers in search of signs of an economic recovery in Europe.

1 The AIT is an indicator that can vary widely from year to year depending on the location and complexity of the incidents and the time at which they occur. Customers may experience very different power interruptions. As the number of incidents entailing interruptions is very limited, the annual overall figures cannot really be considered as valid statistics on which to base conclusions about the observed trends

Security of supply

Thanks to close cooperation between 50Hertz Transmission and the other stakeholders in the electricity system and the expertise of the team at the control centre, no incidents or interruptions of supply were recorded in 2011.

25ELIA GROUP 2011ECONOMIC REPORT

Consumption indicator

In Belgium, the consumption indicator2 for the Elia control area fell by 3.7%, from 86.6 TWh in 2010 to 83.4 TWh in 2011. On an annual basis, this consumption indicator reached its highest value in 2005 (89.5 TWh).

The monthly values recorded in 2011 were down from the equivalent months in 2010, but were up on the equivalent months in 2009, except for September and October.

Overall, consumption in 2011 was 0.5% lower than in 2010 for industrial custom-ers connected directly to the Elia grid, and 5.1% lower for industrial, business and residential customers of the distribu-tion system operators.

2 The Elia consumption indicator covers most of the electricity consumption in Belgium. It includes all the generation capacity connected to the Elia grid, and the import-export balance. The share of consumption provided directly by the generation facilities connected to the distribution grids is not included in the indicator.

Consumption peaks

In Belgium, the maximum consumption on the Elia grid in 2011 was 13,208 MW, re-corded between 5.45 p.m. and 6 p.m. on 11 January 2011. This is 5.9% lower than the all-time record, set on 17 December 2007 (14,033 MW) and 4.6% lower than the maximum value recorded in 2010 (13,845 MW on 1 December 2010).

The lowest consumption (6,232 MW) was recorded between 6.15 a.m. and 6.30 a.m. on 24 July 2011. This annual low was 0.7% lower than the minimum value in 2010 (6,278 MW on 25 July 2010).

In Germany, the maximum load in the 50Hertz control area was 10,162 MW or 2,890 MW lower than in 2010.

Imports and exports

In 2011, the import trend of the Belgian control area became more marked, with a balance of 2.61 TWh, after 2010 had seen a net import balance of 0.55 TWh.The rising import trend recorded until 2008, which was reversed in 2009 due in particular to the economic crisis, was picked up again in 2010. Physical exchanges of electricity with neighbouring countries via the Elia grid totalled 23.92 TWh in 2011 – down 1.3% from 24.24 TWh in 2010. The increase in imports (up 7.0%) went on in 2011, mainly from France (up 128.0%), while exports decreased (down 10.1%), mainly to France (down 56.9%).

50Hertz imported 16.3 TWh of electricity in 2011 (17.8 TWh in 2010), mainly from the Czech Republic and TenneT Ger-many, and exported 34.4 TWh (29.4 TWh in 2010), mainly to Poland and TenneT Germany. As a result, net exports of electricity were up 56% from 11.6 TWh to 18.1 TWh.

■ 2008 ■ 2009 ■ 2010 ■ 2011

CONSUMPTION INDICATOR

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DECNOVOCTSEPTAUGJULJUNMAYAPRMARFEBJAN

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IMPORTS AND EXPORTS – ELIA GROUP (per month)

(GWh) (GWh) (GWh) Change (%) Change (%)

2011 2010 2009 2011-10 2011-09

Elia System Operator

France importexport

7,2212,330

3,1675,409

1,8326,642

128.0-56.9

294.2-64.9

Netherlands importexport

4,5147,004

7,3835,313

5,7873,769

-38.931.8

-22.085.8

Luxembourg importexport

1,5321,318

1,8461,122

1,868910

-17.017.5

-18.044.9

Total importexport

13,26710,652

12,39511,844

9,48611,322

7.0%-10.1%

39.9%-5.9%

Balance Exp-ImpExp+Imp

-2,61523,919

-55224,239

1,83520,808

374.1%-1.3%

-242.5%15.0%


Poland importexport

4325,136

1675,331

1345,616

61-4

69-9

Czech Republic importexport

1,7051,850

2,922494

2,314914

-7173

-3651

Denmark importexport

2,0871,238

6912,742

1,2841,800

67-122

38-45

TenneT GmbH importexport

12,11326,180

14,06720,874

13,30122,498

-1620

-1014

Net offtake from the grid

Net offtake is a measure of the volumes of energy taken from the Elia grid. In the case of local generation, some or all of the power generated is consumed directly on the site of the industrial customer or distribution system operator. The level of local generation was significantly higher than in 2010 (up 6.4%).

Since energy generated and consumed locally is not drawn from the Elia grid, it is not counted as part of the net offtake, al-though it is included in the domestic con-sumption indicator. In 2011, net offtakes were 4.4% down on 2010, from 76,390 TWh in 2010 to 73,052 TWh in 2011.

In 2011 a net volume of 59 TWh was drawn off from the 50Hertz grid. The net offtake of electricity was 6.3% lower than during the same period last year (63 TWh).The maximum offtake within the 50Hertz grid was 10,162 MW in 2011. This is 28% less than the maximum offtake in 2010 (14,058 MW), a result of additional decen-tralised generation, mainly wind and solar, connected to distribution grids.

Balancing generation and consumption to meet the needs of the market

Balancing generation and consumption is primarily the responsibility of market players, in particular Access Responsible Parties (ARPs). ARPs are expected to ensure the best possible balance between their supply sources and their customers’ consumption. To this end, each ARP must inform Elia, one day ahead, of all the energy exchanges it will perform, on a quarter-hourly basis for each point on the

grid. This applies to injections and offtakes, exchanges between ARPs, imports and exports. The residual imbalance for the Belgian control area is offset in real time by Elia using energy reserves available under contract with generators and industrial customers in Belgium.

In Belgium, the volume of energy activated by Elia to ensure the balance of the control area was 1,092 GWh in 2011, as opposed to 844 GWh the year before.

The control power needed to offset the difference between generation and consumption in the 50Hertz control area amounted to 1,383 GWh in 2011, compared with 1,703 GWh in 2010.


InfrastructureLENGTH OF THE HIGH-VOLTAGE GRID AT 1-1-2012

Voltage (kV) Underground cables (km) Overhead lines (km) Total (km)

Elia 2012 2011 2012 2011 2012 2011

380 - - 891 891 891 891

220 5 - 297 297 302 297

150 433 427 2,007 2,008 2,440 2,435

70 280 280 2,381 2,382 2,661 2,662

36 1,921 1,927 8 8 1,929 1,935

30 127 141 22 22 149 163

Total Elia 2,766 2,765 5,606 5,614 8,372 8,379

50Hertz 2012 2011 2012 2011 2012 2011

AC 380 55 55 6,830 6,830 6,885 6,885

AC 220 3 3 2,862 2,862 2,865 2,865

AC 150 75 - - - 75 -

DC 400 15 15 - - 15 15

Transmission grid 150 73 9,690 9,690 9,840 9,765

AC 110 2 2 13 23 15 25

Total 50Hertz 150 75 9,705 9,715 9,855 9,790

The figures do not include networks not owned by Elia. For the overhead lines, the figures shown are geographical lengths, i.e. the sum of the geographical lengths of the overhead lines (whether or not they were in operation) that are given in the table. Parallel circuits are counted only once. For the underground cables, the figures shown are electrical lengths, i.e. the sum of the lengths of the connecting

circuits in operation which are given in the table. Parallel circuits are counted only once.

Note the emergence of 220-kV un-derground cables for connecting up a customer facility whereas previously overhead lines were systematically used for this voltage. This reflects the devel-opment of technology.

The total length of the network of un-derground cables has decreased, after some connections were put in reserve.


InvestmentsInvestments by the Elia Group in its transmission systems are driven by various factors.

The need to meet the connection and upgrade requirements of industrial customers and distribution system op-erators, to cope with changing demand in terms of both volume and localisation of energy drawn, to replace facilities at the end of their service life or bring them in line with environmental requirements, to contribute to the liberalisation of the market, and to promote the integration of renewable energy sources. Each infrastructure project is based on criteria relating to the reliability, economic efficiency and sustainability of the pro-posed options.

Each infrastructure project is based on criteria relating to the reliability, economic efficiency and sustainability of the proposed options.


The Elia grid in Belgium

Connections requested by industrial customers

More than 20 projects to connect up new industrial customers or modify existing connections were studied from a technical and economic perspective in 2011.

Elia has also used underground cables to put in place an electrical connection to the new 220-kV high-voltage substa-tion at Berneau on behalf of Fluxys (operator of the natural gas transmission system). This connection was estab-lished on a loop of the existing Lixhe-Jupille line.

In the case of the GlaxoSmithKline site at Wavre, 36 kV connections were laid between Louvain-la-Neuve and Basse-Wavre, on the one hand, and the customer’s site, on the other, to enable the initial phase of the sched-uled load increase. At a subsequent stage, a 150 kV connection will upgrade the Basse-Wavre substation, using a 150/36 kV transformer.

Grid upgrades to keep up with electricity consumption About ten projects to upgrade the trans-formation capacity to medium voltage or extend the medium-voltage facilities were launched in 2011 to deal with an increase in consumption in some distribution systems. Examples are the 36 kV Destelbergen and 70 kV Recogne facilities.

Facility replacement programme

In 2011, Elia continued to implement its programme to renovate its facilities, al-lowing it to maintain the high level of reli-ability it offers its customers. Examples include the replacement of 36 kV facilities in the Botanique high-voltage substation in Brussels and a number of other projects such as the replace-ment of a 36/12 kV transformer in the Wichelen substation.

Integration of decentralised and/or onshore renewable energy generation

Elia, in close collaboration with the dis-tribution system operators, conducted a number of studies enabling the safe in-tegration of decentralised generation or renewable energy generation at minimal cost for the community.

Significant achievements in this regard in 2011 were the renovation of the high-voltage substation at Monceau-en-Ardennes with a view to connecting up local generation in the area and the 150-kV injection project at Rijkevorsel mak-ing use of a new 150 kV underground connection at a branch point on the existing Massenhoven – Sint-Job line.

Projects falling outside current investment plans

The very high winds that hit Wallonia on 14 July 2010 caused a lot of damage, and the Elia transmission system was no exception. The night following the storm Elia put in place a temporary back-up solution to supply the town of Dinant. Within a few days, Elia also implemented a 380 kV back-up line to restore the France-Bel-gium interconnection and established a back-up supply for the Tihange nuclear power plant’s ancillary services.

20More than 20 projects to connect up new industrial customers or modify existing connections were studied from a technical and economic perspective in 2011.


The various components of the grid that had been damaged were subse-quently repaired or replaced and work on reconstructing the final damaged line was completed on 6 July 2011. Thanks to the commitment of Elia’s staff and subcontractors, all these activities were carried out without causing any delays to the works scheduled at the start of the year.

Stevin: extension of the 380 kV grid to the coast

Through the Stevin project, involving a 380 kV line between Zomergem and Zeebrugge, Elia wants to achieve four objectives: to connect up the second phase of offshore wind farms off the Belgian coast; to connect up many decentralised renewable energy genera-tion units; to create a subsea intercon-nection between the Belgian and UK grids; and to enhance security of supply in West Flanders, and in particular around the port of Zeebrugge.

Final version of the development plan

The final version of the plan is the culmination of a process including an impact assessment and consultation of the general public, the Federal Council for Sustainable Development (FRDO/CFDD), the SEA Advisory Committee (of the Federal Public Service Health, Food Chain Safety and Environment), the authorities and the regulators.

International projects

Interconnection with Germany: ALEGrO projectThe studies conducted in 2011 confirmed the advanta-geous nature of a DC connection between the German and Belgian grids, which will be a first in the Central West Europe region. The project, which has been given the name ‘ALEGrO’ (Aachen Liège Electric Grid Over-lay), will consist of a very high voltage DC cable (with power of 1,000 MW to 1,600 MW) running for around 100 km between the Lixhe substation in Belgium and the Oberzier substation in Germany. In 2011, Elia and transmission system operator Amprion decided to launch the initial phase with a view to laying down the technical aspects and to starting up the authorisation procedures. Commissioning of ALEGrO is planned by 2017. Interconnection with France The studies launched in 2010 by Elia and French transmission system operator RTE and as part of the 10-year ENTSO-E development plan will lead to an upgrade of the transmission capacity between Belgium and France by 2018-2020. Therefore, a feasibility study was started to assess the impact on security of sup-ply, electricity market integration and renewable energy integration. This phase will conclude with a concrete investment proposal based on the results of a cost/benefit analysis.


In 2011, important steps were taken in the permit procedures. For example, the environmental impact report (‘plan-MER’ or ‘milieu-effectenrapport’), which includes alternatives and additional environmental aspects, was approved in May. On 22 July, the government of the Flemish Region outlined the new infrastructure (route, location of high-voltage substations, requirements) in its draft regional land-use plan (‘GRUP’ or ‘gewestelijk ruimtelijk uitvoeringsplan’). The route proposed by the Flemish government comprises 47 km of con-nections, including 10 km underground. The overhead connection follows existing routes and corridors as much as possible. The public consultation period that is provided for in the context of this procedure came to an end; after assessing objections (this process


Interconnection with the UK: the Nemo projectElia and National Grid have continued their joint works aimed at creating a subsea DC connection, of some 130 km in length, between their grids with a view to increasing market liquidity and enhancing security of supply in both the UK and Belgium. The DC connection comprises two separate cables (one with a positive voltage, and the other with a negative voltage). The two ends are connected to a high-voltage substation, a converter station for DC/AC conversion and connection to the existing 380 kV onshore grids. The actual conversion will be carried out by power electronic semiconductor components. The connection will have a capacity of between 700 MW and 1,300 MW, depending on the findings of the ongoing study. While the technical study was completed in 2011, significant steps were also taken in defining the regulatory framework following, for example, a consultation of the market players organised jointly by the Belgian regulator CREG and its UK counterpart OFGEM. It put forward a regulatory model specifically for interconnectors, with Nemo as the pilot project. The connection is due to be commissioned by 2017-2018.

is currently in progress), the Flemish government should announce its final decision in the spring of 2012. Depend-ing mainly on whether building permits are granted, commissioning is expected in late 2014.

Federal development plan approved

In November 2011, the Federal Minister for Energy approved the final version of the development plan 2010-2020 for the electricity transmission system. The plan presents a detailed estimate of transmission capacity needs, based on a series of underlying hypotheses and is in line with the 10-year development plan drawn up by ENTSO-E.

The plan was drawn up in cooperation with the Directorate General for Energy of the Federal Public Service Economy, SMEs, Self-employed and Energy and the Federal Planning Bureau, taking par-ticular account of the prospective elec-tricity study. The final version of the plan is the culmination of a process including an impact assessment and consultation of the general public, the Federal Coun-cil for Sustainable Development (FRDO/CFDD), the SEA Advisory Committee (of the Federal Public Service Health, Food Chain Safety and Environment), the authorities and the regulators.

The direct-current subsea link will be connected on both sides of the English Channel to AC/DC conversion stations.


The 50Hertz Transmission grid in GermanyNorth connection Schwerin for connecting Hamburg wind farms

The connection comprises a number of sections, including one – in Meck-lenburg-Western Pomerania – that was completed in July 2010. The public con-sultation relating to the second change to the schedule for the section in Schleswig Holstein is finished and a decision on whether or not permission will be granted is expected in 2012.

Southwest interconnection

The first part of the connection, be-tween Lauchstädt and Vieselbach, was commissioned in December 2008. For the second part, between Vieselbach and Altenfeld, the planning authority put forward a draft decision in late Decem-ber 2011 and planning permission is expected soon. Appeals against this could delay the project for another year.

The regional planning procedure for the third part, between Altenfeld and the border with Bavaria, was completed in March 2011. The approval document is in preparation.

Ring north of Berlin

The regional planning procedure has been completed and the final route has been decided. The connection will be built in at least two phases to ensure the security of supply to the Hennigsdorf metallurgical industry. The procedures relating to the two phases are carried out in coordination with the planning authority.

Uckermark connection

The regional planning permission pro-cedure has been completed, while the approval procedure is still ongoing. Inten-sive information campaigns and dialogue are under way with politicians, citizens and local environmental associations.

Bärwalde – Schmölln

The regional planning procedure has been completed. Preparations are being made for the approval procedure.

First national grid development plan

In 2012, 50Hertz and the three other German system operators Amprion, TenneT and EnBW TNG will publish a grid development plan that will reflect the expected developments in the German electrical infrastructure over the next 10 years and a 20-year forecast. It will also include specific recommendations on the expansion and construction of transmission systems in Germany, based on a range of technical options including specifically the abandonment of nuclear energy by 2023.From the start of the process, the stake-holders’ involvement is crucial. Against this backdrop, the German TSOs have launched a website about the process and the consultation (www.netzentwick-lungsplan.de).


Interconnection with PolandThe regional planning procedure is expected to be submitted in the winter 2011-2012.


Grid maintenanceMajor technological breakthroughs have also been made in preventive and corrective maintenance, calling for better expertise from teams.

Preventive maintenance of the Belgian grid

This outcome is the result of a pro-gramme of preventive maintenance and replacement policies based on the technologies used in the grid and the condition of the components that make up the infrastructure. This programme is driven by operating experience feedback from in-depth analyses of the causes of each incident, even though most of them did not have any impact on customers. Elia is also continuing to work on standardising and harmonising components, databases and working procedures.

In the case of lines, cables and pylons, preventive maintenance encompasses a number of types of inspections, such as infrared or camera inspection of all 20,000 or so pylons, which are inspected several times a year.

As regards high-voltage substations, preventive maintenance is scheduled on some 11,750 infrastructure elements across Belgium. In 2011, almost 16,950 operations were carried out by teams in the field, covering preventive mainte-nance (11,700), inspections (4,500) and legal checks (750).

As far as investments in replacements are concerned, synergies are sought between investments in upgrading, replacement and worker safety. In 2011, some €68.6 million was invested in upgrading end-of-life equipment. Many projects were carried out, including the replacement, at all voltage levels, of circuit breakers, isolators, bus bars and line sets, voltage and current transform-ers, lightning arresters, meter boxes, protection relays and remote monitoring systems. Maintenance and replace-ment activities are performed by many subcontractors and around 600 Elia

Thanks to the expertise of the teams in the field responsible for preventive and corrective maintenance of the transmission system and for the execution of the replacement investments, security of supply has been at a very high level for more than a decade.

First live works in Belgium: the helicopter from which the basket is suspended prepares for take-off.


staff, of whom two-thirds work in the field and one-third provide technical and administrative support.

In 2011, a number of innovations were tested out in the field so as to expand the range of methods at the depart-ments’ disposal and plan work such that it caused as little disruption as pos-sible to operation of the grid.

LIVE WORKS

Heliborne work on a live 380-kV line were carried out for the first time in Bel-gium, on the Achêne – Lonny intercon-nection. Nearly 150 marking spheres were replaced while the line was kept in service. Keeping lines in service is becoming essential for certain con-nections due to the increase in energy transmission volumes. This pilot project was organised in coordination with the Federal Public Service Economy and the relevant authorities.

ROBOT FOR LINE MONITORING

Elia and RTE jointly carried out tests for using a robot to inspect the cables of their overhead lines, with a view to detecting both more quickly and more reliably those areas where maintenance work is needed, in addition to using the traditional methods at their disposal.

Preventive maintenance of the 50Hertz grid

In Germany, the maintenance pro-gramme planned for 2011, worth around €50 million, was carried out. The priori-ties in this programme were upgrades of the steel conductors of overhead lines and the continued replacement of the insulators in these lines. Work carried out in 2011 was on some 650 pylons, which accounts for 300 km of power lines.

16,950In 2011, almost 16,950 operations were carried out by our teams in the field, i.e. almost 46 operations a day

650 pylons, 300 km

Maintenance work in Germany carried out in 2011 was on some 650 pylons, what accounts for 300 km of power lines.

The inspection of overhead line conductors using a remote-control robot was tested successfully in 2011.


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FR

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Market operationFollowing the liberalisation of the internal electricity market, the role of the market facilitator became crucial to the mission of power transmission system operators.

Integration of the European markets

As in previous years, Elia continued its drive for further integration of the Belgian and German electricity mar-kets with their neighbouring markets and thus contributed to the efforts to meet the objective set by the European Commission of achieving an integrated electricity market by 2014.

Long-term markets

During 2011, transmission system oper-ators of the Central West Europe (CWE) region, in collaboration with the TSOs of Central South Europe (CSE) and the Swiss TSO, laid down a shared set of harmonised rules governing explicit capacity auctions covering 12 borders. These rules, approved by the con-cerned regulators in November 2011, are implemented by CASC.EU, which acts as the inter-regional auctioneer for the market players.

Figure: borders covered by harmonised auction rules


Day-ahead markets

ONE YEAR OF CWE AND ITVC

MARKET COUPLING

‘Price coupling’ enables the volumes of electricity traded and market prices to be calculated on the basis of the information provided by the transmis-sion system operators (transmission capacities available at the borders) and the power exchanges (purchase and sale offerings). The mechanism was initially set up in October 2006 in Continental Europe to couple together Belgian, French and Dutch prices. It uses the Cosmos algorithm developed by Belpex, Elia and N-Side.

This price coupling mechanism was expanded to include Germany on 9 November 2010 and so become the CWE area, and was complemented by interim tight volume coupling (ITVC) for the Scandinavian market (Denmark, Finland, Norway, Estonia and Poland using the Swepol cable). The NorNed interconnector between the Nether-lands and Norway was integrated into this volume coupling system in January 2011. In April, the implicit border alloca-tion mechanism of the CWE region was extended to the BritNed interconnector, thereby establishing coupling between the CWE market with its price coupling mechanism and the APX-Endex day-ahead market in the UK.

Those two coupling mechanisms (price and volume) are combined in a sequential process in which flows on the connections between Germany, Denmark and Sweden are calculated in advance (by EMCC), followed by a CWE region price coupling mechanism (jointly put in place by APX-Endex, Belpex and EPEX Spot) and by a market splitting mechanism for the Scandinavian market (implemented by Nord Pool Spot).

The CWE price coupling mechanism and the ITVC coupling mechanism led to price convergence or prices that were the same most of the time on the day-ahead markets of the CWE countries, including Belpex in Belgium.

In 2011, the prices of the four coupled intraday markets in CWE converged some 65.75% of the time, and prices in Belgium and France were the same 99.18% of the time, while in Belgium and the Netherlands they converged 71.28% of the time.

The CWE market coupling mechanism has also reduced price volatility by com-bining the liquidity of the region’s day-ahead markets with the ability to avoid negative prices in periods of low energy demand coupled with a high level of renewable generation in Germany.

The CWE market is coupled with the Scandinavian market through the interim tight volume coupling (ITVC) mechanism.


PRICE CONVERGENCE IN CWE 2011

All equal : 65,753% All different : 0,411% DE=BE=NL<>FR : 0,103% DE=NL<>FR=BE : 22,443% BE=FR=NL : 5,160% BE=FR : 5,160% BE=NL : 0,263% DE=NL : 0,046%

Market coupling has led to an improve-ment in the utilisation of import/export capacities at the borders between Bel-gium and the Netherlands and between Belgium and France on a day-to-day basis, with average daily volumes of 8,424 MWh for imports and 5,656 MWh for exports.

THE BELPEX DAY-AHEAD MARKET

At the end of 2011, some 35 market players – generators, suppliers, traders, banks and industrial users – were regis-tered and operating on Belpex.

Volumes have steadily increased since Belpex was launched in 2006 (with the exception of 2009 when consump-tion decreased considerably due to the financial and economic crisis). This growth continued in 2011. Volumes trad-ed on the Belpex day-ahead market in relation to the Belgian load are up from 13.7% in 2010 to 14.8% in 2011. The traded volume has also increased, from an average daily volume of 32,446 MWh in 2010 to 33,839 MWh in 2011.

The record volume in 2011, recorded on 16 December, was 73,300.1 MWh, i.e. 29% of the daily consumption on the Elia grid.

The average price on the Belpex day-ahead market was €49.37/MWh, slightly lower than the average for the Neth-erlands (€53.03/MWh) and Germany (€51.12/MWh) but slightly higher than the average for France (€48.89/MWh).

ONGOING PROJECTS

Elia, in cooperation with Belpex and all the other transmission system operators and power exchanges in the CWE re-gion, Scandinavia and the UK, is paving the way for a price coupling mechanism for the North West Europe (NWE) re-gion. A process and a unique algorithm will be implemented that will form the cornerstone for the gradual extension of the mechanism to the rest of Europe.

Furthermore, throughout 2011, the TSOs and power exchanges of the CWE region continued their joint efforts to study the feasibility of a flow-based method for implicit daily allocation. This method, which aims to take better

account of the physical limits of the transmission system, was examined by a feasibility report published in March 2011. The results were presented to the stakeholders involved in June 2011 at a public forum in Amsterdam. An updated version was published in October and can be found on the Elia website. Work in this regard will continue in 2012.

Intraday markets

The intraday markets are important tools, in particular in light of the growing share of intermittent energy sources (wind and solar power) in the energy mix because they allow suppliers to balance their generation with the consumption of their customer in near-real time.

The intraday market in Belgium is oper-ated by Belpex. In 2011, it maintained its strong growth, with a trading volume of 363.4 GWh as opposed to 275.6 GWh in 2010. In total, 5,613 contracts were concluded, compared with 6,896 in 2010.

29 %The record volume in 2011, recorded on 16 December, was 73,300.1 MWh, i.e. 29% of the daily consumption on the Elia grid.


The plans for implicit allocation of cross-border intraday transmission capacities on the interconnection between Belgium and the Netherlands came to fruition in February 2011, when the Elbas trading platform used for the Nordic and Ger-man markets came online. Since it was put in place, it has been responsible for intraday imports of 61.9 GWh from the Netherlands and exports of 206.7 GWh in the other direction.

Moreover, the integration of the Belgian and Dutch intraday markets with the Scandinavian intraday market is sched-uled for March 2012, in the wake of the introduction of an implicit allocation mechanism on the NorNed connection between the Netherlands and Norway. This will make it possible to trade elec-tricity between Belgium and Finland on an intraday basis in a single transaction. Complete integration of the intraday markets of the NWE region (including a mechanism for implicit allocation of the cross-border intraday capacity between Belgium and France) is expected by the end of 2012.

Belgian balance and ancillary services markets

Elia has taken a number of initiatives to anticipate the integration of significant volumes of generation from variable re-newable energy sources in the balance and ancillary services markets.

A new methodology for evaluating the reserve volume, based on probabilistic modelling – and therefore capable of reflecting the impact of errors in the forecasts for wind and photovoltaic energy on balancing the system – has been introduced. On this basis, the methodology and resultant volumes for 2012 were approved by CREG in May 2011. Furthermore, preparations are being made for synergies with the Netherlands and Germany.

Increasing market transparency

In 2011, Elia continued to support the FEBEG drive to increase the transpar-ency of power generation data on the Belgian market. Elia now publishes on its website data relating to the availabil-ity of generation units (daily updates of generation availabilities) and unplanned unavailabilities (in the form of Urgent Market Messages).

German market

COOPERATION IN GRID

MANAGEMENT AND CONTROL

October 2011 saw the launch of the ‘Netzregelverbund’, a cooperative initia-tive relating to grid management and control, with a trial period involving the Danish transmission system opera-tor Energinet.dk. It aims to optimise the use of control energy while avoid-ing instances of activation in opposite directions in two zones. Following good results in Germany, the initiative can now be implemented across national borders, with a corresponding trial pe-riod starting in January 2012. Potential partners are Elia, CEPS, Swissgrid and TenneT NL.

Ongoing projects

Elia, in cooperation with Belpex and all the other transmission system operators and power ex-changes in the CWE region, Scandinavia and the UK, is paving the way for a price coupling mecha-nism for the North West Europe (NWE) region.

Netzregelverbund

The ‘Netzregelverbund’, a cooperative initiative relating to grid management and control, aims to optimise the use of control energy while avoiding instances of activa-tion in opposite directions in two zones.


Preventive management of critical grid situationsAs a power transmission system operator, the Elia Group is taking a series of preventive measures to maintain the balance of the grid and a secure power supply.

Managing the balance between generation and consumption

As electricity cannot be stored in any great quantity (except by means of hy-draulic pumping units), generation must be tailored at all times to consumption in this large grid – consumption that is the result of the actions and needs of more than 500 million inhabitants.

Transmission system operators such as Elia and 50Hertz maintain this balance in their respective control area within strict limits and in compliance with com-mon rules.

To this end, each of the 41 transmis-sion system operators reserves from generators, through European calls for tender, a generation capacity enabling them to adjust upwards or downwards the quantity of energy injected in their respective grid.

This generation capacity is differentiated according to the speed of response and the duration of the intervention. First of all, some generation units are equipped to adjust their generation al-most automatically based on deviations from the frequency of reference (50 Hz in Europe) and the frequency measured on the grid, which depends on the instantaneous imbalance between the quantities of energy injected and taken off the entire interconnected grid. All the generation units connected to the large European grid will consequently react together to immediately offset the simultaneous loss of 3,000 MW (3 mil-lion kW), i.e. the equivalent of two of the largest generation units, irrespective of their location in continental Europe. The system operators, to which the defective powers stations are connected, will then use other means of generation to restore this automatic intervention capability as quickly as possible, until the situation is back to normal.

Black-start: progressive reconstruction of the grid

In the event of an interruption of the power supply across a wide geo-graphical area, the system operator concerned will use generation units specially equipped to start up autono-mously, known as ‘black-start’ units. Each system operator has contracts for black-start services with generators in its area and regularly checks whether these units can start up independently as required. In 2011, Elia conducted detailed tests in two units located in Bel-gium. These generation units gradually allow to resupply a growing segment of the transmission system and therefore the other generation units can be re-started, while at the same time connect-ing up more and more consumers so as to continuously maintain a balance between the quantity of energy injected into the grid and the quantity of energy taken off it.

Better coordination between European electricity transmission system operators is the key to security of supply.


Crisis simulation: teams under pressure performing vigilance tests to improve procedures

In the event of a crisis, the level of prep-aration of the teams mobilised to restore normality is key. Elia has from the outset had an emergency plan setting out the roles and responsibilities of the various players in the event of a major problem in the electricity transmission system. These procedures are regularly tested in simulation exercises. In 2011, Elia put in place the action plan that emerged from the large-scale crisis exercise in late 2010. Moreover, preparations for the next international crisis exercise were started. The exercise will be organised in 2012 in cooperation with the French and Dutch system operators and the regional technical coordination centre Coreso.

Earth Hour: raising awareness to enable better management

As in previous years, Elia and its fellow system operators took appropriate measures for Earth Hour, an initiative organised by the World Wildlife Fund to draw attention to climate change and the energy issue. Elia puts its sites on partial alert to safeguard the operational security of the grid.

Fire at the Bruegel substation

The violent storm that hit Belgium on 28 June 2011 had many impacts across the entire grid. The main incident occurred at the Bruegel high-voltage substation, one of the major junctions in the 380-kV Belgian and European grid. Follow-ing a lightning-strike, a fire broke out on one of the three poles of a 380 kV transformer, caused by the combus-tion of the mineral oil contained in the transformer. The emergency response services acted quickly, mobilising fire-fighters from Asse, Zellik, Zaventem, Brussels and Opwijk and the Civil Protection Agency and the emergency services, after the emergency plan had been put into action by the mayor of Dilbeek. An on-site operations control room was set up. Having established the type of re-sponse required, the fire-fighters put out the fire by spraying a mixture of water and aqueous film-forming foam (AFFF) at it to lower the temperature (measured using an infrared camera).

Remarkably, despite the violent impact of the lightning and the fire, there was no interruption of the power supply pro-vided to Elia’s Belgian customers.

Transmission system operators such as Elia and 50Hertz maintain this balance in their respective control area within strict limits and in compliance with common rules.

Following a fire at the Bruegel substation, a booklet was sent to local residents to tell them about

current facilities in that node of the power transmission system.


Procedure for shortage in generation

Despite all the preventive measures that have been taken, extreme situations resulting from a substantial shortage of power generation remain a pos-sibility. To that end, a procedure was devised by Elia in close consultation with the Belgian Government Coordina-tion and Crisis Centre (GCCC) and the Federal Public Service Economy. Note that ENTSO-E flagged up the risk of a Europe-wide shortage in certain periods (period of intense and prolonged freez-ing) of the winter of 2011-2012 following, for instance, the shutdown of several nuclear units in Germany.

Plan to revise the reconstruction code

The proper operation of the electricity transmission system is of vital impor-tance for the community and for busi-ness and industry. The electrical system was designed to work at a very high level of reliability, but the risk of an inter-ruption cannot be ruled out completely, and therefore grid reconstruction codes were drawn up and have been imple-mented for several years now. They define the operating procedures to be deployed by control centres, balance responsible parties, grid users and other system operators in the event that the grid has to be fully or partially recon-structed.

In 2010, the Elia reconstruction code was fundamentally overhauled, while in 2011 simulator training was intro-duced for the concerned staff. Elia also received a positive opinion from CREG about this revision of the reconstruc-tion code, in terms both of content and structure and of instructiveness. The public version of the code was present-ed at the Elia Customer Day.

Cooperation with the Belgian Government Coordination and Crisis Centre (GCCC)

Elia cooperates closely with the Belgian Government Coordination and Crisis Centre (GCCC) to continuously improve the processes relating to emergency plans. Therefore a training session was organised for the GCCC operators to familiarise them with the electrical systems and the levels of severity of po-tential grid incidents. A consultation was also organised between the managers of the respective crisis centres to give them a better understanding of their structures and their mutual expecta-tions.


43%PROPOSALS OR STARTING IN 2012ADELE-ING, Aiolus, e-Highways 2050, eStorage, High Temperature Conductors, iTesia, Pegase, SDL Batt, SLim, Space Optimised Overhead Conductor Systems

57%COMPLETED IN 2012 AFTER, ANM, Ecogrid, e-Mobility, GRID+, Improvement of Grid Integration of RES, MOSYTRAF, OffshoreGrid, Optimate, RegModHarz, SUSPLAN, Twenties, 7MW-WEC-by11

Preparing for the future : research and developmentThe growing share of variable renewable energy sources and of decentralised generation in the energy mix is causing a radical and lasting change in electrical systems and how they are managed, making innovation essential for transmission system operators.

Against this backdrop, the Elia Group established a Research & Development and Knowledge Management Depart-ment which, in close cooperation with ENTSO-E and the European Electricity Grid Initiative, is participating in a num-ber of European projects.

At the end of 2011, the Elia Group had a portfolio of 13 projects in which the Group is cooperating with one or more Belgian, German or other European partners. At the same time, the Group is involved in some 10 initiatives involving cooperation in R&D projects which will start up in 2012 or are currently being assessed by the funding institutions concerned.

50Hertz is also working, as part of aca-demic partnerships, on some 10 studies that aim to analyse and assess specific issues that are relevant to management of the electrical system, e.g. recon-struction of the 50Hertz grid, studies of regional grids, and planning simulations of generation units.


B-EEGI

Elia is a key partner in the B-EEGI platform, a collaboration platform of five Belgian system operators (Eandis, Elia, Infrax, Ores and Sibelga) as part of the European Electricity Grid Initiative (EEGI). Through this platform, the part-ners want to develop a joint vision of the innovation activities and objectives and therefore benefit from some leverage vis-à-vis regional, Belgian and European support programmes. By participating and actively investing in R&D projects, the B-EEGI partners are helping to meet the objectives of the European Strategic Energy Technology Plan (SET Plan).

REGMODHARZ

The RegModHarz project brings to-gether, alongside 50Hertz, distribution system operators, IT and component manufacturers, research institutes, universities and sponsors of renew-able energy. It is one of the six German regional models supported by the public ‘E-Energy’ programme which analy-ses the challenges and opportunities involved in the integration of renewable energy sources.

SUSPLAN*

50Hertz is a stakeholder in the SUSPLAN project coordinated by SINTEF (FP7* research area EN-ERGY-2007-7.3-05). The project aims to develop regional and pan-European recommendations for more effective in-tegration of renewable energy into future infrastructures. It adopts an integrated approach for electrical, gas and heat infrastructures.

E-HIGHWAYS 2050

Elia and 50Hertz are jointly participating in the ‘e-Highways 2050’ programme facilitated by ENTSO-E and coordinated by RTE (as part of the FP7 call ENER-GY.2012.7.2-1). Following the ENTSO-E Study Roadmap towards a Modular Development Plan on pan-European Electricity Highways System 2050 (MoDPEHS) developed by 50Hertz and coordinated by the ENTSO-E working group on electricity highways by 2050, the consortium comprising transmission system operators and external partners aims to develop tools for a long-term planning schedule containing design options for future European electricity highways.


ECOGRID*

The European EcoGrid project compris-es a demonstration on the Danish island of Bornholm of the effective operational management of a power distribution system entailing strong penetration of a wide range of variable sources (almost 50%). The Elia Group is conducting the research on the implementation of these market concepts on a large scale throughout continental Europe.

ESTORAGE

The storage of electrical energy will become more and more important in Europe, in particular because it can be deployed rapidly to ensure a continu-ous balance between renewable energy and consumption. The eStorage project aims to enhance the technology of pump-storage equipment and to assess the market models enabling its integra-tion and its rapid deployment.

TWENTIES*

The TWENTIES project aims to identify and test the technical resources that facilitate the large-scale penetration of renewable energy, and in particular wind energy. A number of partners are making a contribution to these efforts: Belgian universities, such as the Catho-lic University of Leuven (KULeuven), the Université libre de Bruxelles (ULB) and the University of Liège (ULg), and the Coreso regional technical coordina-tion centre. Elia is responsible for six demonstration activities (NETFLEX – Enhanced Network Flexibility). Elia and 50Hertz will be involved in assessing the potential for deployment of these tools on a European scale.

OPTIMATE*

Five transmission system operators (in Germany, Belgium, France and Spain) have been cooperating with seven distribution system operators since 2009 as part of a three-year research project. This project aims to evaluate the advantages and disadvantages of mar-ket models designed to integrate vast sources of renewable energy sources. Elia and 50Hertz are contributing to the development of market models for the Central West Europe region.

FP7 Projects *

The Seventh Framework Programme (FP7) bundles all research-related EU initiatives to-gether under a common roof playing a crucial role in reaching the goals of growth, competi-tiveness and employment, along with a new Competitiveness and Innovation Framework Programme (CIP), Education and Training programmes, and Structural and Cohesion Funds for regional convergence and competitiveness.


Elia and 50Hertz aim to serve as a role model for the market and the community. The environmental dimension, i.e. a concern for the future of the planet, is an integral part of all the Group’s activities.

Environmental report

02

47ELIA GROUP 2011 ENVIRONMENTAL REPORT

world, shared by left- and right-wing politicians alike, by parliaments and in cities and villages.

“All partners involved in the Renewables Grid Initiative share a single vision: for up to 100% of the power integrated into the electricity system to come from re-newable sources. We must help people to understand that, with the appropriate development of grid infrastructure in Europe, we will open the doors to a climate-friendly future, based on decen-tralised generation and the large-scale integration of renewable energy.”

Grids are the key

“The WWF’s vision is for 100% of all en-ergy worldwide – not just electricity – to come from renewable sources by 2050. Such a vision calls for ambitious actions to be taken by all players – industry, governments and consumers. The European energy sector can and must lead by example. That is why the WWF is closely involved with the Renewables Grid Initiative (RGI). Power transmis-sion system operators like 50Hertz and Elia are demonstrating the leadership needed to establish a power supply that is not only renewable, but also economi-cally viable, reliable and affordable.

“Electricity from renewable energy sources – primarily wind, biomass and solar power – is available in abundance across Europe and in neighbouring areas such as North Africa. To effec-tively capitalise on these resources, greatly expand their use and facilitate a smooth transition from fossil fuel and nuclear power to widespread decentra-lised generation and renewables by the middle of the 21st century, we need to manage interconnections in a coordi-nated way and consolidate and develop a sophisticated infrastructure of power transmission systems. Otherwise, we will not be able to hit our climate targets or provide consumers with a reliable power supply from renewable sources. The WWF appreciates that system operators like 50Hertz and Elia are taking its side in the debate to promote the cause of renewables.

“At the moment it is difficult to obtain public approval for fresh investment in infrastructure. We will not win people over by adopting a merely technocra-tic approach. We must come up with a convincing argument, a compelling story, a vision of a better and cleaner

All partners involved in the Renewables Grid Initiative share a single vision: for up to 100% of the power integrated into the electricity system to come from renewable sources. We must help people to understand that, with the appropriate development of grid infrastructure in Europe, we will open the doors to a climate-friendly future, based on decentralised generation and the large-scale integration of renewable energy.

Stephan Singer DIRECTOR GLOBAL ENERGY POLICY, WWF

ELIA 2010 ENVIRONMENTAL REPORT48

The diligence and know-how of our employees, combined with continuous training efforts, help us meet our environmental obligations.

We want to implement a proactive policy that garners the widespread support of all our colleagues by providing them with the means to actively contribute to green mobility on a daily basis.

“Mobility has become a key challenge for Elia, which has several administra-tive offices dotted around the Brussels region as well as facilities and sites spread across Belgium as a whole. We want to implement a proactive policy that garners the widespread support of all our colleagues by providing them with the means to actively contribute to green mobility on a daily basis.

“The provision of carpooling vehicles, as of 2011, means that employees can leave their own cars parked at home,

even if they are required to travel during the day (near their workplace). Since December 2011, our fleet of carpooling vehicles has included two fully electric cars, translating our aims into concrete action.

“Elia is also the first company in Bel-gium to have signed up to Blue-bike, the shared bike scheme at Belgian rail-way stations. Our employees have five bikes at their sole disposal at Schaer-beek station, enabling them to reach our site in Avenue de Vilvorde in just a

few minutes. The bikes not only save time and money and reduce our envi-ronmental footprint, but also improve our staff’s well-being: scientific studies have shown that employees who cycle to work are in a better health condi-tion.”

Valérie LegatMOBILITY COORDINATOR

“Environmental protection is a key consideration in the planning, devel-opment and operation of our power transmission system. As Environ-mental Manager at corporate level, I continually ensure the follow-up and improvement of the 50Hertz environ-mental management system.

My work is highly varied: I am respon-sible for properly implementing envi-ronmental legislation into our opera-tional procedures and providing expert advice to colleagues responsible for environment at regional centres. I also

work closely with numerous depart-ments on environmental matters, from development projects to hazardous waste transportation, not to mention permit management, pollution control and water conservation.

“Through the integration and transmis-sion of a significant share of renewable energy, 50Hertz is making a consider-able contribution to climate protection. To ensure the transmission of energy that produces little or no pollution, we must establish new connections. The connection of Baltic 1, the first wind

farm in the Baltic Sea owned by the generator EnBW, in April 2011, is an important milestone for our company and demonstrates our commitment to the integration of renewables.

“The diligence and know-how of our employees, combined with continu-ous training efforts, help us meet our environmental obligations.”

Andreas FörsterSYSTEM OPERATIONS

49ELIA GROUP 2011 ENVIRONMENTAL REPORT

Environmental objectives and indicatorsElia has undertaken to meet certain environmental obligations in relation to its activities, especially those concerning the decontamination of polluted soil, waste disposal, the installation of transformer tanks to prevent oil discharge, and compliance with noise regulations and legislation on greenhouse gas emissions and asbestos. Elia also has a duty to set an example in terms of the rational use of energy and the conservation and protection of nature.

Elia must also ensure that its facilities and investment projects are accepted by the community, in terms of their hu-man and environmental impact as well as their cost-effectiveness (i.e. their cost to the community at large).

With this in mind, Elia has undertaken various initiatives such as planting na-tive species in the corridors beneath overhead lines, environmental offsetting measures and energy audits at high-voltage substations and administrative sites.

The main environmental indicators that are relevant to Elia’s activities and their development over time are detailed hereafter.

1. Energy

REDUCING THE ENERGY

CONSUMPTION OF ADMINISTRATIVE

AND TECHNICAL BUILDINGS

Energy audits were performed in vari-ous administrative buildings and Elia’s existing high-voltage substations. The audits led to the establishment of action plans which were implemented at three of Elia’s ten sites. To reduce heating consumption, Elia decided to install a new system for switching the heating on and off automatically from a mobile phone on a trial basis in 25 high-voltage substations. This system will mean that the temperature is high enough when the people who have to work there arrive, while also limiting the heating at times when nobody is there.

New buildings adhere to the principles of sustainable construction. As a result, in 2007 the national control centre build-ing was awarded the title of ‘exemplary building’ by the Brussels Institute for Environmental Management (BIM/IBGE).

The new administrative building under construction nearby (Quai Monnoyer, along the Brussels Canal) will not only be very energy-efficient (passive build-ing), but will also bear the BREEAM ‘Very Good’ label, awarded to buildings that are healthy for their occupants, with low grey energy and water consump-tion, and whose plots are developed to respect biodiversity. The building recently received an award from the BIM/IBGE as part of a call for ‘2011 ex-emplary building’ projects, making it the second exemplary building constructed by Elia.

LIFE+ Elia: ecological management of the

corridors beneath our high-voltage lines

50 ELIA GROUP 2011 ENVIRONMENTAL REPORT

2. Biodiversity

JOINT STATEMENT FOR NATURE

CONSERVATION AND GRID

DEVELOPMENT

Various transmission system operators, including the Elia Group, TenneT, RTE and Terna, and environmental protection associations such as the World Wildlife Fund, Friends of the Earth and Green-peace, brought together under the Renewables Grid Initiative, submitted a joint statement entitled European Grid Declaration on Electricity Network De-velopment and Nature Conservation in Europe, to the European Commissioner for Energy Günther H. Oettinger.

The aims of the joint statement are to generate consensus around crucial grid expansion with a view to integrating re-newables, to combine grid development and nature conservation, and to encour-age transparency and public dialogue.

IMPACT OF OVERHEAD LINES

ON AVIFAUNA

At the request of Elia, Natagora and AVES are conducting a study to more successfully identify the collision and electrocution risks posed to birds by overhead lines. The Research Institute for Nature and Forest (INBO), Bird Protection Flanders (Vogelbescherming Vlaanderen) and the Flemish association Natuurpunt are also taking part in the study. Provisional results demonstrate the need to improve the visibility of overhead lines in areas where waterfowl and certain rare species are present. In general, birds face practically no risk of electrocution because of the differ-ence between the distance separating our conductors and the wingspans of the most common species. The study will identify which measures should be taken or which areas should be avoided for new projects.The report and an accompanying map are scheduled for spring 2012.

PLANTING OF TREES AND HEDGES

AROUND OUR FACILITIES

This project, which involves planting flower meadows and bushes under some ten pylons, has been ongoing since 2008 in collaboration with Faune & Biotopes asbl. The areas serve as a refuge for local fauna on open farmland. Very positive results have already been observed.

Indigenous defensive hedges (consisting of hawthorn, dog rose and blackthorn bushes) are planted each year around the high-voltage substations to better inte-grate the facilities into the landscape and to host the local fauna. Thorny shrubs also serve as barriers to discourage intrud-ers. By late 2011, a total of almost 12 km of indigenous hedges had been planted around some 17 Elia high-voltage substa-tions, totalling more than 40,000 plants.

Various plots of land around and within high-voltage substations were also developed to be more welcoming to biodiversity. Depending on the type of environment surrounding those plots, flower meadows, hedges or borders were planted. In 2011, three plots covering a surface area of more than 5,000 m² were developed.

Even in urban areas Elia does its best to promote biodiversity. As such, various green spaces at Elia’s site on Avenue de Vilvorde, near the Port of Brussels, were completely overhauled to make the area more conducive to urban biodiversity and to enable easier maintenance with-out the need for weed killer.

LIFE+ Elia Project

There will be scope for this innovative pilot to be extended across Europe via knowledge-sharing with other European TSOs, yielding a potential 300,000 km of green corridors.

Joint statement

The aims of the joint statement are to generate consensus around crucial grid expansion with a view to integrating renewables, to combine grid development and nature conservation, and to encourage transparency and public dialogue.

51ELIA GROUP 2011ENVIRONMENTAL REPORT

DEVELOPMENT OF FOREST

CORRIDORS – LIFE+ ELIA PROJECT

LIFE+ Elia is a five-year European proj-ect being rolled out by Elia to trans-form some 130 km of forest corridors (corridors 50 m wide beneath Elia lines in forests, where the vegetation is kept low to protect the lines) into fully-fledged ‘ecological corridors’. Instead of using rotary slashers every five to eight years (hardly beneficial to biodiversity and costly for Elia), Elia is going to restore more stable environments under its lines (such as bogs, shrubs, grasslands managed via grazing, etc.), which will be easier, less expensive to maintain and more beneficial to biodiversity. French TSO RTE has been included in the proj-ect, so prospective developments can be tested in the various climates that exist in France.

For this project, costing €2.55 million, Elia is to obtain subsidies of €1.166 million from the EU (via the LIFE+ pro-gramme) and €815,000 from the Wal-loon Region (DGARNE). Elia will contrib-ute some €460,000 and RTE €110,000. As such, this project will involve partner-ships between private players (Elia and RTE), public bodies (Walloon Region) and associations (CARAH and Solon). Solon asbl will manage the project in constant coordination with Elia.

A ‘best practices guide’ will be pro-duced describing the various methods of managing corridors and demonstrat-ing their financial value. There will also be scope for this innovative pilot to be extended across Europe via knowledge-sharing with other European TSOs, yielding a potential 300,000 km of green corridors.

NEST BOXES

Since its inception in 2001, Elia has in-stalled dozens of nest boxes for kestrel falcons on the pylons of various high-voltage lines. Three nest boxes were also put up on particularly high pylons to house peregrine falcons. Volunteers keep track of births in both Wallonia and Flanders. In 2011, 178 eggs were counted and 158 young birds were ringed.

3. Emissions and waste

GREENHOUSE GASES

Elia recorded its greenhouse gas emis-sions using the Bilan Carbone © method. For the sake of completeness, all emis-sions were analysed, including those caused by electricity dissipated as heat during transmission through the grid.

BREAKDOWN OF CO2 EMISSIONS

Fixed assets 54% Energy 4% SF6 and refrigeration gas 13% Annual procurement 20% Trips made by staff

and visitors 9% Waste 0%

Emission source (general) Emissions Percentage

Energy in buildings 3,170 4.1

SF6 and refrigeration gases 9,859 13.0

Annual procurement 15,241 20.1

Travel 7,113 9.4

Waste 238 0.3

Fixed assets 40,335 53.1

Total 75,956 100.00

Nest boxes are installed on high-voltage pylons for kestrel falcons.


The overall figures were as follows (ex-cluding grid losses):

In 2011, Elia launched a project to reduce its carbon footprint. Action areas will address both direct emissions (such as staff travel and the energy consumed by Elia’s buildings) and indirect emis-sions. A target has been set to reduce direct emissions by 25% by 2016. SF6

SF6 gas has been used in electrical equipment for over 30 years as an elec-trical insulator in high- and very high-voltage devices. Gas Insulated Switch-gear (GIS) is used in densely populated areas because it is more compact than traditional outdoor switchgear which uses air as an insulator. In the case of medium-voltage facilities, Elia uses mainly vacuum-circuit breaking chambers as an alternative to SF6. This alternative is not available for high- and very-high voltage devices.

Elia has drawn up investment and mainte-nance policies to limit the risk of SF6 loss. To this end, manufacturers must guaran-tee a very stringent maximum percent-age of loss throughout the lifetime of the facilities. The maintenance policy keeps operations involving compartments con-taining SF6 to an absolute minimum. The volume of SF6 gas installed in the Elia grid (from 36 kV up to and including 380 kV) comes to 53.08 tonnes. Consumption of SF6 gas (as a replacement and as a top-up in the event of a leak) is tracked closely using a system that monitors each bottle of SF6. The SF6 leak percentage for

all Elia facilities was 0.70% in 2011. This is one of the best results recorded for European TSOs.

Maintenance of facilities containing SF6 is carried out by certified teams in accordance with EU Regulation No. 305/2008. The first Elia employees were certified in 2010 on the basis of the Flemish Decree of 4 September 2009 on the certification of technicians with the task of recovering fluorinated green-house gases from high-voltage facilities. For certification, Elia provides Synergrid (test centre) with access to its experts (jury) and the appropriate equipment to perform practical tests.

HAZARDOUS WASTE

Elimination of PCBs

Since the end of 2005, none of Elia’s equipment has contained more than 500 ppm of PCB (polychlorobiphenyl). Elia has undertaken to decontaminate transformers with concentrations below 500 ppm which are still in operation, or to replace those transformers before the end of their service life. The funds need-ed to complete this project have been earmarked. In 2011, 7 transformers were decontaminated by an accredited firm, representing 59 tonnes of mineral oil.

Asbestos

Small quantities of solid asbestos can be found when carrying out works in the high-voltage substations. They are then put in appropriate bags and brought to accredited treatment facilities.

Batteries

The installation of batteries, which are very common in high-voltage substa-tions, requires a permit to be issued. Environmental legislation in this area is aimed chiefly at preventing possible acid leaks from such batteries. Elia is pro-moting the use of dry batteries instead, as they involve no risk of leakage. Wet batteries now account for just 20% of all batteries installed in the grid.

Accidental soil pollution

Elia manages over 12,000 plots of ground, spread right across Belgium. To prevent waste dumping (fly-tipping) on this land and protect the surrounding environment (soil, ground and surface water, etc.) in the event of accidental pollution, Elia can call on the services of a specialist firm seven days a week to remove all contamination as quickly as possible. Our operational teams also have the appropriate equipment, e.g. absorption mats, to intervene on site.

In 2011, there were 13 interventions of various kinds, including one major intervention: the elimination of pollution in the wake of a fire involving a 380 kV transformer at the Bruegel high-voltage substation (Dilbeek). The debris and oil collected in the recovery tank after the transformer was damaged were eliminated. Work was also undertaken to treat soil polluted by the mineral oil around the tank, dispersed while the fire was being extinguished. Measures to monitor the evacuation of rainwater into drainage facilities were stepped up, although the collection tanks did their job perfectly well.

-25%A target has been set to reduce direct emissions by 25% by 2016.


4. Products and services

EMPHASIS ON GREEN

PROCUREMENT

Elia’s Purchasing and Environment de-partments now include ecological crite-ria in new calls for tender. The procure-ment of more sustainable products is a significant action area for companies aiming to reduce their environmental impact. Indeed, Elia encourages indus-trial players to adopt more responsible production methods. Respect for the environment has been added as a cri-terion for selecting suppliers and should be considered in the same light as price or safety. The supplier’s environmen-tal policy, the energy consumption of the product for its entire service life, transparency regarding product compo-nents, and other factors are taken into account. A Green Procurement policy has been drawn up covering the areas just mentioned.

LIMITING ENVIRONMENTAL IMPACT

Noise

Transformers at high-voltage substa-tions generate low-frequency noise, the level of which must comply with legally defined values, according to the area’s designated land use as stipulated in the land-use plans. Whenever changes or extensions are made to its facilities, Elia uses simulations to ensure that the prevailing values are not exceeded and makes any appropriate adjustments.

Elia follows up on all noise-related complaints from local residents. Such complaints may relate to noise gener-ated at high-voltage substations or by electrical conductors, mainly when there is fog or heavy rainfall. In 2011, four complaints were made about high-voltage substations. Noise studies and simulations were conducted for three of them. Remediation studies are also underway to limit noise in relation to a number of previous complaints.

TRANSFORMER TANKS

Since transformers contain large quanti-ties of mineral oil, new equipment is systematically installed in a watertight tank with an oil-water separator to prevent environmental pollution in the event of a leak. In addition to separa-tors, Elia is installing coalescence filters to guarantee compliance with surface water quality environmental standards in the event of a leak.

In Flanders, in the wake of the Vlarem legislation, all existing transformers must be fitted with a tank if they are upgraded, modified, replaced or moved. In Wallonia, all existing transformers will have to be fit-ted with a tank and a hydrocarbon sepa-rator by 2015. An investment programme was established in 2004 for 540 voltage transformers and 800 backup or earthing transformers. The programme was updat-ed in 2011 and includes an additional in-vestment budget of €8,000,000 over five years. In 2011, 28 power transformers and 28 auxiliary and earthing transform-ers were fitted with tanks, representing an investment of €1,000,000.

SOIL POLLUTION

Since Elia was set up, soil studies have been conducted on over 200 sites across Flanders, in accordance with Flemish soil legislation. These studies showed that our transformers, though potentially responsible for local soil pollution, posed little or no risk to the environment. At sites where significant soil pollution was observed, this had been there previously and was the result not of electricity transmission activities but rather of earlier or nearby industrial activities (gas plants, blast furnaces, chemicals, etc.). Decontamination of the Lier high-voltage substation was carried out this year and approved by the Flanders Public Waste Agency (OVAM). Decontamination of the Ruien high-voltage substation was carried out over seven months while the substation remained operational. Decontamination of the Wilsele substation was temporar-ily suspended with a view to integrating a development project at the site. In late 2011, three decontamination projects were rolled out (for the Merksem site, the Langerbrugge substation and the Zwevegem substation which has been classified). The Merksem decon-tamination project was approved in late December.


Soil legislation was implemented in the Brussels-Capital and Walloon Regions after Elia was established. Elia an-ticipated said legislation by conducting analyses and studies in several of its high-voltage substations. It has thus ringfenced the future costs of poten-tial decontamination projects which are updated in accordance with the changing legislation. In 2011, a proposal was made to the Brussels Institute for Management of the Environment (IBGE/BIM) regarding the management of pollution risks relating to heavy metals for Elia’s new site at Quai Monnoyer. For the Ville-sur-Haine site, Elia was able, under Article 92bis of the Walloon Soil Decree, to submit a decontamination proposal via a special procedure. At the request of the Walloon Waste Bureau, additional tests were performed and a decontamination proposal can be made from early 2012.

ELECTRIC AND MAGNETIC FIELDS

The magnetic field produced by the electricity system has a very low fre-quency (50 Hz), much lower than that used by mobile phones and microwaves for example, and its intensity declines rapidly the further you move from the source.

There are concerns amongst the public about the potential impact of magnetic fields on human health. International scientific studies carried out over the past four decades have not established a correlation between 50 Hz magnetic fields and health problems. Concerned about its responsibility for its employ-ees and society, Elia has been actively contributing to the advancement of scientific knowledge on this subject. In 2009, it renewed its cooperation agreement, including full guarantees of scientific independence, with various re-search centres and universities forming

part of the Belgian BioElectroMagnetic Group (BBEMG). The BBEMG stud-ies the effects of electric and magnetic fields generated by the transmission and use of electrical energy at work and in our day-to-day lives. In addition, Elia has access to the results of high-level inter-national research in the field through the Electric Power Research Institute in the United States.

Elia also measures magnetic fields on site at the request of local residents. It received more than 250 such requests in 2011, resulting in some 200 field measurements.

Concerned about its responsibility for its employees and society, Elia has been actively contributing to the advancement of scientific knowledge on electric and magnetic fields. That’s why it concluded a cooperation agreement with various research centres and universities forming part of the Belgian BioElectroMagnetic Group (BBEMG).


In the absence of specific Belgian legislation in this area, Elia applies the European recommendations issued by the International Commission on Non-Ionising Radiation Protection (ICNIRP) and the Council of the European Union. When planning new investments, mag-netic fields are simulated at the study phase. The area in which the magnetic field of overhead lines has an effect can be reduced through new technologies such as the compact arms of pylons. Furthermore, Elia avoids inhabited areas as much as possible when building new facilities.

ENVIRONMENTAL STUDIES

Strategic environmental assessment

of the 2010-2020 development plan

The federal development plan sets out the investment programme needed to meet future transmission capacity needs. The plan has been subject to a strategic environmental assessment, the aim of which is to identify any potentially significant effects that might support the decision between defined alternatives. The impact of the selected alternatives is in turn assessed in comparison to the existing grid. For instance, when looking at impact on biodiversity, all selected alternatives affect 4.92 ha of habitat, i.e. only 0.75% of the impact caused by the existing grid (657 ha). This comparison

illustrates that the strategy adopted by Elia is keeping to an absolute minimum the impact of grid developments on ar-chaeology, landscapes, views, magnetic fields and biodiversity.

The plan and environmental study were discussed in a public consulta-tion. Some 17 responses were made by individuals, professional federations and public authorities. Significant remarks were taken into account in the final version of the plan. The federal develop-ment plan was approved by the Federal Minister on 13 November 2011.

Environmental assessment

of investment projects

In 2011, around 100 grid modernisation and extension projects were rolled out. To obtain the relevant permits, environ-mental studies must occasionally be conducted depending on both the spe-cific legislation for the relevant regions and the type and scale of the project in question. In the Flemish Region, a formal environmental study (“plan-MER”) was approved for the Stevin project (380 kV connection between Zomergem and Zeebrugge). Since high-voltage substations are not automatically subject to the “plan-MER”, tests were performed for the installation of the Horta and Schoondale substations.

A project-level MER exemption was approved for the second circuit of the existing Massenhoven-Meerhout con-nection. In the Walloon Region, an en-vironmental impact assessment memo was drafted for an underground 150 kV connection cable between Corbais and Basse-Wavre.

6. Transport

SMART MOBILITY

A plan was launched in November 2011 to improve mobility. It covers a wide range of actions intended to facilitate trips made by employees, including both commuting and travel during work-ing hours. These actions include the lending of bikes for journeys between railway stations and the workplace, the promotion of transit offices enabling employees to work close to home once or twice a week, the promotion of teleconferencing tools, the provision of electric vehicles and pool cars, and other measures.


Support for environmental policies

DECENTRALISED GENERATION

In cooperation with the relevant distribu-tion system operators and regional bod-ies, Elia is planning for the integration of decentralised generation units as part of regional sustainable development initiatives.

In Flanders, a number of geographi-cal areas have been identified for the connection of cogeneration facilities for horticultural purposes and of renew-able energy facilities, most notably at Merksplas, Lier and Rijkevorsel. Plans to connect an area in the far north of the Campine region (Hoogstraten - Meer) are currently being examined. Spurred on by the Minister for Energy of the Flemish Region and in coopera-tion with the Flemish regulator, VREG, and the distribution system operators, Elia offers connection contracts based on the prerequisite of safe operation of the grid. Whilst waiting for the Stevin project, this approach has released 114 MW of additional transmission capacity for the connection of 27 projects, previ-ously on a waiting list. In Wallonia, the study conducted by Elia in partnership with the ICEDD and APERe revealed great potential for accommodating wind-power generation in the region spanning the south of the province of Liège and the north of the province of

Luxembourg. On the scale of the Wal-loon Region, the potential of the Elia grid, without significant upgrading of the existing infrastructure, is between 2,000 MW and 3,000 MW of wind-power generation. Elia has entered into a constructive dialogue with the relevant regional authorities about these works with a view to devising an optimum grid development scenario.

GFLEX

GFlex is a flexible procedure for con-necting wind farms. Field tests were performed in 2011 in the East Loop region, with the implementation of automatic procedures for detecting overloads and issuing instructions to reduce wind-farm generation. The pro-cedure enables the connection of such generation facilities with crucial flexibility, from the perspective of the generators in question and the operational security of the electrical system.

Rational use of energy (RUE) and renewable energy sources

PROMOTING RUE AMONGST

OUR CUSTOMERS

As part of its public service obligations in Flanders, Elia implements an action plan each year aimed at encouraging Rational Use of Energy (RUE) amongst its industrial customers. In this context, Elia provides its customers with the resources required to make recurrent savings of 2.5% on their primary energy consumption for each MWh supplied,

in the case of facilities connected at between 36 kV and 70 kV. The objective set for 2011 was savings of 37.8 GWh of electric power, while savings of 41.6 GWh have been made. 48 projects were introduced and our customers undertook to invest in some 44 energy-saving projects.

Thanks to the initiatives Elia has taken amongst its industrial customers, cumu-lative energy savings since 2003 stood at 497 GWh at the end of December 2011, i.e. some 162,000 tonnes of CO2.

Support for renewable energy sources: integration of offshore wind farms

For the offshore wind farms in the North Sea that already exist or are under construction, Elia is helping to finance subsea connection cables to the tune of €25 million per connection, apply-ing special measures to deal with the generation fluctuations associated with such units, and purchasing the green certificates awarded to them in accor-dance with the relevant legislation.

OFFSHORE GRIDS:

A VISION FOR THE FUTURE

The new Electricity Act, approved in late December 2011 as part of efforts to transpose the third package of EU energy legislation, assigns Elia the role of offshore grid operator subject to optimal conditions for the community.


In August 2011, anticipating on the Act to be published, Elia revealed its vision entailing the development of an offshore grid in the North Sea. Elia set itself the ambitious aim of establishing – in several stages – the first North Sea grid, offering comparable benefits to onshore grids in terms of reliability. It also presented a cost/benefit ratio proving that the North Sea grid would be more advantageous than individual connections to each wind farm, as it would reduce the number of underwater cables to the shoreline and enhance integration with other infrastructure projects along the Belgian coast.

The concept – devised in consultation with developers of wind farms along the Belgian coast – is currently being discussed with all project stakehold-ers with a view to setting out concrete plans for the installation of two offshore platforms, the connection of prospective wind farms, and the establishment of the required financial and legal framework for this major undertaking for Belgium and Europe.

Elia also concluded various cooperation agreements to acquire the means and resources it needs to play a leading role in the development of future wind farms:

• participation in the ‘Friends of the Supergrid’ project, an initiative launched in March 2010, which brings together various industrial actors that join forces to create a social, political and regulatory base for a future offshore grid;

• participation in the Renewables Grid Initiative, geared to boosting power generation from renewable sources and the transmission capacity re-quired for its development;

• a strategic cooperation agreement with Alstom in intelligent systems and the integration of renewable energy sources;

• the Eleanore cooperation agreement with 3E, Alstom Grid, CG Power Systems, CMI, DEME Blue Energy and SAG, through Eurogrid Inter-national, aiming to make an active contribution to the development of future offshore infrastructure in Europe.

Support for renewable energies: green certificates

Federal and regional legislators have developed market mechanisms aimed at encouraging investment in facilities for generating electricity from renew-able sources. These include the ‘green certificates’ awarded to generators by the regulator, vouching for the green credentials of their electricity. Suppliers produce the certificates annually in pro-portion to their sales, with the proportion being set by law.

As a transmission system operator, Elia is required by law to purchase the cer-tificates offered to it at a minimum price. Elia returns these certificates to the market via the power exchange Belpex. The balance between the price at which Elia purchases the certificates and the price at which they are sold on Belpex is passed on to the consumers through transmission tariffs.

Under the new mechanism supporting renewable energy in Wallonia, the Wal-loon Energy Commission (CWAPE) has also obliged Elia to buy back certificates offered by individuals with photovoltaic panels, at a regulated price. In this par-ticular case, certificates bought by Elia cannot subsequently be put back on the market. The costs will be borne by the consumers.

Germany

ENERGY

By constructing new, modern opera-tions buildings, 50Hertz is aiming to reduce both heating bills and opera-tional costs in line with its long-term objectives.

BIODIVERSITY

Flora and fauna are systematically taken into consideration from the planning phase of new construction projects, and protected as part of the operational management of installations. 50Hertz cooperates closely with local environ-mental and forestry bureaus.

Offshore grids: a vision for the future Elia’s vision entailing the development of an offshore grid in the North Sea set itself the ambitious aim of es-tablishing – in several stages – the first North Sea grid, offering comparable benefits to onshore grids in terms of reliability.


ECOLOGICAL MANAGEMENT

OF OVERHEAD LINES

A study into the ecological management of overhead lines, funded by the Euro-pean Union and conducted in collabora-tion with local partners, helped to estab-lish differentiated forest management on a regional scale and improved compat-ibility with the landscape. The aim of the study is to enhance biodiversity in the corridors beneath lines while enabling the safe operation of the relevant instal-lations and promoting social accep-tance of overhead lines. A pilot project is underway beneath two high-voltage lines in the Thuringia region. Once the relevant sections of line have been listed and mapped out, action plans will be drafted. For example, target habitats will be defined, as well as implementation strategies and proposals for maintaining the corridors.

EMISSIONS AND WASTE

MANAGEMENT

As part of its responsible conduct and internal monitoring measures, 50Hertz has undertaken to support German industry’s voluntary commitment to reduce emissions of sulphur hexafluo-ride (SF6). An electronic waste detec-tion method, introduced in 2010, was applied and optimised as part of efforts to decommission and decontaminate polluted sites.

ENVIRONMENTAL EXPENDITURE

In 2011, 50Hertz established preventive measures for the repair of transformer oil tanks, and measures to manage noise and eliminate residual pollution during the construction of new installa-tions.

The 50Hertz control area – which includes 15 GW of installed renewable capacity – has a very high proportion of decentralised generation. Most of that power is generated by wind facilities connected primarily to distribution systems.

DECENTRALISED GENERATION

The 50Hertz control area – which includes 15 GW of installed renewable capacity – has a very high proportion of decentralised generation. Most of that power is generated by wind facili-ties connected primarily to distribution systems. To ensure the integration and safe transmission of this decentralised power to major consumption centres in southern and western Germany, 50Hertz cooperates closely with local distribution system operators, for both operational and planning purposes. This ensures the coordinated development of transmission and distribution systems.


The social dimension is central to the Elia Group’s activities. It addresses various aspects and is shaped by a commitment to all internal and external stakeholders.

Social report

03

61ELIA GROUP 2011 SOCIAL REPORT

will run between northern Germany and industrial centres in the south and west of the country.

That is why modern, large-capacity power transmission systems play such a vital role in hitting renewable energy development targets. The investment they require must also be decently remunerated.

“The strategy adopted by the regional government of Mecklenburg-Western Pomerania is justified daily by its suc-cess, and we intend to stick with it.”

Renewable energy: a fantastic opportunity for our region

“Renewable energy is a crucial sector for the future of Mecklenburg-Western Pomerania. Compared with other länder, our prospects for wind power, solar power and biomass are very good. It is truly a fantastic chance for us.

Local government has clearly recog-nised and proactively encouraged opportunities to embrace this avenue of development.

“We are leading the way when it comes to renewable energy, and should take pride in our role. Our region already generates almost half of its electric-ity from renewable sources, with wind accounting for some 60% of that. Fol-lowing on from Baltic 1, other offshore wind farms will be developed along our coastline. We are also working to iden-tify more onshore wind sites.

“Our aim is clear: we want to ensure that our region generates all its energy from renewable sources and also establishes itself as an exporter. This would help to create more jobs for the future. The de-velopment of renewable power genera-tion necessarily entails the creation of a value chain involving thousands of jobs. Between now and 2020, around 20,000 people will build their future careers on this sector.

“The renewable energy market will continue to develop – that much is certain. As a result, we urgently need to develop not only our regional grids, but also the electricity highways that

The renewable energy market will continue to develop – that much is certain. As a result, we urgently need to develop not only our regional grids, but also the electricity highways that will run between northern Germany and industrial centres in the south and west of the country.

Erwin Sellering MINISTER-PRESIDENT OF MECKLENBURG-WESTERN POMERANIA

ELIA 2010 SOCIAL REPORT62

I studied economics and management. I joined 50Hertz in 2009 and followed a training programme there for university and technical college graduates.

Endeavours like Climbing for Life really help to forge ties between participants: facing the same challenge and motivating each other in such a way can only boost solidarity. This event broadened people’s day-to-day social contacts at work.

“More than 650 people work at 50Hertz to ensure a reliable and high-quality power supply. New employees arrive at the company in a number of ways. Personally, I studied econom-ics and management. I joined 50Hertz in 2009 and followed a training programme there for university and technical college graduates. After 18 months’ training, I joined the HR Department.

“Working for a company like this is really motivating and enjoyable. This is where the future is being mapped out for our modern societies, which are becoming increasingly dependent on a reliable and sustainable power supply. I take part in different projects involving HR tools, especially skills de-velopment. This includes reviewing the training programme for young recruits and updating the new competency model. I was also fortunate enough to

be involved in the “Power II” project to optimise the internal strategy. Our competency model serves as a basis for a wide range of HR tools such as training for employees and managers, recruitment, and succes-sion and replacement planning. The model is vital to the continuous de-velopment of our employees, which is essential in Germany for demographic reasons if nothing else.”

Cora TellmannSTAFF MANAGEMENT

“I was lucky enough to be one of the 125 employees and partners of the Elia Group to climb the Col du Galibier as part of the Climbing for Life initiative. Although I do sport regularly, a chal-lenge on this scale forced me to train frequently and push myself to the limit. I had to grit my teeth more than once and my calves suffered, but the cama-raderie of the event kept me going. “While climbing, I had time to think, particularly about the 20 asthma and cystic fibrosis sufferers who also took part in this challenge. This was a mas-sive achievement for them. It was hard

enough for those of us in good health, so just imagine what it must have been like for anyone with restricted lung capacity! The fact that one of those in-dividuals was a colleague of mine from Elia only motivated me even more.

“Endeavours like this really help to forge ties between participants: facing the same challenge and motivating each other in such a way can only boost solidarity. We were all working towards the same demanding goal, and I saw plenty of people egg-ing each other on to get to the top together.

The event created a sense of positivity and broadened people’s day-to-day social contacts at work.

“And the idea that pushing yourself beyond your limits can help to raise awareness of issues like asthma and cystic fibrosis only serves to reinforce the shared sense of achievement.”

Sandra Van EesbeekDIGITAL COMMUNICATION

63ELIA GROUP 2011 SOCIAL REPORT

Staff policyIn carrying out its activities, Elia relies on the professionalism and expertise of some 1,785 staff, including 1,168 in Belgium, of whom half (49.91%) have joined the company since it was founded in 2001, thereby creating an excellent blend of experience and innovation.

The Elia Group faces a variety of chal-lenges, in a constantly and rapidly changing energy environment. These include the need to:

• identify and attract young people, often in advanced technical disci-plines, and train them in the specific skills needed in its activities – both traditional activities, such as high-voltage technology and new ones, e.g. all the disciplines related to smart grids and market operation and regulation;

• ensure career development oppor-tunities for staff within the company and continue to enhance their skills in areas of activity that are changing year by year;

• expand its activities internationally;• develop its innovation capacities;• anticipate the company’s HR needs

and expand its skills base to meet the challenges of tomorrow’s world;

• integrate newcomers with older, more experienced staff who pos-sess valuable knowledge and experience;

• put in place performance manage-ment mechanisms designed to mo-tivate and develop staff according to their own personal aspirations and the specific needs of the company.

Against this backdrop, Elia has intro-duced policies on staff recruitment and retention, skills management, training, mobility and motivation.

These policies are rooted in the values of the company’s mission statement, which Elia believes are an essential foundation underpinning the way its employees should operate, both within the company and in their dealings with outside players. Those values are:

• Entrepreneurship: actively seek opportunities and show the cour-age, along with others, to take the plunge with regard to improvements, overhauls or chances to help Elia to develop and serve its customers better.

• Empathy: be open and attentive to the feelings and opinions of others and demonstrate your desire to understand them while maintaining your own authenticity.

• Integrity: be open, loyal and honest to others, respecting them and their professional ethics. Make commit-ments and keep your word.

• Responsibility: be aware of the importance of your work and hence carry it out successfully using the appropriate resources, while at the same time respecting others and organisational constraints and ac-cepting the consequences of your actions.

Recruitment

Elia took on 111 new employees in 2011 in the wake of both retirements and the creation of new positions.

The proportion of employees with more than 10 years’ seniority has fallen gradu-ally from 68% in 2002 to 52.31% in 2011. Women account for 18.84% of staff and are playing an increasingly significant role in key jobs for the Group’s strategy and future.

64 ELIA GROUP 2011 SOCIAL REPORT

Top Employer 2012

In 2011, for the fifth year in a row, Elia took part in the Top Employer survey or-ganised by the independent experts at CRF (Corporate Research Foundation) and once again won the coveted title of Top Employer for 2012. Five criteria are considered in the selection process: primary working conditions, training op-portunities, internal promotion oppor-tunities, secondary working conditions and corporate culture. The title, which was awarded to 45 Belgian companies, is a further boost to Elia’s profile as a leading employer on the labour market.

Job fairs

As in previous years, job fairs were a particularly useful aid to Elia’s recruit-ment activities. In 2011, in addition to traditional fairs, Elia took part in a job fair on board a train travelling through seven major Belgian cities with a view to meeting student engineers. The initia-tive went down very well with students. Attending these events allows Elia’s recruitment specialists to meet talented young people. Selected candidates are then invited to take part in the first phase of the recruitment procedure.

Partnerships with schools and universities

Elia’s areas of activity, especially those relating to high-voltage technology, are not necessarily well catered for in school and university curricula. For this reason, Elia has developed a partnership policy with educational establishments to offer significant added value to universities and technical colleges and enable students to gain practical experience in the various disciplines associated with operating a transmission system. This is a very valuable learning experience for students and is a chance for Elia to attract young people to the company.

Elia Challenge

Each year, students from a number of technical colleges have the chance to complete an end-of-college project on a subject relating to high voltage with the aid of Elia specialists.

The programme includes a visit to a high-voltage substation and completion of a project on technologies used in high-voltage grids and Elia’s activities. The colleges receive assistance from Elia in the form of financial support. The projects are then presented to members of Elia’s management.

Technical Education Trophy

For a number of years, Elia has or-ganised a Technical Education Trophy aimed at educating secondary school students in scientific and technical subjects.

The Trophy was revamped for the 2010-2011 academic year as Elia decided to place the initiative within the broader context of the Young Belgian Scientists initiative. In this context, upper second-ary school students from all sections were contacted and invited to work on a scientific or technical project which they presented at the Science Expo on 29 and 30 April 2011 at Tour & Taxis in Brussels. The event featured more than 200 projects from all over the country, 17 of which were in competi-tion for the Elia Trophy. In the year 5-6 category, first prizes were awarded to schools from each language com-munity: Broederschool Sint-Niklaas for ‘Wind turbine’, and Centre scolaire Eddy Merckx for ‘What can be connected to a dynamo?’. In the year 3-4 category, the first prize was awarded to pupils at Notre-Dame Immaculée d’Evere for their project ‘From batteries to rechargeable batteries’. The panel also decided to award a special prize to a second-year class from Sacré-Cœur de Linthout for its project ‘This is not just wind’.

COMPOSITION OF THE ELIA STAFF 31/12/2011

Men Women Total FTE

Elia 50Hertz Elia 50Hertz Elia 50Hertz Elia 50Hertz

Management 7 6 0 0 7 6 6.5 6

Supervisory staff 305 58 77 11 382 69 375.8 68.5

Employees 636 462 143 138 779 600 755.53 597.4

Total 948 526 220 149 1,168 675 1,137.83 671.9

65ELIA GROUP 2011SOCIAL REPORT

Elia also set up a fun learning stand, focusing on the electricity transmis-sion system and operated by field staff. The stand aroused the enthusiasm and curiosity of the young people.

Student work placements

Elia conducts a policy of student work placements for final-year secondary school, college and university students. Such placements allow students to get to know the company and its activities. By talking to Elia staff and experienc-ing the working environment, they may discover a real passion for our line of work. Student work placements are also an ideal springboard to subsequent employment with Elia.

Skills management

Elia bases its skills management policy on a skills catalogue which includes five generic skills, defined for all Elia staff in line with the company’s values. Skills are generally analysed at various stages of an employee’s career: in the appraisal when an employee is hired or changes jobs, in the development interviews for both managerial/supervisory staff (the Midyear Review held each summer) and employees (during the annual Jobdate), as well as in the training provided to develop specific skills, and so on.

For managerial/supervisory staff, a number of extra specific skills have been defined for each job family. For em-ployees hired after 2002, the skills are supplemented with a description of the tasks specific to each job category. Vari-ous operational divisions also defined catalogues of specific technical skills.

Both the managerial/supervisory staff and employees hired under the new staff rules are subject to a Performance Management process, including an interview at the start of the year to lay down the objectives that have to be met and the activities that have to be carried out, an appraisal interview at the end of the year and a development interview. For employees hired under the old staff rules, there is currently only a develop-ment interview.

Elia has developed a partnership policy with educational establishments to offer significant added value to universities and technical colleges and enable students to gain practical experience in the various disciplines associated with operating a transmission system.


Training

Elia offers its employees a wide range of training. Detailed in a mini-catalogue, the courses on offer include training on behavioural skills, such as assertive communication, and training related to Elia’s activities, including the Campus Elia training course, the Elia Business Game with its individual versions for specific target groups (middle manage-ment, foremen at Grid Services, etc.), the Elia’s Activities training course and language classes. The IT Department also offers specific training on IT and as-sociated tools. In addition, training path-ways have been established for certain target groups including junior managers, middle managers, assistants to senior managers, newcomers to particular departments and project managers. In addition, Elia allows staff to take part in external training programmes (e.g. at the Vlerick Leuven Ghent Management School), subject to certain conditions (motivation for application, compliance with entry criteria, etc.).

Technical training

Elia has established a wide range of technical training programmes so as to continuously improve the skills of its field staff, who play a crucial role in safely managing the grid and ensuring sup-ply quality in Belgium. Elia is currently working on an integrated skills manage-ment and monitoring system, which will provide added support for the training programmes.

Based on the various catalogues of existing skills, Elia is planning new train-ing programmes to meet the Group’s increasingly specialist needs.In addition to the basic training required for our professional activities and safety compliance (certification training, train-ing modules tailored to different target groups, etc.), new training programmes are being established focusing primarily on technological developments. Training procedures have also been defined to support internal restructuring within the Asset Management Department in 2011.

Training in figures

Average training time per employee

2010: 54.07 hours2011: 37.90 hours

Learning coverage(at least one day of training)

2010: 73.43% 2011: 74.23%

At Expo Sciences, secondary school students learned about the activities carried out by power transmission system operators, mainly in the form of fun learning boards.


Knowledge managementKnowledge management activities are based on six strategic criteria: acquiring and maintaining critical knowledge, managing knowledge loss (departing staff), being equipped with appropriate tools and methodologies, learning and measuring, coordinating and collaborating with a view to extracting lessons from acquired experience.

Benchmarks were established with Solvay and the French system operator RTE with regard to processes, cata-loguing and loss of knowledge. Analyses were conducted with Knoco Ltd consultants to gauge knowledge and assess knowledge flow. The analy-ses focused on Elia’s two operational departments in Belgium: Asset Manage-ment and Energy & System Manage-ment. In 2012, after the assessments, a general knowledge management framework will be established to man-age best practices at Elia, initially within the Safety and National Control Centre departments.

In Germany

50Hertz Transmission is also keen to create an environment to attract and train employees with skills in technical fields and also in market operation and regulation.

Excellence is fostered to ensure employ-ees maintain a consistently high level of professionalism and motivation and an appropriate attitude towards safety.

Facing the impending departure of staff reaching the age limit, 50Hertz has es-tablished a programme for succession, knowledge transfer, leadership develop-ment and talent management.

Professionalism is defined as the ability of an employee to act appropriately, rea-sonably and responsibly both from an individual and social perspective and in a wide range of situations.

An initial staff satisfaction survey to develop and improve services and the work environment was conducted in au-tumn 2011. The participation rate – over 80% – meant that recorded results were largely representative. An action plan will be rolled out in 2012 on this basis.

RECRUITMENT

On 31 December 2011, 50Hertz employed 695 people, including 20 apprentices and 7 trainees. Women account for 22% of the workforce and 3.3% of 50Hertz staff have a disability.

Following a significant increase in em-ployee numbers as a result of both the extensive investment plans already in place or scheduled for the near future, and the development of new activities (Renewable Energy Act and interna-tionalisation of the energy market), the average seniority has fallen from 21.5 to 18.1 years and the average age from 43.9 to 43.1.

PARTNERSHIP WITH UNIVERSITIES

AND RESEARCH CENTRES

50Hertz has established a network to facilitate exchanges and long-term contact with academic institutions, including eight partner universities in its geographical area. By way of example, partnerships have been entered into with the Technical Universities of Berlin, Magdeburg and Cottbus. Professors with extensive expertise in electricity grids, high-voltage engineering and

In Germany

Professionalism is defined as the ability of an employee to act appropriately, reasonably and responsibly both from an individual and social perspective and in a wide range of situations.


energy legislation can thus attract young talents to 50Hertz Transmission’s areas of activity. To strengthen these ties, a chair was created in 2010 at the University of Cottbus, which boasts a leading Research and Development Department. Exchanges between 50Hertz Transmission and the academic teaching staff are stimulated by lectures and visits to research premises and operational sites. 50Hertz also offers students opportunities to deepen their knowledge and acquire professional experience through work placements, seminars and final dissertations.

KNOWLEDGE MANAGEMENT

Due to the technical nature and com-plexity of management activities relating to the power transmission system, vocational training and skills develop-ment are also priorities at 50Hertz. Work is also underway to draft a policy for the management of high-potential employ-ees in line with the needs of 50Hertz. The policy is scheduled for implementa-tion in 2012.

By redefining skills management and updating the long-term succession pro-gramme, the Power II project will help the company to cope with significant demographic challenges and the gen-eral decrease in the active population.

The number of technical apprenticeship contracts will also be increased. Such apprentices continue to work for at least one year in the company after they have completed their apprenticeships. Several trainees and PhD students were also recruited in 2011.

M1Perimeter:

act oncurrent and futureknowledge

M2Knowledge securing

Manage the riskassociated with theloss of knowledge

M3Knowledge Content

Knowledge base andsocial networks

M4Benchmark

processes, audit,monitoring

M5Extent

CollaborationInterface withuniversitiesand experts

M6Capturing and

using lessons fromexperience

PILOTING 2011/2012 DEPLOYMENT 2013/2015

Piloting decision

Go/No Go decision


Employee safety and welfareThe Elia Group prioritises the safety and welfare not only of its employees and the personnel of companies with which it works but also of its customers and the public as a whole. The company makes sure that its facilities are as safe and reliable as possible. Elia has set a target of zero accidents or incidents on the basis of four action areas.

1 - Welfare policy as a key aspect of the company’s management responsibilities

Elia includes risks assessment tech-niques in its management, management systems, procedures and activities. As such, safety is integrated at source into both our infrastructure and our work processes and methods.

2 - Continuous training and coaching

Training, education and the continuous involvement of employees in both op-erational safety risks and corporate risks help to support and consolidate the es-tablishment of constant risk awareness as a part of the corporate culture. Elia’s training programmes are based not only on solid theory, but also practical imple-mentation and feedback from the field. They include the provision of technical training as well as basic safety training

for line managers and employees. Infor-mal learning in the workplace also helps to identify strengths and weaknesses, which can then be taken into account in the efforts to prevent accidents and incidents.

3 - Embedding safe conduct in the corporate culture

This approach calls for involvement at all levels of the company (line man-agement, foremen, committees and em-ployees), compliance with work meth-ods, procedures and instructions and the notions of order and cleanliness. The principles of the Stop-Think-Act-Re-view (STAR) safety campaign contribute to safety in the workplace and at home, when organising work and in the event of unforeseen circumstances. The in-volvement of the CEO, the Management Committee and line management, both in the field and via action programmes, is a vital part of embedding the safety reflex in the corporate culture.

4 - Performance Management and operational monitoring

Safety and security help to ensure the effectiveness and quality of our activities. Elia strives to follow up and continuously improve its safety results through monitoring and objective as-sessment, based on universally agreed and relevant indicators.Safe conduct must also be integrated into employee Performance Manage-ment and must entail key aspects such as personal development and career advancement.

Health

In addition to mandatory check-ups under occupational health obligations (assessment of individual health risks), all members of staff are given access to flu vaccines. In 2011, Elia also helped to raise awareness of the importance of good diet and the potential impact of alcohol- and drug-related issues.


Daniel Dobbeni, CEO

“Our safety objective in the Elia Group is zero accidents. The reason is simple: the severity of an accident – and its potential impact on the health of our employees – cannot be known in advance.Therefore, any accident – whether it involves you or your colleagues or occurs at or outside work – is one too many. Establishing a permanent safety reflex is our only option, and putting it into practice depends entirely on us.”

Results

In recent years, the continued efforts undertaken by Elia with a view to sys-tematically improving the level of safety – through the active implementation of the Plan–Do–Check–Act principle – have produced excellent results, making Elia one of the safest industrial com-panies not only in Belgium, but also in Europe.

These results vindicate the approach to the intrinsic safety of the facilities as well as to operational safety in carrying out our activities.

Moreover, these results fully justify the Elia Group’s belief that ‘any accident is one accident too many’, since aiming to prevent even the smallest of accidents is the best way to avoid serious occupa-tional accidents. A minor oversight or an innocent fall can have unfortunate con-sequences. Our employees have man-aged to drastically reduce accidents due to slipping and falling by never losing sight of this principle, through concrete action and awareness-raising campaigns about cleanliness in our in-dustrial facilities, workshops and offices.

In 2011, a number of events, including a fluid accident, proved that positive safety results can be maintained only through constant vigilance and continu-ous critical assessment of not only our rules, procedures and instructions, but also how they are applied and adjusted to ever-changing real-life situations.

Safety and welfare of subcontracted staff

To encourage the safety reflex amongst subcontractors and reward their positive safety results, various objective safety and quality parameters have been incorporated into both the organisation and implementation of activities in the field. These parameters are then taken into account when selecting contrac-tors and outsourcing work. The results are evaluated and discussed with the subcontractors in a spirit of dialogue. The approach of existing and potential subcontractors to quality and safety is also audited. An action plan is defined as and when necessary to raise the level of their operation and results to the level Elia is looking for. And end is put to the cooperation with subcontractors who do not adequately follow safety policy or do not attain the required level for safety-related parameters and results.

Wider commitment to safety

Elia Group employees and its subcon-tractors’ staff are not the only ones who are required to heed the potential risks of high-voltage infrastructure: the same goes for anybody going near our facilities. At the request of various fire brigades, Elia organised sessions deal-ing with the specific risks and the safety measures to be taken during emergency activities near our facilities. Elia also regularly makes its facilities available to emergency teams and services so that they can conduct exercises in the most realistic possible context. Preventive actions were also undertaken in the construction sector in collaboration with the National Action Committee for Health and Safety in the Construction Industry (CNAC/NAVB). In this connec-tion, around 20 advisors were trained in the safety risks posed by our facilities in their activities. Awareness-raising activi-ties were also organised with FedBeton (Belgian Federation for ready-mixed concrete).


Frequency and severity rates

A total of seven accidents leading to incapacity for work were recorded for around 16,950 interventions in the field, including a fluid accident – which could have been avoided through compliance with procedures and the use of available personal protective equipment at the time – and a commuting accident in-volving an unhitched trailer from another vehicle.

AWARENESS-RAISING CAMPAIGN

Various campaigns were organised in 2011 to raise awareness of the impor-tance of good diet and the potential impact of alcohol- and drug-related issues.

ELIA FREQUENCY RATE ELIA SEVERITY RATE

0

2

4

6

8

10

Elia

201120102009200820070,0

0,1

0,2

0,3

0,4

Elia

20112010200920082007

0,5

2,7

5,1

2,8

1,7

4,6

0,03

0,100,14

0,01

0,28


To encourage the safety reflex amongst subcontractors and reward their positive safety results, various objective safety and quality parameters have been incorporated into both the organisation and implementation of activities in the field. These parameters are then taken into account when selecting contractors and outsourcing work.

In Germany

OCCUPATIONAL HEALTH AND SAFETY

50Hertz came close to the target of zero industrial accidents in 2011. Occupa-tional health and safety is an integral part of the company and a key objec-tive. The Shopper fall-protection system, developed in cooperation with 50Hertz, is due to be certified soon by the rel-evant inspection body. The system was developed by 50Hertz staff (lines team) and managers from the professional as-sociation of which 50Hertz is a member. The new system will help to enhance the safety of line mechanics.

Work clothing and individual protective equipment were also improved and are used by members of staff to provide maximum protection. Subcontracted staff must be registered and certified with regard to safety. This contributes to meeting the appropriate qualification of all workers in the field of occupational safety. A questionnaire was also drawn up for subcontractors in cooperation with the Purchasing Department, to as-sess their occupational safety.

A contract was signed with the German occupational health association (BAD) to provide counselling to employees and management. The relevant services are available to anybody experiencing work-related psychological issues. The programme is supported by employee representatives. Cooperation with these services was optimised and the bond of trust strengthened.

ACCIDENT STATISTICS

One occupational accident was record-ed in 2011 leading to 9 days of incapac-ity for work - a remarkable achievement and a sign of the efforts undertaken in that area.Some eight commuting accidents were recorded, mainly due to poor weather conditions. No serious injuries were sustained.19 employees of companies working for 50Hertz sustained minor injuries during working hours.


Corporate social responsibility The Elia Group plays a crucial role in community welfare, the economic success of its companies and the success of various other organisations. To this end, Elia is a socially responsible company in all its activities:

• supporting European, federal and regional energy and climate targets;

• ensuring the integration of green en-ergy in our grids, including offshore;

• developing tomorrow’s grid in the most cost-effective way for the com-munity;

• ensuring permanent dialogue with all stakeholders in our activities: customers, employees, people liv-ing near our facilities, students, the general public;

• maintaining and developing the grid in an environmentally friendly and cost-effective way for the commu-nity;

• undertaking various social initiatives in both Belgium and Germany;

• promoting technical and scientific studies for young people;

• and many other activities.

Elia is also a member of Business & Society, the benchmark for corporate social responsibility (CSR) in Belgium, and provides support and resources to companies aiming to incorporate social responsibility into their management and activities by:

• sharing best practices;• developing new CSR solutions;• sharing information on various as-

pects of CSR with stakeholders.

Awareness branding campaign

The Elia Group wants its various stake-holders to understand the importance of what it does, among other things, for the economy and the community. To this end, in 2008 the company rolled out a branding campaign, with a view to:

• coming across as a dynamic em-ployer offering good future pros-pects so as to attract the new staff it needs to maintain the efficiency and quality of its service;

• gaining the trust of local residents and public authorities, sustained by a determination to identify the most appropriate solutions in a spirit of constructive dialogue;

• gaining the confidence of investors so as to have the capital for the investments required to safeguard the sustainable development of its activities;

• enabling citizens to better under-stand and support Elia’s role in implementing energy and environ-mental policy, at federal level and within the three regions of Belgium.

The 2011 campaign revolved around two main activities: preparing tomor-row’s grids for the challenges posed by renewable energy, and creating a Euro-pean electricity market. The campaign was rolled out at two key points (June and September), using a giant power plug as a metaphor for the high-voltage grid. Surveys showed a significant in-crease in awareness and understanding of the relevant challenges. The Euro-pean Commission cited the campaign as an example, and ENTSO-E is looking into the possibility of carrying out a similar activity at European level.

The Elia Fund is aimed at people with disabilities in the broad sense of the term.


Elia Fund: wonder and discovery for all

Since it was established, Elia has en-sured that its mission to promote secu-rity of supply and the electricity market has been reflected on the social front, by creating the Elia Fund in cooperation with specialists from the King Baudouin Foundation. The Foundation – an ideal partner for such a project – indepen-dently and transparently manages the Fund in keeping with the company’s values.

The Elia Fund is aimed people with disabilities in the broad sense of the term (people with a mental, physical or sensory disability, older people, families with young children, and so on) and supports projects that offer these individuals transparent and non-discriminatory access to tourist, cultural and sporting facilities, in the same way as everybody else. The Fund, which has an annual budget of some €250,000, places an emphasis on ‘wonder and discovery’.

In 2011, the panel of independent experts selected 22 projects which focused strongly on the integration of disabled people in as broad a context as possible.

PROJETS 2011

• “Ik adem dus ik ben” - Vereniging personen met een handicap (VFG)

• Kreative und musikalische Kurse für Menschen mit und ohne eingeschränkter Mobilität - Kreative Werkstatt Büllingen

• Toneel de Kloef - Vrijetijdsondersteuningscentra Opstap – De Kloef

• Viactive - ASBL Sports Seniors• Samen bergen overwinnen

- VZW Horizont• Quatro avec Tibou - ASBL

Association des Sourds et Malentendants du Tournaisis

• Proeven van kunst en cultuur - VZW Sjarabang

• Le Musée Magritte avec un Visioguide - Fédération Francophone des Sourds de Belgique

• Netwerk Aalst - Centrum voor hedendaagse kunst

• Tous à bord - ASBL Génération Nouvelle

• Outdoor: beperkt!? - VZW De Stroom

• Ciné-ma différence - Centre de Diffusion Cinématographique Montois

• Personen met een beperking op de planken - VZW Sperwer

• Comment sonne mon handicap ? - ASBL Cinetik

• Therapie op een paardenrug - G-Seppe VZW

• Tous aux plaines de vacances - ASBL Badje

• Kapitein op eigen schip - Vormingscentrum Handicum

• La voile dans un fauteuil - asbl ForceDouce

• Low-budget zomerkampen - Jeugdvereniging De Jojo

• La couleur des Sens - ASBL Passe Muraille

• NTGent overbrugt drempels - NTGent

• Imaginaire du Monstre - Atelier Graphoui

• IJspret voor iedereen - St Margaretha vzw

• DG-Inklusiv - Begleitzentrum Griesdeck€250,000

The Fund, which has an annual budget of some €250,000, places an emphasis on ‘wonder and discovery’.

The 2011 campaign revolved around two main activities: preparing tomorrow’s grids for the challenges posed by renewable energy, and creating a European electricity market. The campaign was cited as an example by the European Commission.


Télévie

In 2011, as in previous years, opera-tional staff managed to persuade quite a number of employees, friends and family members to lay aside their fears and climb one of Elia’s high-voltage pylons (not connected to conductors of course). The aim of this initiative is to raise funds for cancer research as part of Télévie. The event is carefully super-vised by both Elia professionals and a group of volunteer para-commandos from the Mons area to ensure the safety of the participants.

International wheelchair tennis tournament

For the third year in a row, Elia support-ed the Belgian Wheelchair Tennis Open. This wheelchair tennis tournament brings together internationally renowned sportsmen and shows how sport con-tributes to the integration of people with reduced mobility.

Climbing for Life

More than 100 Elia Group employees from Belgium and Germany and a num-ber of customers took on the challenge of the Col du Galibier, the legendary climbing stage of the Tour de France. The aim of the initiative, launched by Flemish Minister-President Kris Peeters, was to raise awareness and funds for people with asthma and cystic fibrosis. The event gave participants the chance

not only to push themselves harder than ever before, but also to socialise in a different setting, forge new ties, get to know themselves and others, and establish a network which they could potentially use in their professional lives.

Museum aan de Stroom

Elia formed a partnership with the Museum aan de Stroom (MAS), which opened in Antwerp in May 2011. The company will use the museum to promote its activities in connection with the Métropole social theme, thereby boosting its profile, especially among potential young recruits. This will enable Elia to firmly establish itself in the Ant-werp region which is home to a number of major customers as well as the company’s administrative headquarters for Flanders.

Company visits

Elia organises guided visits for interested groups, featuring a presentation of the company followed by a visit to a control centre and a high-voltage substation. These visits allow people to find out about the transmission system operator’s activities. They usually take place at Elia’s premises on the site at Avenue de Vilvorde in the Brussels port area, which is also home to the Elia Training Centre and the national control centre. Requests can be made to [email protected].

In Germany

In keeping with its values, 50Hertz Transmission showed its commitment to community welfare and sustainable development by supporting various projects for the conservation of nature and the environment, as well as social initiatives geared towards young people. In 2011, 50Hertz established a partnership with the world-renowned Konzerthaus Berlin and supported concerts by the talented young cellist Sol Gabetta. By promoting the revival of the traditional autumn cross-country run Rennsteig-Herbstlauf in Thuringia, 50Hertz also confirmed its social commitment in a region where significant grid extensions are scheduled. 50Hertz is also the main partner of the Windstärken (Wind Forces) exhibition which began in autumn 2011 at the German Museum of Technology. The aim of the exhibition is to raise public awareness of the scientific, technological and economic impact of wind on electricity.

Whether it involves climbing a high-voltage pylon (under supervision) or scaling the Col du Galibier (the legendary stage of the ‘Tour de France’), Elia takes part in a number of events in which participants push their boundaries for the benefit of the community.


Stakeholder relations

Elia engages in open and transparent dialogue with its customers, suppliers, shareholders, potential investors, authorities and the community at large, as well as with Group staff members.

Relations with suppliers

Elia aims to build up a long-term, mutu-ally beneficial relationship with its suppli-ers. Its procurement policy is therefore based on the following principles:

• an objective selection and award procedure;

• compliance with Belgian and EU legislation;

• a constant quest for new partners and innovative solutions;

• a preference for suppliers that sup-port our goal of operating, maintain-ing and developing a secure and reliable electricity system;

• a preference for suppliers that provide the best possible service to both external and internal customers;

• a preference for suppliers that use their knowledge and experience to reduce our costs by minimising the total cost of ownership;

• a preference for contracting work and framework agreements in which the purchase of goods is linked to the provision of the corresponding services and the continual qualifica-tion of suppliers;

• a preference for results-based com-mitments (or service level agree-ments) rather than means-based commitments;

• continuous assessment and improvement of quality, individual safety and the environment.

Relevant certification (SCC, BeSaCC, ISO9001, ISO14000, and so on) is an important criterion in the selection of suppliers.

Relations with investors

The task of the Investor Relations De-partment is to ensure transparent com-munication with financial analysts and current and potential investors. Two-way communication between investors and management has been established to comment on the company’s results, strategy and decisions and to under-stand the concerns of shareholders and analysts as well as the perception of the market.

More than ten roadshows were or-ganised with the CEO and CFO for the benefit of the hundred or so institutional investors in Europe’s major financial centres. The Group also took part in the Belgian Excellence Investment Seminar co-organised by NYSE and ING in New York. In between roadshows, inves-tors and analysts had a chance to talk to the CEO or CFO, either in person or by video conference. In addition, the Elia Group attended many national and international investment conferences as well as the annual events organised by the Vlaamse Federatie van Beleggings-clubs en Beleggers (VFB). Elia’s financial newsletter ‘Investor News’ provides investors with up-to-date information about the company on a regular basis.


Relations with employees

INDUSTRIAL RELATIONS

Sectoral agreements

To fulfil its role in Joint Committee 326, Synergrid (of which Elia is a member) provides various support and consulting services on social issues for its mem-bers, including:

• drawing up transitional procedures for collective labour agreements concluded at sectoral and company levels;

• support for employers’ organisations to prepare for the social dialogue;

• assistance for members in finding solutions to any industrial disputes;

• management of sectoral joint bodies.

Following the establishment of a draft cross-industry agreement in early 2011, the caretaker government introduced a number of implementing measures at national level, such as the maximum wage increase of 0.3%. The discussions will be continued in 2012.

A collective labour agreement was signed on training activities in sectoral companies. Within Joint Committee 218, a sectoral collective labour agree-ment was signed on 24 June 2011 on purchasing power, mobility, training, early retirement and time credits.

Group-level agreements

Company labour agreements were con-cluded for the transposition of collec-tive labour agreement 90 (bonus linked to achievement of a set of collective results) at Elia and Elia Engineering. The joint works council (Elia System Opera-tor, Elia Asset and Elia Engineering) met regularly in 2011. It was provided with detailed information on the financial and economic situation of the Elia Group, and at the annual extraordinary works council meeting.

Elia’s three committees for prevention and protection at work (CPPTs) and Elia Engineering’s CPPT met regularly, sepa-rately or jointly, with particular regard to the welcoming of new employees and the 2012 annual action plan for safety. On the initiative of the CPPTs, the joint working group for ‘collective labour agreement 100 – alcohol and drug abuse prevention policy’ drafted a prevention policy on the consumption of such substances at work, approved by the Works Council meeting of 17 October 2011 and annexed to the work regulations.

On 19 September 2011, the follow-ing collective labour agreements were signed:

• a collective labour agreement under the terms of which a single trade union delegation would be estab-lished as from 1 October 2011 for Elia Asset and Elia System Operator, following restructuring within Asset Management;

• a collective labour agreement under the terms of which Elia Asset, Elia System Operator and Elia Engineer-ing would form a single technical operating unit after the 2012 social elections, for the Works Council, and for the Committee for Prevention and Protection at Work.

The dialogue with employee representa-tives was constructive, and no social conflicts arose.


50Hertz Transmission maintains close and constructive relations with employ-ee representation bodies through the ‘Mitbestimmung’ (co-decision) system. In 2011, employee representatives were closely involved with the POWER inter-nal project which comprises a series of initiatives intended to strengthen the strategic aims and services of 50Hertz. Employee representatives are also kept abreast of changes in the financial and economic situation via the Economic Committee.


Internal relations in the company

Alongside industrial relations in official staff representative bodies, the Elia Group offers many opportunities for em-ployees in both Germany and Belgium to meet, exchange information and engage in dialogue. These are organ-ised at company level – e.g. meetings in the field between the CEO and employ-ees – and within specific divisions (local information sessions). Departmental or team meetings are also held.

Specific sessions were organised in Belgium in the Asset Management divi-sion, following organisational changes introduced in 2011, and in Germany, in connection with the POWER project. In addition, there are various com-munication channels providing regular information to Group staff (website, e-newsletters, company magazine, noon meetings, etc.).

In 2011, for the first time, Belgian and German employees were given oppor-tunities to meet: the sporting challenge in Belgium, the sports day in Berlin, the climb up the Col du Galibier by German and Belgian staff, and the joint meeting between Belgian and German manage-ment teams.

Relations with customers

The Customer Relations Department and its account managers are the bedrock of Elia’s dealings with custom-ers. 2011 was characterised by the specific need for exchanges on new 2012-2015 tariffs. Despite the uncer-tainty surrounding tariffs until the final few days of 2011, Elia endeavoured to keep its customers well informed about new tariff mechanisms. Accordingly, tariff information sessions were held on 28 December 2011 to ensure a sound understanding of 2012-2015 tariffs.

Alongside industrial relations in official staff representative bodies, the Elia Group offers many opportunities for employees in both Germany and Belgium to meet, exchange information and engage in dialogue.


The Users’ Group, set up by Elia as a primary channel for exchanges with grid users, held a number of meetings to this end. With regard to DSOs, a consulta-tion was held at CREG and followed by various bilateral meetings. Elia also set up a process to review the collaboration agreement within Synergrid with a view to incorporating the new tariff rules into the agreement.

Each year, Elia organises a special day for its customers, to keep them informed, strengthen dialogue and increase the number of exchanges on matters that concern them. The 2011 edition attracted record numbers of people. Two discussion panels gave rise to some very interesting debates. The first, consisting of Noémie Laumont (Edora), Marcel Cailliau (FEBEG), Francis van Gijseghem (ODE Vlaanderen), André Pictoel (VREG President, the Flemish regulator) and the head of the Elia Cus-tomer Relations Department, focused on the integration of decentralised generation.

The second, on the development and regulation of the European market, featured Alberto Pototschnig (Director of the Agency for the Cooperation of Energy Regulators (ACER)), Dominique Woitrin (Technical Director of CREG), Anne-Malorie Geron (Head of Markets at Eurelectric), Catherine Vandenborre (CEO of Belpex) and Daniel Dobbeni (President of ENTSO-E). Customers receive a monthly e-news-letter and can consult detailed and transparent information published on the Elia website. They can also access relevant applications and information via the extranet in an efficient, user-friendly and secure way.

Customers’ Day

Each year, Elia also organises a special day for its customers, to keep them informed, strengthen dialogue with them and increase the number of exchanges on matters that concern them.


Information meetings with the public and authorities, a round-the-clock hotline to regional technical secretariats in Brussels, Merksem and Namur and website access at www.elia.be are just a few of the ways Elia caters for individuals and public authorities requiring information.

Relations with the authorities, residents and the general public

Elia takes care to inform the relevant ad-ministrative bodies and authorities and the people living near its facilities about what it is doing (regardless of whether it relates to its investment, maintenance or emergency intervention projects) and how this may affect their daily lives, especially during works carried out by subcontractors or maintenance teams.

Information meetings with the public and authorities, a hotline to regional technical secretariats in Brussels, Merksem and Namur and round-the-clock website access at www.elia.be are just a few of the ways Elia caters for individuals and public authorities requiring information. A lot of informa-tion meetings were organised in 2011 as part of the public consultation on permit procedures for the Stevin project.

Elia was also heard at a hearing organ-ised by the Belgian Federal Parliament’s Economy Committee in connection with Minister Paul Magnette’s bill amending the Act of 29 April 1999 relating to the organisation of the electricity market, and the Act of 12 April 1965 on the transmission of gaseous products.

The regional technical secretariats field around 50,000 questions each year.

50,000questions are fielded by the regional technical secretariats each year.


With a view to meeting certain obligations, Elia is transparent, neutral and non-discriminatory towards all stakeholders involved in its activities.

At Elia, corporate governance is based on two pillars:• the Corporate Governance Code which Elia adopted

as a benchmark; • the Act of 29 April 1999 on the organisation of the

electricity market and the Royal Decree of 3 May 1999 on the management of the electricity transmission system applicable to Elia as a transmission system operator.

Corporate governance statement

04

83ELIA GROUP 2011CORPORATE GOVERNANCE STATEMENT

Composition of management bodies

Board of Directors1

CHAIRMAN

• Luc Van Nevel, whose chairmanship was renewed on 10 May 2011, independent

VICE-CHAIRMEN

• Francis Vermeiren, whose vice-chairmanship was renewed on 10 May 2011, Publi-T

• Thierry Willemarck, whose vice-chairmanship was renewed on 10 May 2011, independent

DIRECTORS

• Jennifer Debatisse, whose term of office was renewed on 10 May 2011, Publi-T

• Clement De Meersman, whose term of office was renewed on 10 May 2011, independent

• Johan De Roo2, until 25 August 2011, Publi-T • Jacques de Smet, whose term of office was renewed

on 10 May 2011; independent• Claude Grégoire, whose term of office was renewed

on 10 May 2011, Publi-T • Philip Heylen3, from 25 August 2011, Publi-T • Jean-Marie Laurent Josi, whose term of office

was renewed on 10 May 2011, independent• Miriam Maes4, whose term of office was renewed

on 10 May 2011, independent• Jane Murphy, whose term of office was renewed

on 10 May 2011, independent• Dominique Offergeld, whose term of office was renewed

on 10 May 2011, Publi-T • Steve Stevaert , whose term of office was renewed

on 10 May 2011, Publi-T • Leen Van den Neste, whose term of office was renewed

on 10 May 2011, Publi-T

HONORARY CHAIRMAN

• Ronnie Belmans6

Corporate Governance Committee

• Thierry Willemarck, Chairman• Jane Murphy• Luc Van Nevel, until 10 May 2011• Miriam Maes, from 10 May 2011

Audit Committee

• Clement De Meersman, Chairman• Jacques de Smet• Claude Grégoire

Remuneration Committee

• Jean-Marie Laurent Josi, Chairman• Jacques de Smet• Francis Vermeiren

1 Composition of the Elia System Operator and Elia Asset Boards of Directors as at 31 December 2011. As of 13 January 2011, the Boards have 14 members.

2 On 25 August 2011, the Elia System Operator and Elia Asset Boards of Directors accepted the voluntary resignation of Johan De Roo, effective from midnight on 24 August 2011. Philip Heylen was co-opted on 25 August 2011 as a non-independent director and replacement for Johan De Roo. He was appointed permanently by the Extraordinary General Meeting of Elia System Operator and Elia Asset on 26 October 2011.

3 See reference 4.4 Following the expansion of the Boards of Directors to 14 members, on 13 January 2011 Miriam Maes

was co-opted as an independent director and Steve Stevaert was co-opted as a non-independent director. They were appointed permanently by the Ordinary General Meeting of Elia System Operator and Elia Asset on 10 May 2011.

5 idem6 This means he is no longer required to attend Board meetings.

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84 ELIA GROUP 2011 CORPORATE GOVERNANCE STATEMENT

Auditors

• Klynveld Peat Marwick Goerdeler Réviseurs d’Entreprises SCRL, represented by Alexis Palm

• Ernst & Young Réviseurs d’Entreprises SCRL, represented by Marnix Van Dooren

Management Committee

• Daniel Dobbeni, Chairman and Chief Executive Officer • Jacques Vandermeiren, Vice-president and Chief

Corporate Officer • Jan Gesquière, Chief Financial Officer • Hubert Lemmens, Chief Innovation Officer • Roel Goethals, Chief Officer European Activities &

Participations • Frank Vandenberghe, Chief Officer Energy

& System Management • Markus Berger, Chief Officer Asset Management

Secretary-General

• Pierre Bernard until 10 May 2011• Gregory Pattou from 10 May 2011

Board of Directors

The Boards of Directors of Elia System Operator and Elia As-set are the same and, since the amendment to the articles of association on 13 January 2011, have consisted of 14 mem-bers, none of whom perform a management role within either of those two companies. Half of the members are independent directors in keeping with the conditions laid down in both Ar-ticle 526ter of the Companies Code and the articles of associa-tion, and having received a positive opinion from CREG on their independence.

In accordance with provisions stipulated by legislation and the articles of association, these Boards of Directors are supported by three committees – a Corporate Governance Committee, an Audit Committee and a Remuneration Committee – which are the same for Elia System Operator and Elia Asset. The Boards ensure the effective operation of these committees.

APPOINTMENT OF DIRECTORS

The following changes were made to the Board of Directors in 2011:

• Following the expansion of the Boards of Directors to 14 members, on 13 January 2011 Miriam Maes was co-opted as an independent director and Steve Stevaert was co-opted as a non-independent director. They were appointed permanently by the Ordinary General Meeting of Elia Sys-tem Operator and Elia Asset on 10 May 2011.

• On 10 May 2011, the terms of office of 14 directors, of whom seven were independent and seven were not, were re-newed by the general meeting of Elia System Operator and Elia Asset for a period of six years. CREG issued a positive opinion on the appointment of the independent directors.

• Johan De Roo voluntarily resigned from his post as director. His resignation was accepted by the Boards of Elia System Operator and Elia Asset on 25 August 2011 with effect from midnight on 24 August 2011.

• The Boards of Elia System Operator and Elia Asset co-opt-ed Philip Heylen on 25 August 2011 as a non-independent director and replacement for Johan De Roo. He was ap-pointed permanently by the Extraordinary General Meeting of Elia System Operator and Elia Asset on 26 October 2011.

The directorships will expire at the end of the 2017 general meeting for the financial year ending on 31 December 2016. The six-year term diverges from the term of four years recom-mended by the Belgian Corporate Governance Code, a fact justified by the technical, financial and legal specificities and complexities associated with the tasks of the transmission sys-tem operator, which call for greater experience in those areas.

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It should be remembered that the corporate governance rules for the appointment of independent and non-independent members of the Elia System Operator and Elia Asset Boards and their committees, as well as their roles, are subject to spe-cific procedures. The appointment procedures are laid down in the Act of 29 April 1999 on the organisation of the electricity market and in the company’s articles of association.

The Act of 29 April 1999 on the organisation of the electric-ity market gave the Corporate Governance Committee the important task of putting forward candidates for the role of in-dependent director. The directors are appointed based on the candidate list drawn up by the Corporate Governance Com-mittee. For each candidate, the Committee takes into account an up-to-date CV and a signed formal declaration outlining the independence criteria as stipulated by legislation applying to Elia and the articles of association. Then the general meet-ing appoints the independent directors. These appointments are submitted to CREG for its opinion on the independence of each independent director. A similar procedure applies where an independent directorship becomes vacant during the rel-evant term of office and where the Board co-opts a candidate put forward by the Corporate Governance Committee.

One of the Corporate Governance Committee’s tasks is to act as a nomination committee for independent directors. For the appointment of non-independent directors, no nomina-tion committee has been established to make recommenda-tions to the Board. This arrangement, which diverges from the Corporate Governance Code, is due to the fact that the Board constantly seeks consensus, wherever possible. Moreover, no significant decision can be made without a majority among the groups of independent directors and non-independent direc-tors respectively.

APPOINTMENT OF COMMITTEE MEMBERS

The terms of office of the chairmen, vice-chairmen and mem-bers of the various committees supporting the Board of Direc-tors were renewed by the Board of Directors’ meeting of 10 May 2011, for a period of three years.Miriam Maes was appointed as a member of the Corporate Governance Committee by the Board of Directors on 10 May 2011, as a replacement for Luc Van Nevel.

AUDITORS

At the ordinary general meetings of Elia System Opera-tor and Elia Asset on 10 May 2011, Ernst & Young Réviseurs d’Entreprises and Klynveld Peat Marwick Goerdeler Réviseurs d’Entreprises were reappointed as auditors, represented by Marnix Van Dooren and Alexis Palm respectively.

The auditors were reappointed for a period of three years. Their terms of office are due to expire following the 2014 ordinary general meeting for the financial year ending on 31 December 2013.

The annual auditors’ fees for auditing the simplified and con-solidated annual accounts of Elia System Operator, and the simplified and consolidated annual accounts of Elia Asset and Elia Engineering were set at €150,000 (€90,000 for Elia System Operator, €50,000 for Elia Asset and €10,000 for Elia Engineer-ing), to be indexed annually based on the cost-of-living index.

BOARD OF DIRECTORS’ ACTIVITY REPORT

Under the Act of 29 April 1999, the Board of Directors: • defines the company’s general policy, values and strategy

– by transposing those values and strategy into primary guidelines, the Board takes into account corporate social responsibility and diversity, both in terms of gender and generally;

• exercises the powers bestowed on it by the Belgian Com-panies Code and by the Act of 29 April 1999 on the or-ganisation of the electricity market, with the exception of powers delegated to the Management Committee;

• takes any action deemed helpful or necessary to achieve the object of the company, with the exception of those ac-tions falling within the scope of the powers attributed or delegated exclusively to the Management Committee, and the powers reserved for the general meeting by law or the articles of association;

• exercises the powers bestowed on it by the articles of as-sociation;

• exercises general control, for example over the Manage-ment Committee in accordance with statutory restrictions regarding access to commercial data and other confidential information relating to grid users and its processing;

• monitors and evaluates the effectiveness of the committees supporting the Board.

In 2011, the Boards of Directors of Elia System Operator and Elia Asset met on ten and eight occasions respectively. The following members were absent at one or more Board meet-ings: Claude Grégoire (13 January 2011), Steve Stevaert and Thierry Willemarck (24 March 2011), Johan De Roo (10 May 2011), Jean-Marie Laurent Josi, Leen Van den Neste and Fran-cis Vermeiren (23 June 2011), Clement De Meersman, Philip Heylen and Miriam Maes (11 October 2011), and Jennifer Deba-tisse, Clement De Meersman, Jean-Marie Laurent Josi, Miriam Maes, Jane Murphy, Leen Van den Neste, Francis Vermeiren and Thierry Willemarck (23 December 2011).

Members who are unable to attend usually have a representa-tive. Under Article 19.4 of the Elia System Operator articles of association and Article 18.4 of the Elia Asset articles of asso-ciation, members who are absent or prevented from attend-ing may give their prior written permission authorising another member of the Board to represent and vote on their behalf. No member can represent more than two directors.


Significant events in 2011

Changes to the articles of association

The articles of association of Elia System Operator and Elia As-set were amended in 2011 with a view to expanding the Board to 14 members, and in line with the new Act of 20 December 2010 on the exercise of certain rights of shareholders.

The amendments to the articles of association must comply with the rules laid down in this regard in the Belgian Companies Code and by the company’s articles of association (in particular Articles 28 and 29 of the articles of association of Elia System Operator and Articles 27 and 28 of the articles of association of Elia Asset). The full latest version of the articles of association can be found on the company’s website.

Extension of the Board of Directors to 14 members

The Boards of Elia System Operator and Elia Asset were ex-tended from 12 to 14 members by the extraordinary general meeting of 13 January 2011. The Boards comprise seven inde-pendent and seven non-independent directors. This extension reflects the growth in the supervisory role per-formed by the Board of Directors of Elia System Operator in the wake of international developments, in particular the acquisition of 50Hertz Transmission and non-regulated activities.

Since the Boards of Elia Asset and Elia System Operator must comprise the same members under Article 9bis(§3) of the Act of 29 April 1999 on the organisation of the electricity market, both Boards were expanded to include 14 members.

As a result, the articles of association were amended as fol-lows:

• The first sentence of Article 12.1 of the articles of associa-tion was amended in light of the expansion of the Board of Directors from 12 to 14 members.

• A new Article (12.4) was added to the articles of association to enable the Board of Directors to validly deliberate and decide whether, in the event of one or more directorships being vacant, the Board of Directors should temporarily comprise fewer than 14 members.

• Article 13.5.2 of the articles of association was amended so as to modify the application rights of A and C shareholders in light of the expansion of the Board of Directors from 12 to 14 members.

Following the extension, two new directors were appointed: one independent and the other non-independent.

New Act of 20 December 2010 on the exercise of certain rights of shareholders

The new Act of 20 December 2010 on the exercise of certain rights of shareholders (rerferred to below as the Act on Share-holders’ Rights), which entered into force on 1 January 2012, increased the rights of shareholders through its amendments to the Companies Code. Elia System Operator and Elia Asset amended their articles of association on 26 October 2011 to bring them into line with the new provisions by 1 January 2012.

The following amendments were made to the articles of asso-ciation of Elia System Operator:

• Article 24.1 of the articles of association was amended in the wake of the new rule regarding the right to question shareholders. The company must receive questions in writ-ing by no later than the sixth (6th) day preceding the general meeting.

• Article 24.3 of the articles of association was amended in the wake of the new rule regarding participation by proxy in general meetings.

• Article 26.1 of the articles of association was amended in the wake of the new rule regarding the right to include top-ics in the agenda of the general meeting.

• Article 26.2 of the articles of association was amended fol-lowing the extension of the number of days by which the Board could defer the general meeting.

• Article 27 of the articles of association was amended in the wake of the new rule regarding the right to participate in general meetings and, where applicable, exercise the right to vote at meetings.

• Article 28.3 of the articles of association was amended in the wake of the new rule regarding votes by mail at general meetings.

• Article 30 of the articles of association was amended in the wake of the new rule regarding the publication of general meeting minutes.

• Article 31 of the articles of association was amended in the wake of the new rule regarding the period within which the Board of Directors is expected to submit the necessary documents to auditors.


Renewal of the terms of office of Board members, Board committee members and the Chairman and Vice-Chairmen; appointment of a new Secretary General

Following the expiry of their terms of office, the seven inde-pendent directors and seven non-independent directors were reappointed for a six-year period by the Elia System Operator and Elia Asset general meeting of 10 May 2011. The new direc-torships will expire following the 2017 general meeting for the financial year ending 31 December 2016.

At the time of their reappointment, the directors satisfied all conditions of independence as laid down in Article 526ter of the Companies Code. Thierry Willemarck, Clement De Meers-man, Jean-Marie Laurent Josi and Luc Van Nevel said they would resign if the total duration of their terms of office reached 12 years, as provided for in Article 526ter(§2).

On 10 May 2011, the chairmanship of Luc Van Nevel and vice-chairmanships of Francis Vermeiren and Thierry Willemarck were renewed for a period of three years or less if required by the aforementioned legal provisions (see above).

The terms of office of the members of the various committees supporting the Board were also renewed for a three-year pe-riod on 10 May 2011 (see above).

Reappointment of auditors

Ernst & Young Réviseurs d’Entreprises and Klynveld Peat Mar-wick Goerdeler Réviseurs d’Entreprises, represented respec-tively by Marnix Van Dooren and Alexis Palm, were reappointed as auditors for a period of three years (see above).

Appointment of a new Secretary General

Gregory Pattou was appointed Secretary General of Elia Sys-tem Operator and Elia Asset, replacing Pierre Bernard, who resigned.

Stakeholding in Atlantic Wind Connection

Eurogrid International, a 60% subsidiary of Elia, acquired a 10% stake in the initial phase of the Atlantic Wind Connection project for the establishment of the first offshore high-voltage direct-current grid along the East coast of the United States. Elia is cooperating with Google, Marubeni, Good Energies and Atlantic Grid Development on this project. Elia also concluded a long-term consultancy contract with the project developer. Specifically, the project will help to develop Group expertise for similar prospective projects in Europe, such as offshore grids and power highways of the future.

Eurogrid International, a 60% subsidiary of Elia, acquired a 10% stake in the initial phase of the Atlantic Wind Connection project for the establishment of the first offshore high-voltage direct-current grid along the East coast of the United States. Elia is cooperating with Google, Marubeni, Good Energies and Atlantic Grid Development on this project. Specifically, the project will help to develop Group expertise for similar prospective projects in Europe, such as offshore grids and power highways of the future.


Reacquisition by the company of its own shares

The permission granted to the Elia System Operator Board of Directors for the reacquisition by the company of its own shares in the event of a serious threat, as defined in Article 37 of the articles of association, was renewed for a period of three years with effect from the date of publication of the decision taken by the extraordinary general meeting of 26 October 2011.

New head of the Management Committee

Jacques Vandermeiren was appointed as the future CEO and Chairman of the Elia Management Committee at the Board meeting of 24 November, following the proposal of the Corpo-rate Governance Committee. He will succeed Daniel Dobbeni in the second half of 2012. In the year to come, Elia will continue to benefit from the expertise of Daniel Dobbeni amongst other things for the follow-up and consultancy regarding European and international energy markets and mandates within bodies of subsidiaries and sector associations.

2012-2015 tariff proposal

The Commission for Electricity and Gas Regulation (CREG) approved the proposal made by Elia in keeping with the regu-lator’s rules regarding tariffs for electricity transmission from 2012 up to and including 2015.

The tariffs were calculated following a consultation between the regulator and Elia with a view to providing market players with appropriate tariff indicators, for both power injection and offtake, and to meeting the needs of the company to enable it to perform its duties. The new tariffs also take into account changes in the energy climate during the first tariff period from 2008 to 2011, against a backdrop of economic uncertainty and in the absence of the third package of European directives. Incentive mechanisms were put in place for consumers and the company so as to promote effective management while maintaining the excellent level of grid reliability seen in Belgium for a number of years.

Removal of the capital increase reserved for personnel

Owing to turbulence on the financial markets on the one hand and the failure to transpose into Belgian law the third pack-age of European directives on the other, the Board of Directors – following the advice of the Management Committee – de-cided to remove the capital increase reserved for personnel (on which it intended to vote) from the agenda of the Extraordinary General Meeting of 26 October.

Remuneration Committee

In addition to its usual support role to the Board of Directors and in accordance with both Article 526quater of the Companies Code and the Act of 29 April 1999 on the organisation of the electricity market, the Remuneration Committee is required to make recommendations to the Board of Directors with regard to remuneration policy and the individual remuneration of Management Committee members and directors. The Remuneration Committee also draws up a remuneration report for presentation at the ordinary general meeting.

The Remuneration Committee met on 12 occasions particu-larly regarding the succession process of the Chairman of the Management Commitee by 2012.

The company evaluates its supervisory staff on a yearly basis in accordance with its performance management policy. This policy also applies to members of the Management Commit-tee. Accordingly, the Remuneration Committee evaluates the members of the Management Committee on the basis of a series of quantitative and qualitative collective and individual targets. As noted elsewhere, remuneration policy for the vari-able portion of the Management Committee’s remuneration was adapted to take account of the implementation of multi-year tariffs. Consequently, since 2008 the salary scheme for members of the Management Committee has included, among other things, an annual variable remuneration and a long-term incentive staggered over the multi-year regulation period. The variable remuneration has two parts: the attainment of quanti-tative collective targets, and individual performance, including progress on business projects.

As part of the process aimed at ensuring continuity within the Management Committee, the Remuneration Committee also made recommendations to the Corporate Governance Com-mittee regarding the succession of the Chairman of the Man-agement Committee. In addition, the Remuneration Commit-tee drafted a proposal in connection with the capital increase reserved for personnel scheduled for 2011 and 2012 (see ‘Sig-nificant events’ for more on these two points).

Audit Committee

In addition to its usual support role to the Board of Directors and in accordance with both Article 526bis of the Companies Code and the Act of 29 April 1999 on the organisation of the electricity market, the Audit Committee is responsible for:

• examining accounts and controlling budgets;• monitoring financial reporting procedures;• ensuring the effectiveness of internal control and risk

management systems;• monitoring internal audits and their effectiveness;• following up on the statutory audit of annual accounts;• evaluating and ensuring the independence of auditors;• making proposals to the Board of Directors as to the (re)


appointment of auditors and the conditions of such (re)appointments;

• investigating any issues surrounding the resignation of auditors and making proposals as to what actions, if any, should be taken in this respect;

• verifying the nature and extent of non-audit services pro-vided by auditors;

• ensuring the effectiveness of external audit procedures.

Pursuant to Article 96(§1)9° of the Belgian Companies Code, this report must justify the independence and accounting and auditing competence of at least one member of the Audit Committee. The obligation for at least one member of the Au-dit Committee to have the necessary accounting and auditing competencies is also laid down in the articles of association.

Clement De Meersman, the Chairman of the Audit Commit-tee, is an independent director and has extensive experience and competence in accounting and auditing. He holds a de-gree in electromechanical engineering and a PhD in applied sciences, both from KULeuven. He has completed executive training courses at IMD in Switzerland and the Vlerick Man-agement School. He was a visiting student researcher at MIT (USA) and the Institute of Technology in Tokyo. He began his working life at KULeuven as an assistant professor before pur-suing a career outside academia at a company affiliated to the Michelin Group, active in the development, manufacture and sale of high-resistance tyres. In 1986, he left this job to join the Dutch DSM Group as a business unit director in charge of the development and sale of plastic materials, composites and high-performance products for the transport and automo-tive industry. In early 1994, he became the CEO of Deceuninck NV/SA, a position he held until 2009. Clement De Meersman is also a board member at Deceuninck, Koramic Industries, ANL, Plasticvision, VKC and Smartroof. He is a member of the advisory board at Verhelst and ING Kortrijk, and used to sit on the board of Roularta.

The Audit Committee may investigate any matter that falls within its remit. It is given the resources it needs to perform this task, has access to all information (with the exception of com-mercial data concerning grid users) and can call on internal and external experts for advice. The Audit Committee met on six occasions in 2011.

The Committee examined the annual accounts for 2010, drawn up in accordance with both Belgian GAAP and IFRS. It then an-alysed the quarterly results as at 31 March 2011, the half-yearly results as at 30 June 2011 and the figures for the first three quarters as at 30 September 2011, drawn up in accordance with Belgian GAAP and IFRS. The Committee took note of the audits and recommendations made. The further expansion of risk management within the company was also approved by the Committee. An action plan was drawn up for each of the audits so as to improve the quality of procedures and of the checks carried out and thereby reduce the associated risks. The Committee monitored these action plans from a number of

perspectives (timetable, results, priorities) on the basis, among other things, of an activity report from the internal audit depart-ment. The Committee concluded that these action plans were being carried out properly and within the agreed time-frames. The 2012 audit plan was submitted to and approved by the Committee.

Corporate Governance Committee

In addition to its usual support role to the Board of Directors and in accordance with both the Act of 29 April 1999 on the operation of the electricity market and the articles of associa-tion, the Corporate Governance Committee is responsible for:

• putting forward candidates to the general meeting to be appointed as independent directors;

• giving prior approval for the appointment and/or resignation (where applicable) of Management Committee members;

• examining – at the request of any independent director, the Chairman of the Management Committee, CREG or any other federal or regional regulatory body – all cases of conflicts of interests between the system operator on the one hand and a dominant shareholder, municipal share-holder or company associated with or linked to a dominant shareholder on the other, with a view to reporting to the Board of Directors (this task aims to strengthen the direc-tors’ independence above and beyond the procedure de-tailed in Article 524 of the Belgian Companies Code, which the company also applies);

• providing its opinion in cases of incompatibility on the part of members of the Management Committee and personnel;

• ensuring the application of provisions laid down by law, reg-ulations, decrees and other acts relating to the organisa-tion of the electricity market, evaluating their effectiveness in view of the objectives for the independent and impartial operation of the transmission system, and reporting annu-ally on this matter to the Board of Directors and regulatory bodies;

• holding – at the request of at least one third of members – Board meetings in accordance with the formalities for call-ing meetings as laid down in the articles of association.

The Committee met on three occasions in 2011. As far as confi-dentiality rules permit, the Committee is kept regularly informed of issues of importance, such as the purchase of ancillary ser-vices and the content of the infrastructure project portfolio, so as to ensure the liberalisation of the electricity market.


Management Committee

The Management Committee was established on 29 July 2003, pursuant to Article 9 of the Act of 29 April 1999 on the organisation of the electricity market. It is responsible for trans-mission system operation and the day-to-day management of the system operator, as well as for exercising the other powers delegated to it by the Board of Directors and the powers as-signed to it by the articles of association.

The Management Committee usually meets formally at least once a month. Members also attend informal weekly meetings. Members who are unable to attend usually have a representa-tive. In accordance with the Committee’s internal rules of pro-cedure, an absent member may authorise another member to represent him or her by giving prior written permission. Nobody must represent more than two members. In 2011, the Management Committee met on 13 occasions for Elia System Operator and 11 occasions for Elia Asset.

Each quarter, the Management Committee reports to the Board of Directors on the company’s financial situation (in particular on the balance between the budget and the results stated). It also reports on transmission system operation at each Board meeting. As part of its responsibilities to report on operation of the transmission system in 2011, the Committee kept the Board informed of changes in legislation and case law which applied to the company, especially developments in the transposal of the third package of European directives, important decisions by regulators and administrations, grid management, the situ-ation facing subsidiaries, the acquisition of shares by Eurogrid International in the AWC project to develop an offshore grid along the East coast of the United States, the development of international projects and the 2012-2015 tariff proposal.

CODE OF CONDUCT

Elia has a Code of Conduct to prevent staff and those with leadership responsibilities in the Group from breaking any laws on the use of privileged information and market manipulation during transactions associated with Elia activities. The Code of Conduct lays down a series of regulations and communication obligations for stock exchange transactions by those individu-als, in accordance with the provisions of Directive 2003/6/EC on insider trading and market manipulation and the Act of 2 August 2002 on monitoring of the financial sector and other financial services.

CORPORATE GOVERNANCE CHARTER AND COMMITTEES’

INTERNAL RULES OF PROCEDURE

The Corporate Governance Charter and the internal rules of procedure of the Board of Directors, Management Committee, Audit Committee, Remuneration Committee and Corporate Governance Committee were amended by the Board of Direc-tors on 25 May 2010. The Corporate Governance Charter can be found on the company’s website (www.elia.be).

TRANSPARENCY RULES – NOTIFICATIONS

In accordance with the Act of 2 May 2007, the Royal Decree of 14 February 2008 on the disclosure of major shareholdings authorised on the regulated market, and various provisions of the Royal Decree of 14 February 2008, Elia was informed of the declaration of transparency by the Arco Group (Arcofin, Arco-par, Arcoplus, Auxipar, Arcosyn and Interfinance) and Publi-T on 30 March 2011.

The full text of this declaration of transparency can be found on www.elia.be.

From left to right: Frank Vandenberghe, Hubert Lemmens, Markus Berger, Daniel Dobbeni, Jan Gesquière, Roel Goethals, and Jacques Vandermeiren.


Remuneration of the Board of Directors and Management Committee

Procedure applied in 2011 with a view to devising the remuneration policy and remunerating directors and Management Committee members

Pursuant to Article 16.1 of the Elia System Operator articles of association and Article 15.1 of the Elia Asset articles of as-sociation, the Remuneration Committee drew up a draft policy for the remuneration of directors and Management Committee members and submitted it to the Board of Directors.

The Remuneration Committee also made various recommen-dations regarding the remuneration of directors and Manage-ment Committee members.

The composition and activities of the Remuneration Committee are covered in greater detail on page 89 of the annual report.

Remuneration of directors

Total remuneration paid to the 14 Elia directors in 2011 was €551,875.34 (€281,275.17 for Elia System Operator and €270,600.17 for Elia Asset). The table below lists the individual gross sums paid to each director for Elia System Operator and Elia Asset combined:

Luc Van Nevel 46.674 € 1

Francis Vermeiren 48.966 €

Thierry Willemarck 40.403 €

Jennifer Debatisse 30.634 € 2

Clement De Meersman 40.280 €

Johan De Roo 19.664 € 3

Jacques de Smet 56.192 €

Claude Grégoire 40.762 € 4

Philip Heylen 15.076 € 5

Jean-Marie Laurent Josi 46.064 €

Miriam Maes 37.388 € 6

Jane Murphy 37.870 €

Dominique Offergeld 31.116 €

Steve Stevaert 30.634 € 7

Leen Van den Neste 30.152 € 8

These figures were calculated on the basis of ten meetings of the Board of Elia System Operator and eight meetings of the Board of Elia Asset in 2011. The Audit Committee met on six occasions, the Corporate Governance Committee on three occasions and the Remuneration Committee on twelve occa-sions.

Directors’ remuneration consists of a basic remuneration of €25,000 per annum (€12,500 for Elia System Operator and €12,500 for Elia Asset) plus an additional €800 (€400 for Elia System Operator and €400 for Elia Asset) for each meeting after the eighth Board meeting of the year, including meetings with regulators. The remuneration is 50% more for the Chair-man and 20% more for each Vice-Chairman of the Board of Directors.An additional fixed remuneration of €6,000 per year per com-mittee (€3,000 for Elia System Operator and €3,000 for Elia Asset) is awarded to directors who sit on a support committee, with an additional remuneration of €800 (€400 for Elia System Operator and €400 for Elia Asset) for each additional commit-tee meeting (i.e. each meeting after the three covered by the basic remuneration), including meetings with regulators.This remuneration is included in the company’s operating costs and is indexed annually in accordance with the consumer price index. All remunerations are paid on a pro-rata basis during the director’s term of office. Directors receive an advance on their annual remuneration at the end of the first, second and third quarters. The advance is calculated on the basis of the basic indexed fee and on a pro-rata basis in relation to the duration of the directorship during the quarter in question. A detailed account is prepared dur-ing the month of December for the financial year. This account takes into consideration any additional remuneration on top of the basic remuneration.

Directors do not receive any other benefits in kind, stock op-tions, special loans or advances. Neither Elia System Operator nor Elia Asset has issued credit to or on behalf of any Board member.

1 LucVanNevelisnolongeramemberoftheCorporateGovernanceCommittee,asof10May2011.2 JenniferDebatisse’sfeesarepaidtothecompanyInterfin.3 JohanDeRooisnolongeramemberoftheBoardofDirectors,asof25August2011.4 ClaudeGrégoire’sfeesarepaidtothecompanySocofe.5 PhilipHeylenbecameaBoardmemberon25August2011.6 MiriamMaesbecameaBoardmemberon13January2011andamemberoftheCorporateGovernance

Committeeon10May2011.7 SteveStevaertbecameaBoardmemberon13January2011.8 LeenVandenNeste’sfeesarepaidtothecompanyArcopar(withtheexceptionofthe€7,538paidinQ1).


Remuneration policy

The Remuneration Committee evaluates the members of the Management Committee once a year. The change in the basic remuneration is linked to the position of each member of the Management Committee with respect to a benchmark salary in the general marketplace and the assessment of his individual performance.

Since 2004, the HayGroup methodology has been used to weight each management position and ensure that remunera-tion is in line with the going market rate.

Management Committee members’ remuneration consists of the following components:

• basic salary;• short-term variable remuneration;• long-term variable remuneration;• pension and other benefits.

Basic remuneration

In view of the many changes that have taken place since the positions were last weighted, such as the company’s listing on the stock exchange in 2005, the acquisition of 50Hertz Transmission, the diversification and internationalisation of the company’s activities as well as internal operational structural changes, five Management Committee positions, including that of Chairman of the Management Committee, were re-evaluated following the Hay Study. The Remuneration Commit-tee decided to apply the new benchmark salary as of January 2011.

Given general market conditions in late 2011, it was decided – based on the proposal of the Chairman of the Management Committee – not to increase the recurring remuneration of Management Committee members on 1 January 2012 beyond inflation.

All the members of Elia’s Management Committee have em-ployee status.

In 2011, the basic remuneration for the Chairman of the Man-agement Committee totalled €384,831.27. The recurring remu-neration paid to the other members of the Management Com-mittee totalled €1,492,153.77 (€1,007,044.50 for Elia System Operator management and €485,109.27 for Elia Asset manage-ment). Therefore a total basic remuneration of €1,876,985.04 was paid to members of the Management Committee in 2011.

Variable remuneration

The Remuneration Committee evaluates Management Com-mittee members at the end of each year based on several qualitative and quantitative targets. Since 2008, the variable portion of the remuneration has comprised two components. The first is based on the attainment of a number of targets set by the Remuneration Committee at the start of the year, with a maximum of 25% of variable remuneration for the individual tar-gets and 75% for the attainment of the Elia Group’s collective targets (‘short-term incentive plan’). The second is based on multiannual criteria covering a period of four years (‘long-term incentive plan’).

SHORT-TERM VARIABLE REMUNERATION

In 2011, short-term variable remuneration paid to the Chairman of the Management Committee stood at €178,434.98. Vari-able remuneration paid to other members of the Management Committee totalled €490,951.12 (€309,788.93 for Elia System Operator management and €181,162.19 for Elia Asset manage-ment). Therefore, a total of €669,386.10 of variable remunera-tion was paid to Management Committee members in 2011.

LONG-TERM VARIABLE REMUNERATION

In 2011, no payments were made under the plan relating to the second pillar. Performance for the 2008-2011 period will be evaluated in early 2012 under the long-term incentive plan.

No other variable remuneration was paid in 2011.

CONTRIBUTIONS TO THE CORPORATE PENSION SCHEME

Since 2007, all pension plans for Management Committee members have been ‘defined contribution’ plans, meaning that the amount paid, excluding tax, is calculated on the basis of annual remuneration. In 2011, Elia System Operator paid a total of €102,095.62 to the Chairman of the Management Commit-tee. For the other members of the Management Committee, Elia paid a total of €342,901.05 (€231,374.91 for Elia System Operator management and €111,526.15 for Elia Asset manage-ment).

Other benefits

Other benefits awarded to members of the Management Com-mittee, such as guaranteed income in the event of long-term illness or an accident, healthcare and hospitalisation insur-ance, invalidity insurance, life insurance, other allowances, as-sistance with public transport costs, provision of a company car, employer-borne costs and other small benefits are in line with the regulations applying to all company managerial/super-visory staff members.


The cost of other benefits in 2011 was valued at €35,225.73 for the Chairman and €258,571.59 for the other members of the Management Committee (€165,076.10 for Elia System Opera-tor management and €93,495.49 for Elia Asset management). There were no Elia stock options for the Management Com-mittee in 2011.

Total remuneration for 2011

In 2011, total remuneration for the Chairman of the Manage-ment Committee stood at €700,587.60, of which 25% was vari-able. Total remuneration paid to other members of the Man-agement Committee stood at €2,584,577.54 (€1,713,284.45 for Elia System Operator management and €871,293.09 for Elia Asset management), of which 19% was variable. Therefore, in 2011, total remuneration for all Management Committee mem-bers stood at €3,285,165.13.

PROVISIONS OF MANAGEMENT COMMITTEE

EMPLOYMENT CONTRACTS AND SEVERANCE BENEFITS

The employment contracts concluded with members of the Management Committee, including the Chairman, when they were hired did not contain any specific terms as regards notice of dismissal.

Shares held by members of the Management Committee and directors

Information to be communicated under Article 96 of the Bel-gian Companies Code and article 34 of the Royal Decree of 14 November 2007 on the obligations of issuers of financial instru-ments admitted to trading on a regulated market

This section contains the information required to be disclosed under the aforementioned legislation and not included in other parts of the annual report. Pursuant to Article 4.3 of the articles of association, all Elia Sys-tem Operator and Elia Asset shares have the same rights, re-gardless of the class to which they belong, except as otherwise stated in the articles of association.

In this context, the articles of association state that specific rights are associated with class A and class C shares regard-ing (a) the appointment of Management Committee members (Article 13.5.2 of the articles of association of Elia System Op-erator and Article 12.5.2 of the articles of association of Elia Asset) and (b) the approval of decisions by the general meeting (Articles 28.2.1 and 28.2.2 of the articles of association of Elia System Operator and Article 27.2 of the articles of association of Elia Asset).

MANAGEMENT COMMITTEE MEMBERS HOLD THE FOLLOWING ELIA SYSTEM OPERATOR SHARES:

Management Committee memberNumber of Elia System

Operator shares

Daniel Dobbeni Chief Executive Officer – Chairman of the Management Committee 8,822

Jacques Vandermeiren Chief Corporate Officer – Vice-Chairman of the Management Committee 1,841

Markus Berger Director Asset Management 5,790

Jan Gesquière Chief Financial Officer 4,670

Roel Goethals Director European Activities & Participations 3,024

Hubert Lemmens Chief Innovation Officer 4,655

Frank Vandenberghe Director Energy & System Management 2,682


Shareholder structure at the balance sheet date

On 31 December 2011, the shareholder structure of Elia Sys-tem Operator NV/SA was as indicated above.

Process of drafting financial information and communications

Elia has taken all possible and appropriate measures to rea-sonably assure that the financial information communicated both within and outside the company takes into account the risks facing the companies of the group and respect the true and fair view principle, in accordance with the applicable legal and regulatory framework.

The budget process is a key component of the internal control mechanism that was established to assess and verify account-ing, financial and economic information and also to determine its regulated tariff. For Elia, it is crucial to be able to draw up reli-able budgets in view of the many elements of uncertainty such as wind forecasts and volumes of offtakes from the grids. The process of drawing up budgets involves identifying the roles and responsibilities of the departments involved so as to pro-vide the best possible forecasts on the basis of the information that is available. These budgets are checked by line manage-ment and then by the internal monitoring body and ultimately approved by the responsible management bodies.

The regulators play a monitoring role, approving the proposed multi-year tariff. Budget monitoring is a collective objective for the whole of the Elia Group and is carried out on an ongoing basis by budget managers and Controlling using, for example, frequently tested tools. The monthly, quarterly and annual re-porting process is based on procedures relating to the bud-geted items and real items. The accounts and consolidated assessment are drafted on the basis of the Group’s accounting manual which is regularly updated to take into account inter-nal and external factors. This reporting follows a schedule and checklists that have been drawn up in advance in consultation with various departments that are involved. The outcome of this process is frequently verified by the Controlling Depart-ment and the Internal Audit Department.

The Accounting Department drafts the financial information under the responsibility of the Accounting & Finance Manager, based on the reporting process described above. The Group results are discussed on a monthly basis by the Accounting and Controlling Department, which makes analyses of and comparisons between the budget, economic and historical information. The final result is submitted to the Executive Com-mittee for approval and the quarterly and annual results are systematically submitted to the Audit Committee and the Board of Directors for approval. The actions of the staff and managers of the Accounting and Controlling Department are guided by the principles described in the ‘Social report’ chapter.

SHAREHOLDER STRUCTURE AT THE BALANCE SHEET DATE

Shares % Shares % Voting rights

Publi-T 27,383,507 45.37 45.37

Publipart 1,526,756 2.53 2.53

Group Arco 5,306,880 8.79 8.79

Other free float 26,138,074 43.31 43.31

Total 60,355,217 100.00 100.00


Features of the internal control and risk management systems

The reference framework for internal control and risk manage-ment, established by the Management Committee and ap-proved by the Elia Board of Directors, is based on the COSO II framework developed by the Committee of Sponsoring Or-ganisations of the Treadway Commission. The framework has five closely linked basic components, providing an integrated procedure for internal control and risk management systems: control environment, risk assessment, control activities, infor-mation and communication, and monitoring.

The use and inclusion of these concepts in Elia’s various pro-cedures and activities enables the company to control its ac-tivities, improve the effectiveness of its operations, optimally deploy its resources, and ultimately achieve its objectives. The implementation of COSO II at Elia is described below.

1. Control environment

ORGANISATION OF INTERNAL CONTROL

Pursuant to the Elia articles of association, the Board of Di-rectors has established various committees to help it fulfil its duties: the Management Committee, the Audit Committee, the Remuneration Committee and the Corporate Governance Committee. The Elia Board of Directors is responsible for eval-uating the effectiveness of the internal control and risk man-agement systems.

The Board has charged the Audit Committee with the task of monitoring: (i) the financial reporting procedure; (ii) the effec-tiveness of internal control and corporate risk management systems; (iii) the internal audit and its effectiveness; (iv) the statutory audit of annual and consolidated accounts, including the follow-up of any issues raised or recommendations made by external auditors; (v) the independence of external auditors.The Audit Committee meets quarterly to discuss the above points.

The Finance Department helps the Management Committee to provide, in a timely manner, correct and reliable financial infor-mation to aid not only decision-making with a view to monitor-ing the profitability of activities, but also effective management of corporate financial services. External financial reporting – one of Elia’s duties – includes (i) statutory financial and tax re-porting; (ii) consolidated financial reporting; (iii) specific report-ing obligations applicable to public companies; (iv) reporting obligations under the regulatory framework.

Financial reporting is organised in such a way as to meet all reporting obligations while ensuring consistency between vari-ous reports and avoiding inefficiencies.

The structured approach developed by Elia helps to ensure that financial data is both exhaustive and precise, taking into account the deadlines for activity reviews and the actions of key players so as to ensure adequate control and accounting.

INTEGRITY AND ETHICS

Elia’s integrity and ethics are a crucial aspect of its internal control environment. The Management Committee and man-agement regularly discuss these principles, on which the cor-porate rules established to clarify the mutual rights and obliga-tions of the company and its employees are based. These rules are disseminated to all new employees, and compliance with them is formally included in employment contracts. The Code of Conduct also helps to prevent employees from breaking any Belgian legislation on the use of privileged information or mar-ket manipulation and suspicious activities.

Management consistently ensures that employees comply with internal values and procedures and – where applicable – take any actions deemed necessary, as laid down in the compa-ny regulations and employment contracts. A particular focus is laid on compliance with confidentiality rules, primarily by means of a specific confidentiality clause in employment con-tracts, but also through various measures applied in the event of noncompliance.

By virtue of its legal status as a power transmission system operator, Elia abides by a large number of statutory and regu-latory rules setting out various fundamental principles such as confidentiality, transparency and non-discrimination. With a view to meeting these specific obligations, Elia has drawn up an Engagement Programme (approved by the Corporate Governance Committee) and produced a roadmap identifying which control initiatives should be taken, and in which order. The Compliance Officer reports annually to the relevant regula-tory bodies in this regard.


ROLES AND RESPONSIBILITIES

Elia’s internal control system relies on clearly defined roles and responsibilities at all levels of the organisation. The roles and responsibilities of the various committees* established within Elia are primarily identified in the legal framework applicable to Elia, the articles of association and the Corporate Governance Charter.Under the supervision of the Chief Financial Officer, the Ac-counting Department is responsible for statutory financial and tax reporting and the consolidation of the Elia Group’s various subsidiaries. The Controlling Department monitors analytical accounting and reporting and assumes responsibility for all re-porting in a regulatory context. The Investor Relations Depart-ment is responsible for specific reporting applicable to compa-nies listed on the stock exchange.

As regards the financial reporting process, the tasks and re-sponsibilities of all employees in the Accounting Department have been clearly defined with a view to producing financial results that accurately and honestly reflect Elia’s financial trans-actions. A detailed framework of tasks and responsibilities has been drawn up to identify the main control duties and the fre-quency with which tasks and control duties are performed.

An IFRS Accounting Manual is used by all entities within the scope of consolidation as a reference for accounting principles and procedures, thus ensuring consistency, comparability and accurate accounting and reporting within the Group. The Fi-nance Department has the appropriate means (including IT tools) to perform its tasks; all entities within the scope of con-solidation use the same ERP software, which has a range of in-tegrated controls and supports task separation as appropriate.

Elia also clarifies the roles and responsibilities of all its employ-ees by providing a description of its procedures, in keeping with the Business Process Excellence methodology, and of each job.

COMPETENCIES

With a view to ensuring its various activities are performed reli-ably and effectively, Elia clearly spells out the vital importance of its employees’ competencies and expertise in its recruitment, training and retention procedures. The Human Resources De-partment has drawn up the appropriate policies and defined all jobs in order to identify the relevant roles and responsibilities as well as the qualifications needed to fulfil them. Elia has drawn up a policy for the management of generic and specific competencies in line with the company’s values, and promotes training so as to enable all its employees to effec-tively perform the tasks allocated to them. Requirements with regard to competency levels are continually analysed by means of formal and informal (self-)assessments at various stages of an employee’s career.

Training programmes on financial reporting are offered to all employees involved directly or indirectly with that task. The training lays an emphasis on the existing regulatory framework, accounting obligations and actual activities, with a high level of understanding enabling participants to address the appropri-ate issues.

The structured approach developed by Elia helps to ensure that financial data is both exhaustive and precise, taking into account the deadlines for activity reviews and the actions of key players so as to ensure adequate control and accounting.

* See the sections relating to the committees for more information.


2. Risk assessment

Risk assessments are crucial in helping Elia to achieve its stra-tegic objectives as defined in its mission. The Board of Direc-tors and Risk Manager jointly and regularly identify and assess key financial and non-financial strategic risks. The risks are assessed qualitatively or quantitatively and according to their probability. The Risk Manager then makes recommendations. Based on the assessment, preventive, remedial and corrective action plans are implemented wherever existing internal control activities need to be strengthened.

The objectives set for the entire Group feed through to each level of the organisation. Assessments are performed annually to determine how well those objectives have been achieved.

As part of its responsibilities, the management establishes an effective internal control system to ensure accurate financial re-porting, among other things. It emphasises the importance of risk management in financial reporting by taking into account, with the Audit Committee, a whole range of associated activi-ties and risks. It ensures that risks are truly reflected in financial results and reports.Financial risk assessments primarily involve the identification of:

(i) significant financial reporting data and its purpose;(ii) major risks involved in the attainment of objectives;(iii) mechanisms for controlling misreporting risks.

Financial reporting objectives include (i) ensuring financial state-ments comply with widely accepted accounting principles; (ii) ensuring that the information presented in financial results is both transparent and accurate; (iii) the use of accounting princi-ples appropriate to the sector and the company’s transactions; (iv) ensuring the accuracy and reliability of financial results.

The activities undertaken by Elia, as a power transmission sys-tem operator, in relation to its physical installations contribute significantly to financial results. Therefore, appropriate proce-dures and control systems have been established to ensure the exhaustiveness and physical existence of installations.

Elia has established an enterprise risk management (ERM) cul-ture to ensure constant control. This approach incorporates the key policies and procedures set out in the risk management recommendations and Risk Management Charter.Risk awareness is supported by the delegation of relevant re-sponsibilities to all employees as part of their specific activities, as defined in the Charter.

CONTINUOUS ASSESSMENT

Employing a simultaneously top-down and bottom-up ap-proach enables Elia to identify and, where possible, quickly anticipate events and react to any incidents occurring inside or outside the organisation which might affect the attainment of objectives. TOP-DOWN APPROACH BASED ON STRATEGIC RISKS

Strategic risk assessments are covered in a quarterly report to the Audit Committee. Action plans or specific additional as-sessments are put forward in the report in view of prospective events, whether they are perceived as threats or potential op-portunities. BOTTOM-UP APPROACH WITH REGARD TO BUSINESS

With a view to identifying new risks or evaluating changes in existing risks, the Risk Manager and management line remain in constant contact and look out for any change that may call for the relevant risk assessment and associated action plans to be amended.

Various criteria are used to determine the need to re-evalu-ate financial reporting procedures and associated risks. They place an emphasis on risks associated with changes in the fi-nancial and regulatory context, industrial practices, accounting standards and corporate developments such as mergers and acquisitions.Operational management assesses the relevant risks and puts forward action plans. Any significant changes to assessment rules must be approved by the Board of Directors.

In general, Risk Management helps Elia to maintain its value for stakeholders and the community, works with all departments with a view to optimising Elia’s ability to achieve its strategic objectives, and advises the company regarding the possibility or nature of future risks.


3. Control activities

MAIN CONTROL ACTIVITIES

Elia has established control activities at its various structural levels so as to ensure compliance with standards and inter-nal procedures geared to the proper management of identified risks. These include:

(i) clear task separation as part of procedures, preventing the same person from initiating, authorising and recording a transaction – policies have been drawn up regarding ac-cess to information systems and the delegation of powers;

(ii) integrated audit methods as part of procedures so as to link end results with the transactions supporting them;

(iii) data security and integrity through the appropriate alloca-tion of rights;

(iv) appropriate documentation of procedures through the use of the Business Process Excellence Intranet, which cen-tralises policies and procedures.

Departmental managers are responsible for establishing activi-ties to control the risks inherent to their department.Elia takes all necessary measures to adapt its control activities where internal or external events are liable to affect existing processes.

FINANCIAL REPORTING PROCEDURE

For all significant financial reporting risks, Elia sets out appro-priate control mechanisms to minimise the probability of er-ror. Roles and responsibilities have been defined in connection with the closing procedure for financial results.Measures have been established for the continual follow-up of each stage, with a detailed agenda of all activities undertaken by Group subsidiaries; control activities are performed to en-sure quality and compliance with internal and external require-ments and recommendations.

During closing, a specific test is performed to ensure control over significant unusual transactions (e.g. through data mining software), accounting lines and adjustments at the end of the relevant period, company transactions and critical estimates.

All of these controls combined sufficiently ensure the reliabil-ity of financial results. Regular internal and external audits also contribute to financial reporting quality.

In identifying those risks affecting the achievement of financial reporting objectives, the management takes into account the possibility of misreporting associated with fraud and takes ap-propriate action where internal control needs to be strength-ened. Internal Audit performs specific audits based on the risk assessment for potential fraud, with a view to avoiding and preventing any instances of fraud, and data mining software is used in areas susceptible to fraud.

4. Information and communication

Elia disseminates relevant information to its employees to en-able them to fulfil their responsibilities and achieve their objec-tives. Financial information is needed for budgeting, forecasts and ensuring compliance with the regulatory framework. Oper-ational information is also vital for the production of various re-ports. As such, Elia records recent and historical data needed for corporate risk assessments. Multiple communication chan-nels are used: manuals, memos, emails, bulletin boards and intranet applications.

Established information systems are used to structure infor-mation from a range of different sources so as to ensure: (i) transactions are recorded and monitored in real time; (ii) data is entered within a time-frame and at a level of detail that meets risk management requirements; (iii) the quality of information through discussions at different levels: the information owner validates the relevant data before publication, the management checks its accuracy and reliability, and IT risks (such as the quality of IT developments or the stability of data transmission) are followed up by action plans.

Financial results are reported internally and validated at differ-ent levels. The management responsible for financial reporting regularly meets other internal departments (operational and control departments) to identify financial reporting data. It vali-dates and documents the critical assumptions underpinning booked reserves and the company’s accounts.

Elia disseminates relevant information to its employees to enable them to fulfil their responsibilities and achieve their objectives.


At Group level, consolidated results are broken down into seg-ments and validated by means of a comparison with historical figures and a comparative analysis between forecasts and ac-tual data. This financial information is reported monthly to the Management Committee and is discussed quarterly with the Audit Committee. The Chairman of the Audit Committee then reports to the Board of Directors.

5. Monitoring

Elia continually re-evaluates the adequacy of its risk manage-ment approach. Monitoring procedures include a combination of monitoring activities carried out as part of normal business operations, in addition to specific ad-hoc assessments on se-lected topics.

Monitoring activities include (i) monthly reporting of strategic indicators to the Management Committee and the manage-ment; (ii) follow-up on key operational indicators at departmen-tal level; (iii) a monthly financial report including an assessment of variations as compared with the budget, comparisons with preceding periods and events liable to affect cost controlling. Consideration is also given to third-party feedback from a range of sources, such as (i) stock market indices and reports by ratings agencies; (ii) share value; (iii) reports by federal and regional regulators on compliance with the legal and regulatory framework; (iv) reports by security and insurance companies.

Comparing information from external sources with internally generated data and ensuing analyses allows Elia to keep on making improvements.

Internal Audit also plays a key role in monitoring activities by conducting independent reviews of key financial and opera-tional procedures in view of the various regulations applicable to Elia. The findings of those reviews are reported to the Audit Committee to help it monitor internal control and risk manage-ment systems and corporate financial reporting procedures.

The Group’s legal entities are also subject to external audits, which generally entail an evaluation of internal control and re-marks on (annual and quarterly) statutory and consolidated fi-nancial results. External auditors make recommendations for improving internal control systems. The recommendations, action plans and their implementation are reported annually to the Audit Committee, which in turn reports to the Board of Directors on the independence of the auditor or statutory audit firm and drafts a motion for a resolution on the appointment of external auditors.

Financial information is needed for budgeting, forecasts and ensuring compliance with the regulatory framework. Operational information is also vital for the production of various reports. As such, Elia records recent and historical data needed for corporate risk assessments.


Description of the risks and uncertainties facing the company

1. Regulatory and income risks

INTERNATIONAL

The two transmission system operators in the Elia Group pro-actively anticipate European legislation, new directives and regulations being prepared at EU level or awaiting transposition into Belgian and German law in order to minimise uncertainties.

Elia and 50Hertz Transmission are European leaders when it comes to the components of the European Commission’s third package of directives aimed at developing a single electricity and gas market, as regards both the independence and impar-tiality of the management.

The provisions of the third package were transposed into Bel-gian and German law in 2012. Under these provisions, Elia Sys-tem Operator and 50Hertz will be subject to new procedures, such as certification as a full-owned unbundled TSO. The time-table and results of these new procedures at European level may include regulatory risks for both companies.

Elia and 50Hertz are also founding members of the Europe-an Network of Transmission System Operators for Electricity (ENTSO-E), which was set up in December 2008 and brings together 41 transmission system operators from 34 countries, including the EU Member States. Amongst other things, ENT-SO-E performs the role of the European Network of Transmis-sion System Operators provided for in the third package. The Chairman of the Management Committee was re-elected as president of the association for another two years in June 2011.

NATIONAL

The Belgian legal framework was established when the first EU Directive on the internal electricity market was transposed by the Electricity Act of 29 April 1999. The company’s net profit is largely determined by the fair return, which, for the period 2008-2011 contains an ‘incentive’ component spread over four years. Elia’s result will therefore be influenced annually, either positively or negatively, by its ability to achieve and/or exceed the efficiency improvement factor, by changes to Belgian linear bonds (10-year OLOs), and by the federal regulator’s analysis of the various budget items. On 22 December 2011, the tariffs and mechanisms determining Elia’s profitability as Belgium’s transmission system operator were approved by CREG for a new four-year tariff period, effective 1 January 2012. That ap-proval was provisional since the third package of European di-rectives had not been transposed into Belgian by that date. In addition, one or more customers may submit an appeal to the

Brussels Court of Appeal to contest the tariffs approved by CREG. This results in a legislative and regulatory risk likely to negatively impact the company’s profitability.

On the other hand, Elia’s turnover also depends on the energy drawn off from its grid, and therefore on the level of business activity of its customers. The decline in residential consumption prompted by the slowdown in economic activity in 2009 has re-sulted in an income deficit compared with the tariffs approved by the regulator for 2008-2011. Under prevailing legislation, this deficit and the extra costs, such as additional financing, must be offset by the tariffs for the next regulatory period. The im-pact on the electricity consumption of Elia’s various customer segments and the uncertainty surrounding the outlook for an upturn in business amongst industrial customers continue to pose a risk to Elia’s cash flow.

The regulatory framework for 50Hertz is based on an initial cost assessment and defines a revenue ceiling and efficiency incentives. It fixes the grid tariffs that include the remunera-tion based on a fixed return on capital invested for a five-year tariff period. The return for other regulatory periods will have to be confirmed subsequently. The German regulator has also defined a specific remuneration system for investments in the grid called ‘investment budgets’. To this end, 50Hertz files a request for approval of these budgets to ensure appropriate re-muneration during the regulatory period. The investment bud-gets for various projects are currently in the approval process. Specific rules apply to costs and income generated by support programmes for renewable energy sources and cogeneration. The German government’s decision to shut down eight nuclear power stations following the incident in Japan results in ad-ditional costs for managing technical constraints on grids. The time it takes to offset the costs incurred means that 50Hertz prefinances its costs, which may have an impact on its cash flow and on its profit as defined by HGB accounting rules.


REGIONAL

The regulatory framework entails risks at regional level in Bel-gium. For instance, contradictions between the various regula-tions, including the grid codes, can hinder the exercise of the company’s activities. The further development of and changes to these regulations may also impact the company’s liability in the event of a power outage on the grid or – in the context of a reform of the State – the division of powers between federal and regional authorities, including the power to approve trans-mission tariffs.In addition, the regulatory uncertainty surrounding certain sur-charges linked to, among other things, the green certificates mechanism means a risk that may affect cash flow and invest-ment requirements.

2. Operational risks

SECURITY OF SUPPLY

Every year, Elia and 50Hertz Transmission seek to contract the reserves needed to ensure continual balance between produc-tion and consumption in their respective zones. To that end, they analyse, at both national and European level, how the growing proportion of intermittent renewable energy genera-tion units can be integrated without compromising the security. The growth across Europe in the number of cogeneration and renewable energy units connected to distribution systems and the future connection of large offshore wind farms also create new challenges for operational grid management and require the further development of their infrastructure.

These developments, changing trends in offtake and the en-hancement of interconnection capacity between EU member states are dependent on securing permits and approvals from local, regional, national and international authorities. The need to obtain such approvals and permits within certain timeframes represents a risk to timely implementation. Moreover, these ap-provals and permits can be contested in the relevant courts.

Enhanced coordination at European level during the planning phase as well as during the phase immediately preceding real time has made it possible to minimise the impact of loop flows on available transmission capacity for commercial purposes. However, intervention to limit this - transmission capacity to guarantee reliability and supply quality as for as possible - can-not be ruled out, especially in view of the growing share ac-counted for by variable production (wind, solar).

POWER OUTAGES

The reliability of the transmission systems operated by Elia and 50Hertz is among the best in Europe. Nonetheless, un-foreseen events, such as unfavorable weather conditions, may occur which interrupt the smooth operation of one or more in-frastructure components. In most cases, these incidents have no impact on consumers’ power supply because the meshed structure of the grids operated by Elia and 50Hertz means that consumers can be reached via a number of different connec-tions. However, in extreme cases an incident in the electricity system may lead to a local or widespread outage (known as a blackout). Such outages may be caused by natural phenome-na, unforeseen incidents or operational problems, either in Bel-gium or abroad. Elia regularly holds crisis management drills so that it is ready to deal with the most unexpected and extreme situations. The general terms and conditions of its standard contracts limit the liability of Elia and 50Hertz to a reasonable level while its insurance policy is designed to offset the financial repercussions of these risks.

RISKS ASSOCIATED WITH ELECTRONIC, IT AND

TELECOMMUNICATION TECHNOLOGIES

The incorporation of electronic, IT and telecommunication tech-nologies in electricity transmission systems for the purposes of operational management, communication and surveillance (such as smart grids) modifies the nature of electricity systems and infrastructure used by TSOs such as Elia and 50Hertz.Failures in the telecommunications network or IT systems used to operate the electricity system may harm the latter’s perfor-mance. Elia takes appropriate measures to back up the IT net-work and associated systems to the maximum extent allowed by technical and financial considerations. It has drawn up and regularly tests recovery plans for the most critical IT systems. However, component failures in the telecommunication net-work and IT systems are impossible to rule out. Where systems do fail, Elia will strive to minimise the impact on customers.

ENVIRONMENTAL RISK

Elia’s results may be affected by outgoings needed to keep up with environmental legislation, including costs associated with implementing preventive or corrective measures or settling third-party claims. The company’s environmental policy is de-veloped and monitored in such a way as to manage these risks. Where Elia might in any way be liable for decontamination, the appropriate provisions are set aside. Additional analyses are in progress and could lead to a revision of existing provisions or the adoption of new provisions. The same holds true for elec-tric and magnetic fields.


RISK OF LEGAL DISPUTES

Although the company operates in such a way as to minimise the risk of legal disputes, it may nonetheless become involved in such disputes. Where necessary, the appropriate provisions are laid aside for this.

SAFETY AND WELFARE

Elia operates facilities that may cause harm to the natural or human environment or for which accidents or external attacks may have major repercussions. Persons working in or near electricity transmission facilities may be exposed, in the event of an accident, error or negligence, to the risk of electrocution. The safety and welfare of individuals (both Elia personnel and third parties) is a daily priority for the Elia Group’s management, supervisory staff and personnel, and substantial resources are invested in safeguarding them. Each year, an action plan is approved and implemented based on developments in safety figures.

RISKS ASSOCIATED WITH INEFFICIENT INTERNAL

CONTROL MECHANISMS

All internal processes can have an impact on the company’s results in some way. The multi-year tariff mechanism increases the need for year-on-year increases in the company’s overall efficiency. To this end, the efficiency of internal processes is monitored regularly, using performance indicators and/or au-dits, to ensure they are kept under proper control. This is over-seen by the Audit Committee, which controls and monitors the work of the Internal Audit & Enterprise Risk Management Department.

3. Financial risks

The Group is exposed to various financial risks in the exercise of its activities: market risk (namely interest rate risk, inflation risk, tax risk and limited exchange risk), liquidity risk and credit risk. The risks the company faces are identified and analysed in order to establish appropriate limits and controls and monitor risks and compliance with such limits. To this end, the Group has defined responsibilities and procedures specifically for the financial instruments to be used and the operating limits for managing them. These procedures and related systems are revised on a regular basis to reflect any changes in market con-ditions and the activities of the Group. The financial impact of these risks is limited, as Elia and 50Hertz are operating under the Belgian or German regulatory framework. See the ‘Regula-tory framework’ section.

To finance its investments and to achieve its short- and long-term strategic goals, Elia and 50Hertz turn to the capital markets. At the time of writing, the economic and financial environment in Europe has been shaken by the debt crisis af-fecting banks and the member states of the EU. This tension on the capital and credit market in a highly interdependent fi-nancial system may have an impact on loans to companies, in some cases reducing the financing capacity of Elia and/or 50Hertz. This situation could have an adverse effect on Elia’s and 50Hertz’s future growth and on the pursuit of their objec-tives. Elia is partly financed with floating rate bonds. Although a financing policy has been approved that strives to achieve an optimal ratio between fixed and variable interest rates and ap-propriate financial instruments are used to mitigate the financial risk, a change in interest rates can have an impact on financial

Every year, Elia and 50Hertz Transmission seek to contract the reserves needed to ensure continual balance between production and consumption in their respective zones. To that end, they analyse, at both national and European level, how the growing proportion of intermittent renewable energy generation units can be integrated without compromising the security.


charges passed on in a subsequent regulatory tariff period (or in the same period in the event of an exceptional change in charges). Financial charges are also related to the credit rating of the company. Elia cannot guarantee total protection in the event of significant movements in interest rates or in the event of a downgrading of its rating, or Eurogrid GmbH’s rating. For more information, see the section on ‘Financial risk and finan-cial derivatives’ in the annual report.

4A. New business developments

The Elia Group strives to anticipate new opportunities relating to its core business, both inside and outside the Belgian regu-lated framework. The launch of international projects abroad may create risks associated with foreign regulations or uncer-tainties regarding the business plans to be drawn up. Efforts to identify and assess risks are carried out in parallel to the business plan in order to assess and manage the various risks.

OFFSHORE GRID IN THE NORTH SEA

Belgium has an installed generating capacity of 195 MW in off-shore wind farms, comparable to Germany (195 MW) and the Netherlands (247 MW). The North Sea offshore grid project is part of a broader project to interconnect Belgium, the Nether-lands, Germany, Denmark, Norway and the United Kingdom in a North Sea grid (North Sea Grid Initiative). Elia factors in risk areas such as technical feasibility, financial risks, impact on customers, environmental risks and permit risks.

ATLANTIC WIND CONNECTION

This is the first direct current high-voltage offshore grid, located off the East Coast of the United States. Elia is part of the con-sortium of companies that own the project. Elia takes account of the risks inherent in a business activity in a country whose legislative and regulatory framework and whose permitting procedures are different, while also factoring in the project’s financial aspects and governance.

4B. Specific risks relating to Elia’s acquisition of 50Hertz

As regards the acquisition of 50Hertz by Elia and IFM (through Eurogrid International CBVA/SCRL and Eurogrid GmbH), the possibility of a limited or non-existing recourse to Vattenfall concerning certain risks relating to the activities of 50Hertz cannot be excluded, nor can it be excluded that certain risks are not covered by representations and guarantees or allow-ances provided by Vattenfall. 50Hertz operates within the Ger-man legal and regulatory framework and may be subject to other constraints than Elia. Elia holds only 60% of the 50Hertz shares; the other 40% are held by IFM.

The risks the company faces are identified and analysed in order to establish appropriate limits and controls and monitor risks and compliance with such limits.


5. Contextual factors

MACRO-ECONOMIC RISKS

In recent months, all European economies have faced greater uncertainty and volatility, while the recovery expected after the multifaceted economic and financial crisis that emerged in 2007/2008 has proven to be premature. Even if the current liquidity crisis can be avoided, there remains uncertainty about how to solve the underlying long-term structural economic problems, such as national account imbalances and diverg-ing levels of competitiveness between EU countries. Against this uncertain backdrop, an extended period of slow economic growth can have a negative impact on volumes of electricity transmitted and plans to develop the current grid and electric-ity generation assets (including renewable energy sources). In addition, the impact of the financial crisis has magnified the (upward and downward) volatility of factors influencing the fi-nancial results in connection with the current fair return mech-anism, such as the Belgian 10-year linear bond and interest rates in Germany.

HUMAN RESOURCES RISK

Elia pursues an active image and recruitment policy to maintain an appropriate level of expertise and know-how in a tight la-bour market. This is an ongoing risk, bearing in mind the highly specialised and complex nature of its business.

IMAGE RISK

Generally speaking, circumstances may arise that have a neg-ative impact on the company’s image. Elia has an internal con-trol mechanism to guarantee the confidentiality of data. Despite this, external parties may pass on information in their posses-sion that could have an impact on the company’s share price.

MISCELLANEOUS

Elia realises that there might be other risks of which the com-pany is not yet aware. Some risks may seem limited today but increase in the future. The subdivisions used give no indication of the potential consequences of the listed risks.

Elia and 50Hertz Transmission are European leaders when it comes to the components of the European Commission’s third package of directives aimed at developing a single electricity and gas market, as regards both the independence and impartiality of the management.


The results of the year 2011 in details.

Financial Report

05

107ELIA GROUP 2011 FINANCIAL REPORT

Consolidated financial statements IFRS

(in million €) – Year ended 31 December Notes 2011 2010

CONTINUING OPERATIONS

Revenue (5.1) 1,188.2 939.5

Raw materials, consumables and goods for resale (5.3.1) (5.9) (5.9)

Gross profit 1,182.3 933.6

Other income (5.2) 90.2 98.0

Services and other goods (5.3.1) (638.4) (457.2)

Personnel expenses (5.3.2) (158.4) (133.9)

Depreciation, amortization, impairment and changes in provisions (5.3.3) (140.9) (127.5)

Other expenses (5.3.4) (26.8) (31.1)

Results from operating activities, before non-recurring items (REBIT) 308.0 281.9

Gain on bargain purchase 0.0 286.5

Non-recurring services and other goods 0.0 (8.0)

RESULTS FROM OPERATING ACTIVITIES (EBIT) 308.0 560.4

NET FINANCE COSTS (5.4) (128.6) (123.2)

Finance income 14.2 21.8

Finance costs (142.8) (145.0)

Share of profit of equity accounted investees (net of income tax) (5.6) 1.4 (1.2)

Profit before income tax 180.8 436.0

Income tax expense (5.5) (43.3) (34.0)

Profit from continuing operations 137.5 402.0

Profit for the period 137.5 402.0

Profit attributable to:

Owners of the Company 137.5 401.7Non-controlling interest 0.0 0.3

PROFIT FOR THE PERIOD 137.5 402.0

Earnings per share (€) Notes 31.12.2011 31.12.2010

Basic earnings per share (5.7) 2.28 7.36

Diluted earnings per share (5.7) 2.28 7.36

Consolidated income statement

The accompanying notes are an integral part of these consolidated financial statements.

108 ELIA GROUP 2011 FINANCIAL REPORT

Consolidated statement of comprehensive income


PROFIT FOR THE PERIOD 137.5 402.0

Other comprehensive income

Effective portion of changes in fair value of cash flow hedges (5.4) (3.9) (3.1)Tax on effective portion of changes in fair value of cash flow hedges (5.4) 1.3 1.1Defined benefit plan actuarial gains and losses (6.12) (16.3) 25.9Tax on defined benefit plan actuarial gains and losses (6.12) 5.5 (8.8)Exchange differences on translation of foreign operations 0.1 0.0

Other comprehensive income for the period, net of income tax (13.3) 15.1

Total comprehensive income for the period 124.2 417.1

Profit attributable to:

Owners of the Company 124.2 416.8Non-controlling interest 0.0 0.3

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 124.2 417.1

109ELIA GROUP 2011FINANCIAL REPORT

Consolidated statement of financial position

ASSETS (in million €) Notes 31.12.2011 31.12.2010

NON-CURRENT ASSETS 5,145.1 4,994.1

Property, plant and equipment (6.1) 3,150.5 3,010.9

Intangible assets (6.2) 1,753.6 1,751.1

Trade and other receivables (6.3) 120.3 114.7

Investments in equity-accounted investees (6.4) 30.6 29.2

Other financial assets (including derivatives) (6.5) 84.9 79.5

Deferred tax assets (6.6) 5.2 8.7

CURRENT ASSETS 698.7 909.9

Inventories (6.7) 16.3 14.5

Trade and other receivables (6.8) 281.6 513.8

Income tax receivable 10.0 6.3

Cash and cash equivalents (6.9) 385.6 366.0

Deferred charges and accrued revenues (6.8) 5.2 9.3

TOTAL ASSETS 5,843.8 5,904.0

EQUITY AND LIABILITIES (in millions €) Notes 31.12.2011 31.12.2010

EQUITY 2,046.9 2,007.2

Equity attributable to owners of the Company (6.10) 2,046.9 2,007.2

Share capital 1,500.6 1,500.6Share premium 8.5 8.5Reserves 67.6 51.4Hedging reserve (23.3) (20.7)Retained earnings 493.5 467.4

Non-controlling interest 0.0 0.0

Non-controlling interest 0.0 0.0

NON-CURRENT LIABILITIES 3,203.5 3,211.0

Loans and borrowings (6.11) 2,918.5 2,917.3

Employee benefits (6.12) 108.1 103.8

Derivatives (7.3) 35.2 31.4

Provisions (6.13) 53.7 44.6

Deferred tax liabilities (6.6) 67.6 93.3

Other liabilities (6.14) 20.4 20.6

CURRENT LIABILITIES 593.4 685.8

Loans and borrowings (6.11) 0.0 0.1

Provisions (6.13) 24.5 43.6

Trade and other payables (6.15) 366.1 448.8

Income tax payables 26.0 14.0

Accruals and deferred income (6.16) 176.8 179.3

TOTAL EQUITY AND LIABILITIES 5,843.8 5,904.0


Consolidated statement of changes in equity

(in million €) – Year ended 31 December

Share capital

Share premium

Hedging reserve

Foreign currency

translationRetained earnings Total

Non controlling

interestsTotal

equity

BALANCE AT 1 JANUARY 2010 1,207.3 8.5 (18.7) - 168.2 1,365.4 1.7 1,367.1

Profit for the period - - - - 401.7 401.7 0.3 402.0OCI: cash-flow hedges - - (2.0) - - (2.0) - (2.0)

OCI: actuarial gain/(loss) - - - - 17.1 17.1 - 17.1

Total comprehensive income for the year - - (2.0) - 418.8 416.8 0.3 417.1

Retained earnings Eurogrid GmbH at acquisition date - - - - (1.6) (1.6) - (1.6)

Shares issued 299.7 - - - - 299.7 - 299.7

Costs of shares issued (6.4) - - - - (6.4) - (6.4)

Deconsolidation non-controlling interest - - - - - - (2.0) (2.0)

Dividends - - - - (66.6) (66.6) - (66.6)

BALANCE AT 31 DECEMBER 2010 1,500.6 8.5 (20.7) - 518.8 2,007.2 - 2,007.2

BALANCE AT 1 JANUARY 2011 1,500.6 8.5 (20.7) - 518.8 2,007.2 - 2,007.2

Profit for the period - - - - 137.5 137.5 - 137.5

OCI: cash-flow hedges - - (2.6) - - (2.6) - (2.6)

OCI: actuarial gain/(loss) - - - - (10.8) (10.8) - (10.8)

OCI: exchange differences - - - 0.1 - 0.1 - 0.1

Total comprehensive income for the period - - (2.6) 0.1 126.7 124.2 - 124.2

Dividends - - - - (84.5) (84.5) - (84.5)

BALANCE AT 31 DECEMBER 2011 1,500.6 8.5 (23.3) 0.1 561.0 2,046.9 - 2,046.9


Consolidated statement of cash flows


CASH FLOWS FROM OPERATING ACTIVITIES

Profit for the period 137.5 402.0 Adjustments for: Net finance costs (5.4) 134.3 124.0Income tax expense (5.5) 58.7 16.6Profit or loss of equity accounted investees, net of tax (5.6) (1.4) 1.2Depreciation of property, plant and equipment and amortisation of intangible assets (6.1 - 6.2) 139.7 114.5Gain on sale of property, plant and equipment and intangible assets (6.1 - 6.2) 11.7 7.6Impairment losses of current assets (5.3.4) 12.2 1.0Change in provisions (5.3.3) (25.3) (2.6)Change in fair value of derivatives (7.2) 1.1 0.9Change in deferred taxes (6.6) (15.3) 17.4Changes in fair value of financial assets through profit or loss (0.2) 3.3Change in non-cash items 0.0 0.0Gain on bargain purchase 0.0 (286.5)

Cash flow from operating activities 453.0 399.4

Change in inventories (6.7) (2.3) 0.3Change in trade and other receivables (6.8) 219.2 (43.0)Change in other current assets (6.8) 1.0 (12.7)Change in trade and other payables (6.15) (53.4) 119.2Change in other current liabilities (6.14 - 6.16) (42.3) 60.1

Changes in working capital 122.2 123.9

Interest paid (5.4) (139.6) (135.7)Income tax paid (5.5) (49.5) (19.9)

Net cash from operating activities 386.2 367.7

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of property, plant and equipment and intangible assets (6.1 - 6.2) (288.3) (199.5)Acquisition of subsidiary net of cash acquired 0.0 (278.8)Acquisition of equity accounted investees 0.0 (21.2)Acquisition of investment (7.1) (0.8) (0.0)Proceeds from sales of investments 0.1 8.6Interest received (5.4) 7.1 2.3

Net cash used in investing activities (281.9) (488.6)

CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from issue share capital 0.0 299.7Expenses related to issue share capital 0.0 (6.5)Dividends paid (-) (6.10) (84.5) (66.6)Repayment of borrowings (-) 0.0 (210.0)Proceeds from withdrawal borrowings (+) 0.0 297.6Non-controlling interest 0.0 (2.0)

Net cash flow from (used in) financing activities (84.5) 312.2

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 19.8 191.3

Cash & Cash equivalents at 1 January 365.9 174.6Cash & Cash equivalents at 31 December 385.7 365.9Net variations in cash & cash equivalents 19.8 191.3


Notes to the consolidated financial statements

1. Reporting entity 115

2. Basis of preparation 1152.1. Statement of compliance 1152.2. Functional and presentation currency 1152.3. Basis of measurement 1152.4. Use of estimates and judgements 1152.5. Approval by the board of directors 116

3. Significant accounting policies 1163.1. New, revised and amended standards and interpretations 1163.2. Basis of consolidation 1173.3. Foreign currency translation 1183.4. Financial instruments 1183.5. Balance sheet items 1193.6. Income statement items 123

4. Segment reporting 1244.1. Segment Elia Transmission (Belgium) 1244.2. Segment 50Hertz Transmission (Germany) 1264.3. Reconciliation of segments with total of group 128

5. Items of the consolidated income statement and other comprehensive income 1285.1. Revenue 1285.2. Other income 1285.3. Operating expenses 129

5.3.1. Cost of materials, services and other goods 1295.3.2. Personnel expenses 1295.3.3. Depreciation, amortisation, impairment and changes in provisions 1295.3.4. Other expenses 129

5.4. Finance income and expenses 1295.5. Income taxes 1305.6. Share in the results of associates 1315.7. Basic earnings per share 1315.8. Other comprehensive income 131


6. Items of the consolidated statement of financial position 1316.1. Property, plant and equipment 1316.2. Intangible assets 1336.3. Non-current trade and other receivables 1346.4. Equity-accounted investees 1346.5. Other financial assets 1356.6. Deferred tax assets and liabilities 1356.7. Inventories 1366.8. Current trade and other receivables 1376.9. Cash and cash equivalents 1376.10. Shareholders’ equity 1376.11. Interest-bearing loans and borrowings 1386.12. Employee benefits 1396.13. Provisions 1436.14. Other non-current liabilities 1436.15. Trade and other payables 1436.16. Accruals and deferred income 144

7. Miscellaneous 1447.1. Effect of new acquisition 1447.2. Deconsolidation of Belpex NV/SA 1467.3. Financial risk and derivative management 1467.4. Commitment and contingencies 1507.5. Related parties 1517.6. Subsidiaries, joint ventures and associates 1527.7. Subsequent events 1537.8. Relationship with auditors 1537.9. Declaration by responsible persons 153


1. Reporting entity

Established in Belgium, Elia System Operator SA (the ‘company’ ‘Elia’) has its registered office at Boulevard de l’Empereur 20, B-1000 Brussels. The company’s consolidated financial state-ments for the 2011 financial year include those of the company and its subsidiaries (together referred to as the ‘Group’) and the Group’s interest in joint ventures and associates.

The company is a limited liability company, with its shares listed on NYSE Euronext Brussels, under the symbol ELI.

With the acquisition of German TSO 50Hertz, in cooperation with Industry Funds Management (IFM), the Elia Group devel-ops, maintains and operates two major electricity networks located in Central and North West Europe: the Belgian trans-mission grid interconnected with France and the Netherlands and 50Hertz Transmission grid interconnected with Poland, Hungary and Denmark. These two grids connect producers to major industries and distribution system operators and ensure electricity imports and exports from and to other European countries in an efficient, reliable and secure way. Elia owns the entire Belgian very high voltage grid (150 to 380 kv) and some 94% (ownership and user rights) of the high-voltage grid (30 to 70 kv) with 5,606 km of overhead lines and 2,766 km of underground cables. 50Hertz owns the entire network (220 to 380 kv) in its geographical area as well as the transmission grid in the Hamburg area and off-shore connections in the Baltic sea. The 50Hertz grid comprises 9.705 km of overhead lines and 150 km of underground cables. Elia Group’s investment in interconnection capacity with its neighbours makes it the most open and interconnected transmission system operator in Europe.

2. Basis of preparation

2.1. Statement of compliance

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Stand-ards (IFRS), as adopted for use in the European Union. The Group has applied all new and revised standards and interpre-tations published by IASB and applicable to the Group’s activi-ties which are in force for financial years starting on 1 January 2011.

2.2. Functional and presentation currency

The financial statements are presented in million euro (the func-tional currency of the Group), rounded to the nearest hundred thousand, unless stated otherwise.

2.3. Basis of measurement

The financial statements have been prepared on a historical-cost basis, except for the derivative financial instruments, which are estimated at fair value. Non-current assets and dis-posal groups held for sale are valued at the lowest of the car-rying amount and the fair value less cost to sell, and employee benefits are valued at the present value of the defined benefit obligations, less plan assets. Changes in fair value of financial assets are recorded through profit and loss.

2.4. Use of estimates and judgements The preparation of financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions that could affect the reported amounts of as-sets and liabilities and revenue and expenses. The estimates and underlying assumptions are based on historical experi-ence and various other factors that are believed to be reason-able under the circumstances, the results of which form the basis for making judgements regarding the carrying amounts of assets and liabilities. Actual results could differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recog-nised in the period in which the estimate is revised if the revi-sion only affects this period, or in the period in which the es-timate is revised and future periods if the revision affects both current and future periods.


Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the follow-ing Notes:

• Deferred tax assets are recognized for the carry forward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. In making its judgment, management takes into account elements such as long-term business strategy and tax planning opportunities. Tax receivable: recovery of the tax receivables of Elia System Operator is deemed highly probable (see Note 5.5).

• Credit risk related to customers: management closely reviews the outstanding trade receivables, also considering ageing, payment history and credit risk coverage (cf. Note 7.2).

• Employee benefit obligations: the defined-benefit obligations are based on actuarial assumptions such as discount rate and expected rate of return on plan assets, which are exten-sively detailed in Note 6.12.

• Provisions for environmental issues: at each year-end an es-timate is made of future expenses in respect of soil pollution, based on the advice of an external expert.

Provisions for “litigation” and for “rights to use land” are based on the value of the claims filed or on the estimated amount of the risk exposure. The expected timing of the rela t ed cash outflow depends on the progress and the dura-tion of the associated process/procedures (cf. Note 6.13).

• Impairment: the Group performs annual impairment tests on goodwill and on cash-generating units for which there are indicators that the carrying amount might be higher than the recoverable amount. This analysis is based upon assump-tions such as market evolution, market share, margin evolu-tion and discount rates (see Note 6.2).

• Lease accounting: more information can be found in Note 7.4.• Hedging: changes in the fair value of the derivative hedging

instrument designated as a cash flow hedge are recognised directly in other comprehensive income (OCI) to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognised in profit or loss (see Note 7.3).

• Fair value adjustments for business combinations: in ac-cordance with IFRS 3 ‘Business Combinations’, the Group re-measures the assets, liabilities and contingent liabilities acquired through a business combination to fair value. Where possible, fair value adjustments are based on ex-ternal appraisals or valuation models, e.g. for contingent li-abilities and intangible assets which were not recognized by the acquiree. Internal benchmarks are often used for valuing specific production equipment. All of these valuation meth-ods rely on various assumptions such as estimated future cash flows, remaining useful economic life etc. (see Note 7.1).

The accounting policies set out hereafter have been applied consistently to all the periods presented in these financial state-ments and have been applied by all Group entities.

2.5. Approval by the Board of Directors

These consolidated financial statements were authorised for issue by the Board of Directors on 22 March 2012.

3. Significant accounting policies

3.1. New, revised and amended standards and interpretations

THE GROUP HAS APPLIED THE FOLLOWING

INTERPRETATIONS AND AMENDMENTS:

• Amendment to IAS 24 Related Party Disclosures (applica-ble to financial years as from 1 January 2011): clarifies the definition of a related party and modifies certain related-party disclosure for government-related entities.

• Amendment to IAS 1 Presentation of financial statements – Clarifies that an entity will present an analysis of other comprehensive income for each component of equity, ei-ther in the statement of changes in equity or in the notes to the financial statements (applicable to financial years as from 1 January 2011).

• Amendment to IAS 27 Consolidated and Separate Finan-cial Statements (amendments applicable to financial years beginning on or after 1 July 2010).

• Amendment to IAS 34 Interim financial reporting – Provide guidance to illustrate how to apply disclosure principles in IAS 34 (amendments applicable to financial years begin-ning on or after 1 January 2011).

None of the above amendments to the policies for financial re-porting had a significant impact on the consolidated financial statements.

The following amended and new standards are effective but are not applicable to the Group:

• Amendment to IAS 32 Financial Instruments: Presentation — Classification of Rights Issues (applicable to financial years as from 1 February 2010).

• IFRIC 19 Extinguishing Financial Liabilities with Equity In-struments (applicable to financial years as from 1 July 2010).

• Amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards — Limited exemption from comparative IFRS 7 disclosures for first-time adopters (ap-plicable to financial years as from 1 January 2011).

• Amendment to IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction — Prepayments of a Minimum Funding Require-ment (applicable to financial years as from 1 January 2011).

• Amendment to IFRS 3 Business combinations (applicable to financial years as from 1 July 2010).

• Amendment to IFRS 7 Financial Instruments – Guidance on the interaction between quantitative and qualitative disclo-


sures about the nature and extent of risks associated with financial instruments (applicable to financial years as from 1 January 2011).

• Amendment to IFRIC 13 Loyalty Programmes (applicable to financial years as from 1 January 2011).

The standards and interpretations listed hereafter are pub-lished on the date of approval of these consolidated financial statements but are not yet effective, and the Group did not opt for early adoption 1 :• Amendment to IFRS 7 Financial Instruments: Disclosures

on derecognition (applicable to financial years as from 1 July 2011).

• Amendment to IFRS 7 Financial Instruments: Disclosures – Amendments enhancing disclosures about offsetting of financial assets and financial liabilities (applicable to finan-cial years as from 1 January 2013).

• Amendment to IFRS 1 First time adoption, on fixed dates and hyperinflation (applicable to financial years as from 1 July 2011).

• Amendment to IAS 12 Income taxes - Deferred taxes: re-covery of underlying assets (applicable to financial years as from 1 January 2012).

• Amendment to IAS 1 Presentation of Financial statements – Amendments to revise the way other comprehensive in-come is presented (applicable to financial years as from 1 July 2012).

• Amendment to IAS 19 Employee benefits – amended Standard resulting from Post-Employment Benefits and Termination Benefits projects (applicable to financial years as from 1 January 2013).

• IFRS 9 Financial instrument – Classification and measure-ment (applicable to financial years as from 1 January 2013).

• IFRS 10 Consolidated financial statements: defines the principles of control and establishes controls as the ba-sis for consolidation (applicable to financial years as from 1 January 2013).

• IFRS 11 Joint operations: reflection of joint arrangements by focusing on the rights and obligations of the arrange-ment rather than its legal form (applicable to financial years as from 1 January 2013).

• IFRS 12 Disclosures of interests in other entities (applicable to financial years as from 1 January 2013).

• IFRS 13 Fair value measurement (applicable to financial years as from 1 January 2013).

• IAS 27 (revised 2011) Separate financial Statements (appli-cable to financial years as from 1 January 2013).

• IAS 28 (revised 2011) Investments in Associates and Joint Ventures (applicable to financial years as from 1 January 2013).

3.2. Basis of consolidation

1. SUBSIDIARIES

A subsidiary is an entity that is controlled by the company. Control means that the company has the power to directly or indirectly govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial state-ments from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. Losses applicable to the non-control-ling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

2. ASSOCIATED COMPANIES

Associated companies are those companies in which the company has significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the Group’s share of the total recognised profits and losses of associated companies on the basis of the equity method, from the date that significant influence com-mences until the date that significant influence ceases. When the Group’s share of the losses exceeds its interest in an asso-ciated company, the Group’s carrying amount is reduced to nil and further losses are not recognised except to the extent that the Group has incurred legal or constructive obligations or has made payments on behalf of an associated company.

3. JOINT VENTURES

‘Joint ventures’ refers to jointly controlled entities, established pursuant to a contractual agreement and subject to the re-quired approval for strategic, financial and operating decisions. Investments in joint ventures are consolidated proportionally: a proportionate part of the assets, equities & liabilities and income and expenditure statements must be in accordance with IFRS as applied by Elia, with similar items in the consoli-dated figures grouped into the same category. The gain or loss realised via the acquisition will be recognised as a surplus or as gain on bargain purchase. If, following integration, the joint venture takes over a controlled entity (authorised to manage, either directly or indirectly, the financial and operating activi-ties of the subsidiary in question to derive benefit from those activities), the requirements set out in IFRS 3 Business Combi-nations must be applied.

4. LOSS OF CONTROL

Upon the loss of control, the Group derecognizes the assets and liabilities of the subsidiary, any non-controlling interests and the other components of other comprehensive income re-lated to the subsidiary. Any surplus or deficit arising on the loss of control is recognized in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is meas-ured at fair value at the date that control is lost. Subsequently

1 The Group does not expect any major impact on its financial statements in the period of their initial application of the other standards and interpretations listed hereafter, except for IFRS 10 and IFRS 11, for which Elia started the assessment of their impact on its financial statements in 2011.


it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influ-ence retained.

5. ELIMINATION OF INTRA-GROUP TRANSACTIONS

Intra-group balances and any unrealised gains or losses or revenue and expenses arising from intra-group transactions are eliminated when preparing the consolidated financial state-ments.

Unrealised gains from transactions with associated companies are eliminated to the extent of the Group’s interest in the entity. Unrealised losses are eliminated in the same way as unreal-ised gains, but only to the extent that there is no evidence for impairment.

3.3. Foreign currency translation

FOREIGN CURRENCY TRANSACTIONS AND BALANCES

Transactions in foreign currencies are converted into the func-tional currency of the Group, at the foreign exchange rate on the date of the transaction. Monetary assets and liabilities de-nominated in foreign currencies on the balance sheet date are converted at the foreign exchange rate on that date. Foreign exchange differences arising on conversion are recognised in profit or loss.

Non-monetary assets and liabilities denominated in foreign currencies that are valued in terms of historical cost are con-verted at the exchange rate on the date of the transaction.

FOREIGN OPERATIONS

A foreign operation is an entity that is a subsidiary, associate, joint venture or branch of the reporting entity, the activities of which are based or conducted in a country or currency other than those of the reporting entity.

The financial statements of all Group entities that have a func-tional currency different from the Group’s presentation cur-rency are translated into the presentation currency as follows:

• Balance sheets are translated at the exchange rate at re-porting date.

• Income statements are translated at the average exchange rate of the year.

• Shareholder’s equity is translated at historical exchange rate.

Exchange differences arising from the translation of the net investment in foreign subsidiaries, joint ventures and associ-ates at closing exchange rates are included in shareholder’s equity under “cumulative translation adjustments” as part of the “Other comprehensive income”. At disposal of foreign sub-sidiaries, joint ventures and associates, cumulative translation adjustments is recognized in the income statement as part of the gain/loss of the sale.

3.4. Financial instruments

DERIVATIVE FINANCIAL INSTRUMENTS

The Group sometimes uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operating, financing and investment activities. In accordance with its treasury policy, the Group neither holds nor issues derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as instruments held for trading purposes.

Derivative financial instruments are recognised initially at fair value. Any gain or loss resulting from changes in the fair value is immediately booked in the income statement. Where derivative financial instruments qualify for hedge accounting, the reflec-tion of any resultant gain or loss depends on the nature of the item being hedged.

The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the end of the reporting period, taking into account the current interest rates and the current creditworthiness of the swap counterpar-ties and the Group. The fair value of forward exchange con-tracts is their quoted market price at the end of the reporting period, i.e. the present value of the quoted for ward price.

DERIVATIVES USED AS HEDGING INSTRUMENTS

Cash-flow hedges

Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised directly in other comprehensive income (OCI) to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognised in profit or loss.

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in OCI remains there until the fore-cast transaction occurs. When the hedged item is a non-finan-cial asset, the amount recognised in OCI is transferred, where justified, to the carrying amount of the asset. In other cases the amount recognised in OCI is transferred to profit or loss in the same period that the hedged item affects profit or loss.

When a derivative or hedge relationship terminates, cumulative gains or losses still remain in OCI provided that the hedged transaction is still expected to occur. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss is removed from OCI and is immediately recog-nised in profit or loss.

Hedging of monetary assets and liabilities

Hedge accounting is not applied to derivative instruments that economically hedge monetary assets and liabilities denomi-nated in foreign currencies. Changes in the fair value of such derivatives are recognised in profit or loss of foreign currency gains and losses.


3.5. Balance sheet items

PROPERTY, PLANT AND EQUIPMENT

Owned assets

Items of property, plant and equipment are stated at cost (in-cluding the directly allocated costs such as finance costs) less accumulated depreciation and impairment losses (see chapter “Impairment”). The cost price of self-produced assets compris-es the cost of materials, of direct labour and, where relevant, of the initial estimate of the costs of dismantling and removing the assets and restoring the site where the assets were located. If parts of an item of property, plant and equipment have dif-ferent useful lives, they are accounted for as separate items of property, plant and equipment.

Leased assets

Leases under the terms of which the Group assumes substan-tially all the risks and rewards of ownership are classified as finance leases. Fixed assets used via a finance lease are stated at an amount equal to the lower of the fair value and the present value of the minimum lease payments at the start of the lease, less accumulated depreciation (see hereafter) and impairment losses (see chapter “Impairment”). Lease payments are ac-counted for as described in the chapter “Expenses”.

Subsequent costs

The Group recognises in the carrying amount of an item of property, plant and equipment the cost price of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied in the item will flow to the Group and the cost price of the item can be assessed re-liably. All other costs are recognised in profit or loss as and when they are incurred.

Depreciation

Depreciation is recognised in profit or loss on a straight-line ba-sis over the estimated useful life of each component of an item of property, plant and equipment. Land is not depreciated. The applied depreciation percentages are as follows:

%

Administrative buildings 2.00

Industrial buildings 2.00 – 4.00

Overhead lines 2.00 – 4.00

Underground cables 2.00 – 5.00

Offshore cables 2.50 - 5.00

Substations (facilities and machines) 2.50 – 6.67

Remote control 3.33 – 12.50

Dispatching 4.00 - 10.00

Other property plant and equipment: fitting out rented buildings contractual period

Vehicles 6.67 – 20.00

Tools and office furniture 6.67 – 20.00

Hardware 25.00 – 33.00

Depreciation methods, remaining useful lives and residual val-ues of the property, plant and equipment are reassessed an-nually and are prospectively adjusted as the occasion arises.

Dismantling obligation

Provision is made for decommissioning and environmental costs, based on future estimated expenditures, discounted to present values. An initial estimate of decommissioning and environmental costs attributable to property, plant and equip-ment is recorded as part of the original cost of the related prop-erty, plant and equipment.Changes in the provision arising from revised estimates or dis-count rates or changes in the expected timing of expenditures that relate to property, plant or equipment are recorded as ad-justments to their carrying value and depreciated prospectively over their remaining estimated economic useful lives; other-wise such changes are recognised in the income statement.

The unwinding of the discount is included within the income statement as a financing charge.

Derecognition

An asset is no longer recognised on the balance sheet when the asset is subject to disposal or when no future economic benefits are expected from its use or disposal. Gains or losses arising from the de-recognition of the asset from the balance sheet (which is determined as the difference between the net disposal proceeds and the carrying amount of the asset) are included in profit or loss during the year in which the asset was derecognised from the balance sheet.

INTANGIBLE ASSETS

Business combinations and goodwill

Business combinations are accounted for using the acquisi-tion method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that cur-rently are exercisable.

The Group measures goodwill at the acquisition date as:• the fair value of the consideration transferred; plus• the recognised amount of any non-controlling interest in the

acquiree; plus• if the business combination is achieved in stages, the fair

value of the pre-existing equity interest in the acquiree; less• the net recognised amount (generally fair value) of the iden-

tifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recog-nised immediately in profit or loss.The consideration transferred does not include amounts re-lated to the settlement of pre-existing relationships. Such amounts generally are recognised in profit or loss.


Transactions costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.Goodwill is stated at cost price less accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but tested annually for impairment (see chapter “Impairment”). In the case of associated companies, the carry-ing amount of goodwill is included in the carrying amount of the investment in the associated company.

Computer software

Software licences acquired by the Group are stated at cost less accumulated amortisation (see below) and impairment losses (see chapter “Impairment”).

Expenditure for research activities undertaken with the pros-pect of developing software within the Group is recognised in profit or loss as expenditure as incurred. Expenditure for the development phase of software developed within the Group is capitalised if:

• the costs of development can be measured reliably;• the software is technically and commercially feasible and

future economic benefits are likely;• the Group plans - and has sufficient resources - to com-

plete development;• the Group plans to use the software.

The capitalised expenditure includes cost of material, direct la-bour costs and overhead costs that are directly attributable to preparing the software for its use. Other costs are recognised in profit or loss as incurred.

Licenses, patents and similar rights

Expenditure on acquired licences, patents, trademarks and similar rights is capitalised and amortised on a straight-line ba-sis over the contractual period, if any, or the estimated useful life.

Subsequent expenditure

Subsequent expenditure on capitalised intangible assets is cap-italised only when it increases the future economic benefits em-bodied in the specific asset to which it relates. All other expendi-ture is recognised in profit or loss as expenditure as incurred.

Amortisation

Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful life of intangible assets, unless the useful life is indefinite. Goodwill and intangible assets are tested systematically for impairment on each end of the report-ing period. Software is amortised from the date it is available for use. The estimated useful lives are as follows:

%

Licences 20.00

Concessions contractual period

Computer software 20.00 - 25.00

Depreciation methods, remaining useful lives, and residual val-ues of intangible assets are reassessed annually and are pro-spectively adjusted as the occasion arises.

INVESTMENTS

Each type of investment is recognised on the date of the trans-action.

Investments in equity securities

Investments in equity securities are undertakings in which the Group does not have significant influence or control. This is the case in undertakings where the Group owns less than 20% of the voting rights. Such investments are designated as available-for-sale financial assets and are measured at fair value. Any re-sulting changes in fair value, except those related to impairment losses and foreign exchange gains and losses, are recognised directly in other comprehensive income (OCI). On disposal of an investment, the cumulative gain or loss previously recognised directly in equity in OCI is recognised in profit or loss.

Investments in debt instruments

Investments in debt securities classified as held for trading pur-poses or as being available-for-sale are carried at fair value, with any resulting gain or loss respectively recognised in profit or loss or directly in equity. The fair value of these investments is deter-mined as the quoted bid price at the end of the reporting period. Impairment charges and foreign exchange gains and losses are recognised in profit or loss. Investments in debt securities classified as held to maturity are measured at amortised cost.

Other investments

Other investments held by the Group are classified as available-for-sale and are measured at fair value, with any resulting gain or loss recognised directly in equity. Impairment charges are recognised in other comprehensive income (OCI) (see chapter “Impairment”).

TRADE AND OTHER RECEIVABLES

Construction work in progress

Construction work in progress is stated at cost price plus profit based on progress made to date, less a provision for foresee-able losses and less progress billing. The cost price comprises all expenditure directly related to specific projects, plus an al-location of fixed and variable overheads incurred during the Group’s contract activities based on normal operating capacity.


Lease receivables

Receivables from lease contracts are stated at an amount equal to the present value of the future net lease payments at the start of the contract. The values of the receivables are reduced in the course of the lease contract by the amount of the lease payments associated with the reimbursement of the principal amount.

Trade and other receivables

Trade receivables and other receivables are measured at am-ortized cost, less the appropriate allowance for amounts re-garded as unrecoverable.

INVENTORIES

Inventories (spare parts) are stated at the lower of cost and net realisable value. Net realisable value is the estimated sell-ing price less the estimated costs of completion and selling expenses. The cost of inventories is based on the weighted-average-cost-price method. The cost includes the expenditure incurred in acquiring the inventories, and the direct costs of bringing them to their location and making them operational.Write-offs of inventories to net realisable value are recognised in the period in which the write-off occurred.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash balances, bank bal-ances and deposits that can be withdrawn on demand. Over-drafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

IMPAIRMENT

The carrying amount of the Group’s assets, excluding invento-ries (see chapter “Inventories”) and deferred taxes (see chapter “Income taxes”), are reviewed at the end of the reporting pe-riod for each asset to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is estimated.

The recoverable amount of goodwill and intangible assets with an indefinite useful life and intangible assets that are not yet available for use is estimated at the end of each reporting period.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss.

Recognised impairment losses relating to cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units and then to reduce the carrying amount of the other assets in the units on a pro-rata basis.

After recognition of impairment losses, the depreciation costs for the asset will be adjusted for future.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against loans and receivables or held-to-maturity investments securities. Interest on the impaired asset continues to be recognised. When an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

Impairment losses on available-for-sale financial assets are recognized by reclassifying the losses accumulated in the fair value reserve in equity to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current value, less any impairment loss recognized previously in profit or loss. Changes in cu-mulative impairment losses attributable to application of the effective interest method are reflected as a component of in-terest income. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the in-crease can be related objectively to an event occurring after the impairment loss was recognised, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.

Calculation of the recoverable amount

The recoverable amount of intangible assets and property, plant and equipment is determined as the higher of their fair value less costs to sell or value in use. In assessing value in use, the expected future cash flows are discounted to their present value using a pre-tax discount rate that reflects both the cur-rent market assessment of the time value of money and the risks specific to the asset.

The Group’s assets do not generate cash flow that is independ-ent from other assets and the recoverable amount is therefore determined for the cash-generating unit (i.e. the entire high-voltage network) to which the asset belongs. This is also the level at which the Group administers its goodwill and reaps the economic benefits of acquired goodwill.

Reversals of impairment

An impairment loss in respect of goodwill is not reversed.Impairment loss on other assets is reversed if there have been changes in the estimates used to determine the recoverable amount.An impairment loss is reversed only to the extent that the as-set’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amor-tisation, if no impairment loss had been recognised.


SHARE CAPITAL

Transaction costs

Transaction costs in respect of the issuing of capital are de-ducted from the capital received.

Dividends

Dividends are recognised as a liability in the period in which they are declared.

INTEREST-BEARING LOANS

Interest-bearing loans are recognised initially at fair value less related transaction costs. Subsequent to initial recognition, interest-bearing loans are stated at amortised cost price with any difference between cost price and redemption value being recognised in profit or loss over the period of the loans on an effective interest basis.

EMPLOYEE BENEFITS

Defined-contribution plans

Obligations related to contributions to defined-contribution pension plans are recognised as an expense in profit or loss as incurred.

Defined-benefit plans

For defined-benefit plans, the pension expenses are assessed on an annual basis by accredited actuaries separately for each plan by using the projected unit credit method. The estimated future benefit that employees have earned in return for their service in the current and prior periods is discounted to deter-mine its present value, and the fair value of any plan assets is deducted. The discount rate is the interest rate as at the end of the reporting period on high-quality bonds which have maturity dates that approximate the terms of the Group’s obligations and that are denominated in the currency in which the benefits are expected to be paid. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in profit or loss on a straight-line basis over the average period until the benefits be-come vested. To the extent that the benefits are vested imme-diately, the expense is recognised immediately in profit or loss.

All actuarial gains and losses as at 1 January 2004, the date of transition to IFRS, were recognised in the opening reserves. Actuarial gains and losses are immediately recognised as li-abilities and do not affect the income statement, but are imme-diately recognised in OCI. The amount charged in profit or loss consists of current service cost, interest costs, the expected return on any plan assets and the past service cost.Where the calculation results in a benefit to the Group, the rec-ognised asset is limited to the balance of past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan.

Other long-term employee benefits

The Group’s net obligation in respect of long-term service ben-efits, other than pension plans, is assessed on an annual basis by accredited actuaries. The net obligation is calculated using

the projected unit credit method and is the amount of future benefit that employees have earned in return for their service in the current and previous periods. The obligation is discounted to its present value and the fair value of any related assets is deducted. The discount rate is the yield as at the end of the reporting period on high-quality bonds having maturity dates that approximate to the terms of the Group’s obligations and that are denominated in the currency in which the benefits are expected to be paid.

Short-term employee benefits

Short-term employee benefits are measured on an undiscount-ed basis and are expensed as the related service is provided. A liability is recognised as for the amount expected to be paid out under a short-term cash bonus or profit-sharing plans if the Group has a legal or constructive obligation to pay this amount as a result of the past service provided by the employee and the obligation can be estimated reliably.

PROVISIONS

A provision is recognised in the balance sheet when the Group has a current legal or constructive obligation as a result of a past event and it is likely that an outflow of economic benefits - of which a reliable estimate can be made - will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessment of the time value of money and, where appropriate, of the risks specific to the liability.

If the Group expects to recover some or all of the provisions from a third party, the compensation is only included as a sep-arate asset if it is virtually certain that said compensation will be awarded. The cost connected to a provision is included in profit or loss net of any compensation.

The total estimated cost of dismantling and disposal of an as-set are, if applicable, recognised as property, plant and equip-ment and depreciated over the asset’s entire useful life. The total estimated cost of dismantling and of disposal of the asset, is posted as provisions for the discounted current value. If the amount is discounted, the increase of the provision due to the lapse of time is classified as finance expenses.

TRADE AND OTHER PAYABLES

Trade and other payables are stated at amortised cost.

GOVERNMENT GRANTS

Government grants are recognised when it is reasonably cer-tain that the Group will receive the grant and that all underlying conditions will be met. Grants related to an asset are presented under other liabilities and will be recognised in the income state-ment on a systematic basis over the expected useful life of the related asset. Grants related to expense items are recognised in the income statement in the same period as the expenses, for which the grant was received. Government grants are pres-ented as other operating income in the income statement.


3.6. Income statement items

REVENUE

Revenue is recognised when it is probable that the company will enjoy the economic benefits associated with the transac-tion and the income can be measured reliably and recovery of the compensation due is likely.

Goods sold and services rendered

Revenue from services and the sale of goods is recognised in profit or loss when the significant risks and rewards of owner-ship have been transferred to the buyer.

Construction work in progress

As soon as the outcome of a construction contract can be esti-mated reliably, contract revenue and expenses are recognised in profit or loss in proportion to the stage of completion of the contract. An expected loss on a contract is immediately recog-nised in profit or loss.

Transfer of assets from customers

The revenue from customers (financial contribution) for the construction of connections and related grid enhancement to the high-voltage grid is recognised in profit or loss on the basis of the stage reached in recovery of the underlying property, plant and equipment.

EXPENSES

Operating lease payments

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received to conclude the leasing agreement are recognised in profit or loss as an integral part of the total lease expenses.

Finance lease payments

Payments made under finance lease payments are apportioned between the financing charges and the reduction of the out-standing liability. The financing charges are allocated to each period of the total lease term so as to produce a constant pe-riodic rate of interest over the remaining balance of the liability.

FINANCE INCOME AND EXPENSES

Finance expenses comprise interest payable on borrowings, calculated using the effective interest rate method, foreign exchange losses, gains on currency hedging instruments offsetting currency losses, results on interest rate hedging instruments, losses on hedging instruments that are not part of a hedge accounting relationship, losses on financial assets classified as for trading purposes and impairment losses on available-for-sale financial assets as well as any losses from hedge ineffectiveness. Net finance expenses comprise interest on loans, calculated using the effective interest rate method and foreign exchange gains and losses.Interest income is recognised in profit or loss as it accrues us-ing the effective interest rate method.

Borrowing costs that are not directly attributable to the acquisi-tion, construction or production of a qualifying asset are recog-nised in profit or loss using the effective interest method.

INCOME TAXES

Income taxes comprise current and deferred tax. Income tax expense is recognised in profit or loss, except to the extent that it relates to items recognised directly in equity.

Current tax is the expected tax payable on taxable income of the year, using tax rates enacted or substantively enacted at the end of the reporting period, and any adjustments to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet method, on temporary differences arising between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in sub-sidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising from initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they are reversed, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabili-ties and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised only to the extent that it is likely that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer likely that the related tax benefit will be realised.

Additional income taxes that arise from the distribution of divi-dends are recognised at the same time as the liability to pay the related dividend.


4. Segment reporting

The Group has opted for a geographical segmentation since this segmentation forms the basis of the Company’s internal management reporting and enables the Chief Operating Deci-sion-Maker (CODM) to evaluate and assess the type and finan-cial profile of its activities in a transparent way.

Pursuant to IFRS 8, the Group has identified the following oper-ating segments based on the aforementioned criteria:

• Elia Transmission (Belgium), which comprises Elia System Operator and the companies whose activities are directly linked to the role of Belgian transmission system operator (i.e. group before the acquisition of 50Hertz);

• 50Hertz Transmission (Germany), which comprises Eurogrid International SCRL and companies whose ac-tivities are directly linked to the role of transmission system operator in Germany.

The two operating segments also have been identified as the cash generating units of the group, as the group of assets man-aged by both segments independently generates cash flows.

The Chief Operating Decision-Maker (CODM) has been identi-fied by the Group as being the Boards of Directors, the CEO’s and the Executive Committees of each segment. The Chief Operating Decision-Maker periodically reviews the Group’s segments performance against a certain number of indicators, such as revenue, EBITDA and operating profit.

The Company’s geographical segments are mainly character-ized by common revenue and cost drivers and the same public service mission in their respective geographical area, but they distinguish themselves mainly at the level of the specific coun-try related regulatory frameworks. For more details around this topic we refer to the chapter on “Regulatory framework and tariffs”.

The information presented to the CODM follows the IFRS ac-counting policies of the Group, therefore no reconciling items have to be disclosed. Intergroup transactions are concluded on an at arm’s length basis.

As described by IFRS 8 the Group is required to report seg-ment information about each operating segment that exceeds certain quantitative thresholds. Since the operational activities of Atlantic Grid (see Note 7.1) do not exceed the threshold, its operations have been aggregated in the reporting segment 50Hertz Transmission (Germany), because its activities are regularly evaluated by the CODM of that segment.

4.1. Segment Elia Transmission (Belgium)

KEY FIGURES

(See table below)

Results Elia Transmission 2011 2010 Difference (%)

(in million €) – for the period ended 31 December

Revenue 801.8 763.3 5.1Depreciation, amortization, impairment and changes in provisions (102.3) (107.1) (4.5)EBITDA* 354.0 336.8 5.1Operating profit (EBIT)* 251.7 229.6 9.6Finance income 10.6 17.0 (37.6)Finance costs (128.2) (129.7) (1.2)Income taxes (29.8) (20.8) 43.3Basic earnings, attributable to the Owners of the Company 105.7 94.6 11.7

BALANCE SHEET

Total assets** 4,473.8 4,518.1 (1.0)Capital expenditures 118.1 113.9 3.7

Net financial debt 2,448.1 2,385.2 2.6

* EBIT = earnings before interest and taxes EBITDA = EBIT + depreciation / amortization + changes in provisions** This section includes a reclassification of the figures per 31 December 2010 for comparison reasons


In 2011, Elia Transmission’s revenue in Belgium increased to €801.8 million, up 5.1% compared to the same period last year. The table hereafter provides more details of changes in the various revenue components.

2011 2010 Difference (%)

(in million €) – for the period ended 31 December

DETAIL REVENUE

Grid connection revenue 34.8 33.6 3.6Grid use revenue 533.0 539.2 (1.1)Revenues from the reversal of surpluses from previous years (decision by the regulator) 46.0 34.1 34.9Ancillary services revenue 108.2 115.2 (6.1)International revenue 23.5 28.0 (16.1)Other revenue 53.7 50.3 6.8

Subtotal revenue 799.2 800.4 (0.1)

Deviations from approved budget (settlement mechanism) 2.6 (37.1) n.r.

TOTAL REVENUE 801.8 763.3 5.0

Grid connection revenue rose by 3.6%, mainly due to an in-crease in the number of new connections by industrial custom-ers compared to the previous year.

Grid use revenue remained more or less at the same level as in 2010. The lower volumes as a result of the economic crisis, mild temperatures and the rise in decentralised generation (es-pecially in the second half of 2011) compared with the previous year were offset by surplus revenue from grid imbalances.

Revenue from reversal of surpluses from previous years increased by 34.9% to €46 million as agreed with the regula-tor in the tariffs for 2008-2011. As a result, all the remaining surpluses from the period from 2002 up to and including 2006 were returned to customers. The disappearance of these tariff surpluses is one of the reasons for the rise in tariffs for the period 2012-2015.

Ancillary services revenue dropped by 6.1% due to a lower level of off-takes from the Elia grid and lower purchasing costs, which have to be passed on.

International revenue fell by 16.1% compared to 2010, mainly as a result of further optimisation of the utilisation of border capacity due to market coupling with Belgium’s neighbours.

Other revenue rose slightly from €50,3 million to €53.7 mil-lion, primarily on account of the application of IAS 19 2 (up €7.4 million), the deconsolidation of Belpex (down €2.9 million) and a decrease in own produced assets (down €1.1 million).

In comparison with the tariff approved for 2011 by CREG in late 2007 as regards non-controllable costs and revenue, an operational tariff deficit of €2.6 million has been established (to be passed on to the tariffs of the next tariff period).

The EBITDA (up 5.1%) and the EBIT (up 9.6%) rose sharply in 2011 compared with 2010, mainly due to the increase in rev-enue.

Net finance expenses (up 4.4%) were adversely affected by the absence of capital gains on the sale of Belpex in 2010 (€8.4 million), which was partly offset by more revenue from surplus cash and lower general bank charges.

Income tax expense (up 43.3%) rose more rapidly than the net profit, both because tax-free capital gains were achieved on financial fixed assets (cf. Belpex) in 2010 and due to an in-creased taxable profit in 2011 (for example due to higher OLOs) and taxes on the efficiency gains made in both 2010 and 2011 at the marginal rate of 33,99%.

2 IAS 19: Annual recalculation of recoverable costs in relation to future retirement obligations.


Consolidated IFRS profit after income tax rose by 11.7% from €94.6 million in 2010 to €105.7 million in 2011 due to the following items 3 :

1. increase in regulated profit due to high OLOs (+€10.3 million);2. increased additional savings and revenue ( +€1.8 million);3. court ruling on the CREG decision regarding 2009 deci-

sion of CREG on regulated balances 2010 having an influ-ence on 2010 and 2011 4 (- €1.7 million);

4. absence of the 2010 costs pertaining to the capital in-crease for acquisition of 50Hertz minus costs for Eurogrid International (+€6.1 million);

5. absence of the 2010 capital gains (60%) on the sale and deconsolidation of Belpex in 2010 (- €5.1 million);

6. decrease in IFRS adjustments in 2011 compared to 2010 (- €0.3 million).

Total assets decreased slightly (by 1%) to €4,473.8 million, while the net financial debt went up 2.6% or €62.9 million, primarily as a result of an increase in working capital due to repayment of the outstanding tariff surpluses.

4.2. Segment 50Hertz Transmission (Germany)

The table hereafter shows the 2011 results of 50Hertz Trans-mission’s transmission system operator activities in Germany as per International Financial Reporting Standards (IFRS).

The results of 50Hertz Transmission for 2011, consolidated at Eurogrid International level (60% proportional consolidation), include the entire 12 months for the first time, in contrast with the 2010 figures, which reflected only the period from June to December (inclusive). Consequently, the 2011 figures are best compared to the 12-month pro forma figures for 2010 (last col-umn) compiled in accordance with International Financial Re-porting Standards (IFRS).

3 Items 1-5 relate to the regulatory framework in Belgium.4 In a decision of 25 June 2010 relating to 2009, CREG (federal regulator) indicated that it did not agree

with certain aspects of the results. Elia contested several provisions of this decision before the Court of Appeal. The Court of Appeal’s final decision of 31 May 2011 was factored into the figures for 2011. Elia received CREG’s final decision with regard to financial year 2010 on 17 February 2012. In line with the decision of the Court of Appeal regarding 2009 the federal regulator has decided that the obtained efficiency gains had, according to the Royal Decree of 8 June 2007, to be taxed at the marginal rate of 33,99%.

Results 50Hertz Transmission 2011 2010 Difference 2010

(in million €) 60% proportional consolidation – for the period ended 31 December

12 months 7 months % 12 months unaudited Pro forma

Revenue 477.7 275.0 73.7 475.0

Depreciation, amortization, impairment and changes in provisions (38.6) (20.3) 90.1 (38.9)

REBITDA* 94.9 72.6 30.7 124.1

EBITDA* 94.9 351.2 (73.0) 402.6

Operating profit (REBIT*) 56.3 52.3 7.7 85.2

Operating profit, including non-recurring items (EBIT*) 56.3 330.8 (83.0) 363.7

Finance income 3.6 4.8 (25.0) 1.3

Finance costs (14.6) (15.3) (4.6) (17.7)

Income taxes (13.5) (13.2) 2.3 (23.7)

Basic earnings, including non-recurring items, attributable to the Owners of the Company 31.8 307.1 (89.6) 323.6

Basic earnings, excluding non-recurring items, attributable to the Owners of the Company 31.8 28.6 11.2 45.0

BALANCE SHEET

Total assets 1,370.3 1,386.8 (1.2) -

Capital expenditures 152.3 107.5 41.6 -

Net financial debt 84.8 166.3 (49.0) -

* EBIT = earnings before interest and taxes REBIT = recurring EBIT (excluding one-off items) EBITDA = EBIT + depreciation / amortization + changes in provisions REBITDA = recurring EBITDA (excluding one-off items)


50Hertz Transmission’s revenue remained fairly stable compared to the same period last year. This revenue is described in more detail in the table below.

2011 2010 Difference (%)

(in million €) – for the period ended 31 December Pro forma

DETAIL REVENUE

Vertical grid revenue 369.8 384.0 (3.7)

Horizontal grid revenue 13.6 17.3 (21.4)

Ancillary services revenue 56.2 76.4 (26.5)

Other revenue 37.7 28.4 32.8

Subtotal revenue 477.3 50.1 (5.7)

Deviations from approved budget (settlement mechanism) 0.5 (31.1) n.r.

TOTAL REVENUE 477.7 475.0 0.6

Vertical grid revenue pertains to the use of the 50Hertz grid. The 3.7% downturn is a result of lower volumes drawn from the grid mainly as a result of a larger share of decentralised generation.

Horizontal grid revenue pertains to revenue for the use of the sea cable between Germany and Denmark (Kontek cable) as well as all revenue from auctioned transmission capacity on the border with the Czech Republic, which also connects the 50Hertz grid with TenneT Germany. The 21.4% downturn is due mainly to lower price differences between Denmark (Nord Pool Spot) and Germany (EPEX Spot) thanks to the market coupling with Benelux, Germany and France.

Ancillary services revenue concerns mainly passing on to grid users costs (generation reserve capacity and balancing costs) that 50Hertz incurs in order to balance generation with demand in the area. This revenue fell significantly due to ongo-ing optimisation of system control between the four German TSOs and due to the fact that the revenue from the EEG 5 im-balances is allocated directly to EEG activity.

Other revenue pertains primarily to telecom revenue, subsi-dies, capitalised costs of own works, technical services and expertise to third parties and contributions from customers. The sharp rise is the result of a one-off EEG bonus of €11.4 mil-lion 6.

Owing to the acquisition of 50Hertz Transmission, the corre-sponding purchase price has been recorded in the financial statement of 2010. Under IFRS a goodwill allocation or a gain on bargain purchase has been made with the help of a Pur-chase Price Allocation or ‘PPA’. In a PPA, all property, debts and (conditional) services to be identified are valued at fair val-

ue. This PPA exercise was carried out for Eurogrid GmbH (Ger-man financing and acquisition structure above 50Hertz Trans-mission), yielding Eurogrid GmbH a one-off and definite income (gain on bargain purchase) of €477.5 million (€286.5 million for 60%). The absence of this one-off profit in 2011 explains the sharp drop compared to 2010 in EBITDA, EBIT and net profit, including non-recurring items. In 2011 it became apparent that no further modifications are needed for the 2010 PPA.

The drop in REBITDA and REBIT is mainly due to one-off cor-rections in 2010 (€5.5 million), the absence of one-off auction revenue booked in 2010 (€9.6 million) and higher personnel and maintenance costs (€9.6 million).

The net finance expenses were positively influenced by more revenue from surplus cash (strong improvement in cash posi-tion due to a drop in working capital for EEG) as well as lower general bank costs.

The net profit (excluding non-recurring topics) decreased in line with the lower operating profit.

The net financial debt consists of a €500 million 10-year Euro-bond issued in October 2010 and a cash position of €355 mil-lion, of which €43.8 million is related to EEG activities. Of these amounts, 60% has been consolidated.

5 EEG refers to the German subsidy mechanism for renewable energy, where the transmission system operator is required to pay the feed-in tariff to the producer of renewable energy and to sell that energy on the German energy exchange. The difference between the feed-in and sale price is offset via a monthly fee approved by the government. The entire mechanism is neutral in terms of net profit for 50Hertz.

6 The entire mechanism is usually neutral in terms of net profit for 50Hertz, except when a bonus is approved by the BNetzA for handling the EEG activities.


4.3. Reconciliation of segments with total of group

Consolidated results 2011 2011 2011 2011(in million €) - for the period ended 31 December

Elia Transmission (Belgium)

50Hertz Transmission (Germany)

Consolidation entries

Elia Group

Revenue 801.8 477.7 (1.1) 1,278.4

Depreciation, amortization, impairment and changes in provisions (102.3) (38.6) 0.0 (140.9)

REBITDA 354.0 94.9 0.0 448.9

EBITDA 354.0 94.9 0.0 448.9

Operating profit (REBIT) 251.7 56.3 0.0 308.0

Operating profit, including non-recurring items (EBIT) 251.7 56.3 0.0 308.0

Finance income 10.6 3.6 0.0 14.2

Finance costs (128.2) (14.6) 0.0 (142.8)

Income taxes (29.8) (13.5) 0.0 (43.3)

Basic earnings, including non-recurring items, attributable to the Owners of the Company 105.7 31.8 0.0 137.5

Basic earnings, excluding non-recurring items, attributable to the Owners of the Company 105.7 31.8 0.0 137.5

BALANCE SHEET

Total assets 4,473.8 1,370.3 (0.3) 5,843.8

Capital expenditures 118.1 152.3 0.0 270.4

Net financial debt 2,448.1 84.8 0.0 2,532.9

The Group has no concentration of customers in neither of the operating segments.

The 2010 figures include the 50Hertz Transmission (Germany) segment for the period from May to December, whereas the 2011 figures consist of both segments for the full period, being January to December.

5.1. Revenue

Detail revenue (in million €) 2011 2010

Revenue 1,188.2 939.5Other income 90.2 98.0

Total revenue and other income 1,278.4 1,037.5

5.2. Other income

The following table further details “Other income”, as indicated in Note 5.1 “Detail revenue”:

(in million €) 2011 2010

Own production 13.5 13.4Bonus previous year 1.5 0.0Optimal use of assets 13.1 11.6Services and technical expertise 7.8 5.7Changes in non-current assets related to application of IAS 19 4.6 (2.8)Transfers of assets from customers 18.6 14.4Subsidies and grants (1.2) 1.8Offshore revenue (horizontal) 10.5 4.0Revenue from penalty 0.0 3.7Belpex activities 0.0 2.9EEG bonus 2011 6.8 0.0Other 15.0 43.3

Total other income 90.2 98.0

5. Items of the consolidated income statement and other comprehensive income


The other income, section Other, mainly consists of proceeds from sale of tangible assets, recoverable amounts of claims paid by insurance companies, etc.

5.3. Operating expenses

5.3.1. COST OF MATERIALS, SERVICES AND OTHER GOODS

(in million €) 2011 2010

Purchase of ancillary services 414.2 267.3Raw materials, consumables and goods for resale 5.9 5.9Services and other goods (excl. purchase of ancillary services) 224.2 189.9Non-recurring services and other goods 0.0 8.0

Total 644.3 471.1

The “purchase of ancillary services” line includes the costs for services which enable the Group to balance generation with demand, to maintain voltage levels and to manage congestions on its grids. The increase compared to last year is mainly due to the 50Hertz network with exceptional weather conditions (very windy in December) and the decision of the German govern-ment to close eight nuclear power plants. These costs are re-covered in future tariffs with a delay of two years.

The “services and other goods” line is related to maintenance of the grid, services provided by third parties, insurance, con-sultancy, etc.

The 2010 non-recurring services and other goods relate to one- off costs regarding the acquisition of 50Hertz in May 2010

5.3.2. PERSONNEL EXPENSES

(in million €) 2011 2010

Salaries and wages 113.9 94.1Social security contributions 28.5 26.8Pension costs 6.1 6.6Employee benefits (other than pensions) 6.5 2.5Share-based payment with reduction 0.0 0.1Other personnel expenses 3.4 3.8

Total 158.4 133.9

For more information regarding employee benefits, see Note 6.12 Employee Benefits.

5.3.3. DEPRECIATION, AMORTISATION, IMPAIRMENT

AND CHANGES IN PROVISIONS

(in million €) Note 2011 2010

Depreciation of property, plant and equipment 6.1 131.2 113.6Depreciation of intangible assets 6.2 8.6 8.5Total of depreciation 139.8 122.1

Impairment of inventories and trade receivables 0.4 1.0Total of impairment 0.4 1.0

Provisions for litigation 6.13 1.1 2.7Environmental provisions 6.13 (0.3) 3.3Other provisions 6.13 (0.1) (1.7)Total of provisions 0.7 4.3

Total 140.9 127.4

A detailed description of provisions is provided in Note 6.13.The variance for impairment in respect of inventories and re-ceivables during the year can be found in Note 7.3 “Financial risk and derivative management”.

5.3.4. OTHER EXPENSES

(in million €) 2011 2010

Taxes other than income tax 13.6 12.1Net loss on disposal/sale of property, plant and equipment 2.9 2.7Other 1.4 16.3Bonus-malus settlement of previous year 8.9 0.0

Total 26.8 31.1

The 2010 expenses classified as “Other” consisted mainly of a settlement of a claim of €11.4 million, which did not occur in 2011.

5.4. Finance income and expenses

(in million €) 2011 2010


Interest income on investment trust, bank deposits, cash and cash equivalents 6.6 6.0Other financial income 7.6 15.8

Finance costs 142.8 145.0

Interest expense on eurobonds and other bank borrowings 131.0 120.0Interest expense on derivatives 11.4 13.4Other financial costs 0.4 11.6

Net finance expense recognised in profit or loss (128.6) (123.2)


The other financial income consists of the moratorium interests which are computed on the tax claim (we refer to Note 5.5 below). The decrease in other financial income results from the sale of Elia’s stake in Belpex, which generated a gain of €8.4 million.

For more details on net debt and loans, see Note 6.11.

5.5. Income taxes

RECOGNISED IN PROFIT OR LOSS

The consolidated income statement includes the following taxes:

(in million €) 2011 2010

Current year 43.4 16.5Adjustments prior years 15.3 0.1Total income tax expenses 58.7 16.6

Origination and reversal of temporary differences (15.4) 17.4Total deferred tax (15.4) 17.4

Total income tax recognised in profit or loss 43.3 34.0

RECONCILIATION OF THE EFFECTIVE TAX RATE

The tax on the company’s profit (loss) before tax differs from the theoretical amount that would arise using the Belgian statu-tory tax rate applicable to profits (losses) of the consolidated companies as follows:

(in million €) 2011 2010

Profit after tax 136.1 403.2Share of profit of equity accounted investees 1.4 (1.2)Profit for the period 137.5 402.0

Income tax expenses 43.3 34.0Profit before tax 180.8 436.0

Income tax using the domestic corporation tax rate 61.5 148.2Domestic corporate income tax 33.99% 33.99%

Effect of the foreign tax rate (2.3) (14.6)Non-deductible expenses 1.8 1.9Gain on disposal of shares (0.5) (2.5)Other tax free income (0.1) (102.1)Adjustments prior years 0.0 0.1Tax incentives (notional interest deduction) (19.0) (16.9)Other 1.9 19.9

Total income tax expenses in profit or loss 43.3 34.0

The item ‘Gain on disposal of shares’ in 2010 is mainly related to the sale of the stake in Belpex to APX-ENDEX (see Note 7.2), and ‘Other tax-free income’ in 2010 includes the tax impact on the gain from bargain purchase, realised through the acquisi-tion of 50Hertz (see Note 7.1).

Elia received a tax assessment in early 2008 in view of taxation of the remaining tariff surpluses as at 31 December 2004. The income taxes paid total €93.8 million, including an administra-tive charge of 10% and an increase due to insufficient prepay-ments. Having consulted its tax advisor and CREG and given that similar tariff surpluses accounted for by other companies in the sector were not taxed, Elia management decided to file a complaint, but it was rejected by the tax authorities. By mat-ter of consequence, Elia has filed a judicial claim for the full amount, including moratorium interest.

In 2009, the tax authorities made a similar decision on the in-crease of tariff surpluses in 2005 and 2006. Elia received a tax assessment of €35.8 million, including an administrative charge of 10% and an increase due to insufficient prepayment, and decided to file a complaint about this in line with the case of 2004.The tariff surpluses that led to the additional assessment will be systematically settled in tariffs over the years to come (refund to consumers) in accordance with CREG decision, meaning that this solely is a matter of a timing difference between a surplus generated in the past and a refund in the subsequent years.

If Elia’s complaint is rejected, the corporate income tax paid on the remaining surpluses will automatically be offset by ‘re-coverable taxes’ on the refund given to consumers in 2005, 2006 and 2007 and subsequent periods. In that way the basic amount of the corporate income tax can be recovered in full. If a balance is still outstanding, it will be settled using the tariff mechanism.On Friday 23 December, the Brussels Court of First Instance ruled in favour of Elia in its tax dispute 7 with the Belgian tax authorities. As a result of the ruling, the tax authorities must re-imburse Elia €118.4 million, consisting of €80.2 million in taxes that were paid twice and which therefore must be reimbursed with 100% certainty, €5.1 million in prepayments, €8.5 million in administrative tax increase and €24.6 million in interest. How-ever, the tax authorities lodged an appeal on 6 February 2012, thus suspending the ruling by the Court of First Instance. The Court of Appeal is not expected to rule on the case until 2014 at the earliest.

Deferred income taxes are discussed in Note 6.6 (‘Changes in deferred tax assets and liabilities resulting from movements in temporary differences during the financial year’).

7 Elia’s tariffs are based on estimated income and costs as well as budgeted volumes. At the end of each tariff period, this results in tariff surpluses or deficits that must be factored into future tariffs. However, in 2008 the tax authorities ruled that tariff surpluses from the past (2003-2004) should be taxed immediately while Elia, in consultation with the regulator, considered this to be a debt in respect of future tariffs. All such tariff surpluses have actually been returned to consumers since the end of 2011.


5.6. Share in the results of associates

(in million €) 2011 2010

H.G.R.T. 0.4 (1.3)APX-Endex 1.0 0.1Coreso 0.0 0.0Subtotal - associates 1.4 (1.2)

Total 1.4 (1.2)

The share in the results of joint ventures can be found in Note 4.2 Segment 50Hertz Transmission (Germany). All companies related to the 50Hertz Transmission segment are joint ven-tures. There are no joint ventures in other segments.

5.7. Basic earnings per share

The basic earnings per share (EPS) are calculated by dividing the net profit attributable to the shareholders of the company (€137.5 million) by the weighted average number of ordinary shares outstanding during the year (60,355,217).

WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES

2011 2010

Issued ordinary shares on 1st of January 60,355,217 48,270,255

Impact of the shares issued in January 2010 - 12,045Impact of the shares issued in June 2010 - 6,267,657

Weighted average number of shares on 31st of December 60,355,217 54,549,957

Diluted earnings per share

Diluted earnings per share (EPS) is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which com-prise share options granted to employees.

The diluted profit is equal to the ordinary profit per share, since there are no convertible bonds or share options.

Share capital and reserves per share

Share capital and reserves per share totalled €33.9 per share on 31 December 2011, compared with a value of €36.80 per share at the end of 2010. This decrease is due to the use of “weighted average number of shares” instead of “number of shares at reporting date” in the formula.

5.8. Other comprehensive income

Total comprehensive income includes both the result of the period recognised in the income statement and the other com-prehensive income recognised in equity. Other comprehensive income includes all changes in equity other than owner-related changes, which are analysed in the statement of changes in equity.

The following table analyses the deferred taxes and the changes in fair value booked in equity by item of other comprehensive income:

INCOME TAXES RECOGNIZED

IN OTHER COMPREHENSIVE INCOME

(in million €) 2011 2010

Derivatives 1.3 1.0Actuarial gains (losses) on employee benefits 5.5 (8.8)

Total 6.8 (7.8)

RECOGNIZED IN OTHER COMPREHENSIVE INCOME

(in million €) 2011 2010

Net changes in fair value of interest rate swaps 3.9 3.1


Recognised in: Hedging reserve 3.9 3.1

The hedging reserve is discussed in detail in Note 7.3.

6. Items of the consolidated statement of financial position

6.1. Property, plant and equipment

(in million €) 2011 2010

High-voltage substations and transformers 1,580.9 1,515.8Lines and cables 1,256.1 1,202.6Land on which substations, lines and cables are located 98.9 93.0Facilities used for network operation 142.1 130.7Administrative buildings, furnishings and vehicles 72.5 68.9

Total property, plant and equipment 3,150.5 3,011.0


(in million €)

Land and

buildings

Machinery and

equipment

Furniture and

vehicles

Other tangible

assets

Assets under

construction Total

ACQUISITION VALUE

Balance at 1 January 2010 143.1 3,983.3 123.4 11.2 121.2 4,382.2

Acquired by business combinations 48.0 703.1 9.9 0.0 86.9 847.9

Other acquisition 5.5 70.6 3.4 0.1 113.6 193.2

Disposals (3.1) (25.1) (14.7) 0.0 0.0 (42.9)

Transfers from one heading to another 1.2 76.6 2.7 (2.4) (78.1) 0.0

BALANCE AT 31 DECEMBER 2010 194.7 4,808.5 124.7 8.9 243.6 5,380.4

Balance at 1 January 2011 194.7 4,808.5 124.7 8.9 243.6 5,380.4

Other acquisition 7.5 83.5 7.7 0.2 183.8 282.7

Disposals 0.0 (14.8) (2.2) 0.0 (7.8) (24.8)

Transfers from one heading to another 0.6 121.9 0.9 2.0 (125.5) (0.1)

Deconsolidation business combinations (0.2) (6.7) (0.8) 0.0 0.0 (7.7)

BALANCE AT 31 DECEMBER 2011 202.6 4,992.4 130.3 11.1 294.1 5,630.5

DEPRECIATION AND IMPAIRMENT

Balance at 1 January 2010 (21.9) (2,144.8) (115.6) (10.1) 0.0 (2,292.5)

Depreciation of the period (2.0) (107.0) (4.4) (0.2) 0.0 (113.6)

Withdrawals and disposals 2.4 19.7 14.6 0.0 0.0 36.7

Transfers from one heading to another 0.0 0.1 (3.0) 2.9 0.0 0.0

BALANCE AT 31 DECEMBER 2010 (21.5) (2,232.0) (108.4) (7.4) 0.0 (2,369.4)

Balance at 1 January 2011 (21.5) (2,232.0) (108.4) (7.4) 0.0 (2,369.4)

Depreciation of the period (2.6) (123.0) (5.5) (0.5) 0.0 (131.6)

Deconsolidation business combinations 0.1 5.3 0.8 0.0 0.0 6.2

Withdrawals and disposals 0.0 12.5 2.2 0.0 0.0 14.7

Transfers from one heading to another (0.1) 2.0 0.0 (1.8) 0.0 0.1

BALANCE AT 31 DECEMBER 2011 (24.1) (2,335.2) (110.9) (9.7) 0.0 (2,480.0)

CARRYING AMOUNT

At 1 January 2010 121.2 1,838.5 7.8 1.1 121.2 2,089.7

At 31 December 2010 173.1 2,576.5 16.2 1.4 243.6 3,011.0

At 1 January 2011 173.1 2,576.5 16.2 1.4 243.6 3,011.0

At 31 December 2011 178.5 2,657.3 19.3 1.4 294.1 3,150.5

The most important projects in Belgium are the upgrading and/or extension of substations (Bruegel-380 kv / Seraing-220 kv / Bruges-150 kv / Ruien-150 kv / Monceau-150 kv / Schaar-beek-150 kv / Zurenborg-150 kv / Wijgmaal-150 kv / Mache-len-150 kv and Gouy-150 kv), the construction of overhead lines (Harmignies-Monceau 70 kv and Tihange-Gramme 150 kv) and the construction of underground cables (Basse-Wavre-Louvain 36 kv / Zeebrugge-Blauwe Toren 150 kv / Brecht-Rijkevorsel 150 kv and Mechelen-Muizen 70 kv).

The most important onshore projects in Germany relate to the “South-West-Coupling-Line”, the “Uckermark Line”, the exten-sion of substation Wolmirstedt (€15,7 million), investments in the new transmission control center and the construction of a new 380/110 kv substation in North Freiberg.

The offshore capital expenditure in Germany includes the con-nection with the offshore wind farms, Baltic I and Baltic II, in the Baltic Sea.


Application of the IAS 23 Borrowing Costs standard had an im-pact of €5.3 million on the 2011 acquisition of the assets using an average interest rate of 4.22%

Other liabilities relating to new investments are described in Note 7.4.

(in million €) Goodwill SoftwareLicences/

Concessions Total

ACQUISITION VALUE

Balance at 1 January 2010 1,707.8 37.7 1.1 1,746.6

Obtained by business combinations 0.0 1.7 17.8 19.5

Acquired, others - own construction capitalised 0.0 8.3 2.6 10.9

Deconsolidation business combinations 0.0 (2.7) 0.0 (2.7)

BALANCE AT 31 DECEMBER 2010 1,707.8 45.0 21.5 1,774.3

Balance at 1 January 2011 1,707.8 45.0 21.5 1,774.3

Acquired, others - own construction capitalised 0.0 10.9 0.2 11.1

BALANCE AT 31 DECEMBER 2011 1,707.8 55.9 21.7 1,785.4

DEPRECIATION AND IMPAIRMENT

Balance at 1 January 2010 0.0 (16.2) (0.3) (16.5)

Deconsolidation business combinations 0.0 1.4 0.0 1.4

Depreciations 0.0 (7.2) (0.9) (8.1)

BALANCE AT 31 DECEMBER 2010 0.0 (22.0) (1.2) (23.2)

Balance at 1 January 2011 0.0 (22.0) (1.2) (23.2)

Depreciations 0.0 (7.4) (1.2) (8.6)

BALANCE AT 31 DECEMBER 2011 0.0 (29.4) (2.4) (31.8)

CARRYING AMOUNT

At 1 January 2010 1,707.8 21.5 0.8 1,730.1

At 31 December 2010 1,707.8 23.0 20.3 1,751.1

At 1 January 2011 1,707.8 23.0 20.3 1,751.1

At 31 December 2011 1,707.8 26.4 19.4 1,753.6

Software comprises both IT applications developed by the company for operating the grid and software for the Group’s normal business operations.

See Note 5.3.3 for the impact of depreciations in intangible as-sets on profit or loss.

The goodwill, amounting to €1,707.8 million, relates to the fol-lowing past transactions:

(in million €) 2011 2010

Acquisition of participations in Elia Asset by Elia System Operator - 2002 1,700.1 1,700.1Acquisition of participations in Elia Engineering by Elia Asset - 2004 7.7 7.7

Total 1,707.8 1,707.8

6.2. Intangible assets


IMPAIRMENT TEST FOR CASH-GENERATING UNIT ELIA

TRANSMISSION (BELGIUM) CONTAINING GOODWILL

In 2002, the acquisition of Elia Asset by the company for an amount of EUR 3,304.1 million resulted in a positive consolida-tion difference of €1,700.1 million. This positive consolidation difference is the result of the difference between acquisition value of this economic entity and carrying amount of the assets of Elia Asset. This difference consists of different elements such as the fact that (i) Elia was appointed as a TSO for a period of 20 years, (ii) Elia has unique resources in Belgium as Elia is the owner of the whole very-high-voltage network and is the owner of (or has the right to use) 94% of the high-voltage network, and hence only Elia is entitled to propose a development plan, and (iii) Elia has the TSO know-how. At the date of acquisition, the qualification or the quantification in euro of these elements could not be performed on an objective, transparent and reli-able basis and therefore, the difference could not be allocated to specific assets and was considered unallocated. Therefore, this difference has been recognised as goodwill since the first adoption of IFRS at 1 January 2005. The regulatory framework, in particular the offsetting in the tariffs of the decommissioning of fixed assets, applicable as from 2008 onwards, did not have an impact on this accounting treatment.The goodwill, as described above and the goodwill resulting from the acquisition of Elia Engineering in 2004 were allocated to the single cash-generating unit for the impairment test deter-mined, since the income and expenses were generated by one activity, specifically the ’regulated activity in Belgium’, which will also be considered as one cash-generating unit. As a result, the company assigned the carrying amount of the goodwill to one unit, the regulated activity in Belgium. Since 2004, annual impairment tests have been conducted and did not result in recognition of any impairment losses. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually as the higher of their fair value less cost to sell or value in use, applying the assumptions hereafter and using the following valuation methods.

The impairment test was conducted by an independent expert and was based on the following valuation methods and apply-ing the following assumptions (according to fair value less cost to sell methodology):

1. discounting of future cash flows and using the “Regulated Asset Base” or “RAB” as the basis for the estimation of the terminal value;

2. discounting of future dividends;3. comparison between the previously mentioned impair-

ment methods and those used by some comparable West European listed companies, such as Red Electrica Es-paña, Enagas, Terna, Snam Rete Gas, National Grid and Fluxys;

4. market valuation based on the company’s share price.

The future cash flows and future dividend methods are based on Elia’s 2010-2020 business plan.The key assumptions used for this valuation are

• risk-free rate of 4.66%, based on Belgian 10-year bond rates;• cost of debt of 5.20%;• tax rate of 33.99%;• market risk premium of 6.00%;• perpetual growth rate of 1.25%.

The independent analyses did not result in recognizing an impairment loss on goodwill in 2011. Based on current know-ledge, reasonable changes in key assumptions (including dis-count rate and OLO) would not generate material impairments for the cash-generating unit Elia Transmission (Belgium).

6.3. Non-current trade and other receivables

(in million €) 2011 2010

Tax receivables 118.4 111.9Other amounts receivable 1.8 2.8

Total 120.2 114.7

Long-term receivables consist of the basic amount of tax re-ceivable (€93.8 million) and the cumulative moratorium interest that the company could recover in the future. A detailed de-scription can be found in Note 5.5.

6.4. Equity-accounted investees

INVESTMENTS IN ASSOCIATED COMPANIES

(in million €) 2011 2010

At 1 January 29.2 9.4Acquisition of subsidiary 0.0 21.1Sale of subsidiary 0.0 (0.1)Share of (loss)/profit 1.4 (1.2)

At 31 December 30.6 29.2


Summary of financial data on equity-accounted investees, not corrected for the group’s ownership percentage:

Name Assets Liabilities Revenues Profit/(loss) Interest held %

2010

H.G.R.T. 31.8 0.1 0.0 2.6 24.5APX-Endex 937.0 902.7 30.7 2.7 20.0Coreso 2.8 1.5 3.5 0.1 28.5

TOTAL 971.6 904.3 34.2 5.4 -

2011

H.G.R.T. 33.3 0.1 0.0 2.6 24.5APX-Endex 915.4 876.1 34.7 4.5 20.0Coreso 2.8 1.4 4.8 0.1 28.5

TOTAL 951.5 877.6 39.5 7.2 -

The summary of financial data of joint ventures can be found in Note 4.2 Segment 50Hertz Transmission (Germany). All companies related to the 50Hertz Transmission segment are joint ventures. There are no joint ventures in other segments.

6.5. Other financial assets

(in million €) 2011 2010

Immediately claimable deposits 13.6 13.4Others 71.3 66.1

Total 84.9 79.5

‘Immediately claimable deposits’ classified at fair value for which the changes in fair value are recognised in OCI. The risk profile of these investments is discussed in Note 7.3.

The item ‘Others’ is mainly related to a recoverable amount of a portion of the pension liability - see Note 6.12.

6.6. Deferred tax assets and liabilities

RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES

(in million €) Assets Liabilities

2011 2010 2011 2010

Property, plant and equipment (7.6) (2.9) (63.4) (61.1)Intangible fixed assets (8.2) (7.4) 0.0 0.0Inventories (0.9) (1.1) 0.0 0.0Interest-bearing loans and other non-current financial liabilities 11.4 9.8 0.0 0.0Employee benefits 34.2 32.5 1.1 0.9Provisions 0.1 0.1 2.0 (2.1)Accrued charges and deferred income 0.0 0.0 (0.3) 0.0Other items (23.8) (22.3) (7.0) (31.0)

Net tax asset / (liability) 5.2 8.7 (67.6) (93.3)


CHANGES IN DEFERRED TAX ASSETS AND LIABILITIES RESULTING FROM MOVEMENTS

IN TEMPORARY DIFFERENCES DURING THE FINANCIAL YEAR

(in million €) 1 january

Recognised in income statement

Recognised in other

comprehensive income

Acquired by business

combinations 31 december

2010

Tangible fixed assets 0.5 (9.6) 0.0 (55.0) (64.1)Intangible fixed assets (7.1) (0.3) 0.0 0.0 (7.4)Other financial assets 0.0 0.0 0.0 0.0 0.0Inventories (1.0) (0.1) 0.0 0.0 (1.1)Interest bearing loans and other long term financial liabilities 8.6 0.2 1.1 0.0 9.9Employee benefits 47.7 (6.3) (8.9) 0.8 33.3Provisions 0.1 (0.6) 0.0 (1.5) (2.0)Other items (30.6) (0.7) 0.0 (21.9) (53.2)

TOTAL 18.2 (17.4) (7.8) (77.6) (84.6)

2011

Tangible fixed assets (64.1) (7.1) 0.0 0.0 (71.1)Intangible fixed assets (7.4) (0.7) 0.0 0.0 (8.2)Inventories (1.1) 0.2 0.0 0.0 (0.9)Interest bearing loans and other long term financial liabilities 9.9 0.2 1.3 0.0 11.4Employee benefits 33.3 (3.5) 5.5 0.0 35.3Provisions (2.0) 4.1 0.0 0.0 2.1Accruals and deferred income 0.0 (0.2) 0.0 0.0 (0.2)Other items (53.2) 22.4 0.0 0.0 (30.8)

TOTAL (84.6) 15.4 6.8 0.0 (62.4)

EFFECT OF CHANGES IN TEMPORARY DIFFERENCES

DURING THE FINANCIAL YEAR

Changes in temporary differences during the year are reflected in profit or loss as income tax expense (also see Note 5.5).

UNRECOGNISED DEFERRED TAX ASSETS

For the following items no deferred income taxes are recog-nised in the balance sheet:

(in million €) 2011 2010

Notional interest deduction 122.8 122.3

Not recognised tax asset / (liability) 122.8 122.3

The Belgian government has announced late 2011 that the sys-tem of notional interest deduction will undergo some changes. The amount that was not used from the past remains recovera-ble from future tax profits. The new rules regarding the method of release for a given year haven’t been finalized. Therefore the Group has opted not to recognize the deferred tax asset con-sistent with last year.

The Group profit or loss account reserve includes €44.6 million of distributable reserves retained by subsidiaries and equity-accounted entities, intended to be distributed as dividend to the Group in the future.

6.7. Inventories

(in million €) 2011 2010

Raw materials and consumables 28.2 25.9Write-off (11.9) (11.4)

Total 16.3 14.5

The warehouse primarily stores replacement and spare parts for maintenance and repair work on the Group’s high-voltage substations, overhead lines and underground cables.


6.8. Current trade and other receivables

(in million €) 2011 2010

Projects for third parties 4.4 4.0Other trade receivables and advance payments 196.2 287.2Levies 16.2 0.0VAT, other taxes 40.4 125.2Other 24.4 97.3Deferred charges and accrued income 5.2 9.4

Total 286.8 523.1

The decrease compared to last year is mainly due to decrease in outstanding customers and the decrease in VAT. The item ‘Other’ consists of EEG related items.

The Group’s exposure to credit and currency risks, and impair-ment losses related to trade and other receivables, are shown in Note 7.3.

DOUBTFUL AMOUNTS

(in million €) 2011 2010

Not past due 184.7 254.0Past due 0-30 days 8.9 11.9Past due 31-60 days 0.8 (5.8)Past due 61 - one year 2.3 26.1More than one year (0.7) 0.7Total (excl. Impairment) 196.0 286.9

Doubtful amounts 21.9 15.2Amounts write offs (21.7) (14.9)

Total 196.2 287.2

6.9. Cash and cash equivalents

(in million €) 2011 2010

Balance at bank 34.4 128.7Call deposits 351.2 237.2

Total 385.6 365.9

Short-term deposits are invested for periods that vary from a few days and a few weeks to several months, depending on immediate cash requirements, and report interest in accord-ance with the interest rates for the short-term deposits. The interest rate of interest-bearing investments at the end of the reporting period varies from 0.15% to 2.00%. An amount of €6 million is limited in use as result of contractual conditions related to a subsidy granted by the European community.

Bank-account balances earn interest in line with the variable rates of interest on the basis of daily bank deposit interest. The Group’s interest rate risk and the sensitivity analysis for finan-cial assets and liabilities are discussed in Note 7.3.

6.10. Shareholders’ equity

SHARE CAPITAL AND SHARE PREMIUM

Number of shares Ordinary shares2011 2010

Outstanding on 1January 60,355,217 48,270,255Issued against cash payment 0 12,084,962

Outstanding on 31 December - paid 60,355,217 60,355,217

In January 2010 the Elia Group gave its personnel the oppor-tunity to subscribe to an Elia System Operator SA capital in-crease (tax tranche) which resulted in a €0.3 million increase in the share capital and the number of shares outstanding rose by 13,919 shares without nominal value.

Elia launched a second capital increase for a nominal amount of €299.4 million, between 8 and 18 June 2010, with a view to fi-nancing the acquisition of a 60% stake in German grid operator 50Hertz Transmission, which was fully subscribed. During the subscription period with preferential rights for existing share-holders, whereby for every four preferential rights they could take up one new share at a price of €24.80, 91.84% of the shares available (11,085,617 of the 12,071,043 new shares on offer) were subscribed. On 22 June 2010, the other 3,941,704 rights were offered to institutional investors in a private place-ment. All remaining preferential rights were sold as scrips for €0.20 per scrip, bringing the share purchase price to €25.60. The new shares were listed for the first time on 25 June 2010.

The capital of Elia System Operator SA increased from €1,207.3 million to €1,500.6 million in 2010 taking into account the costs for capital increases.

RESERVES

In accordance with Belgian legislation, 5% of the parent com-pany’s statutory net profit must be transferred to the legal re-serve each year until the legal reserve represents 10% of the capital. Within the tariff mechanism, Elia must reserve in shareholders’ equity the realised surplus passed on in the tariffs as a result of decommissioning fixed assets (decrease in Regulated Asset Base). In 2010, this amounted to €16.2 million. The General Meeting of 10 May 2011 decided to include that amount in the legal reserve.


As per 31 December 2011 the Group’s legal reserve amounts to €67.6 million. This reserve can only be paid to shareholders in the event of liquidation.

The Board of Directors can propose the payment of a dividend to shareholders up to a maximum of the available reserves and the profit carried forward from previous financial years of the parent company, including the profit of the financial year ended 31 December 2011. Shareholders must approve the dividend payment at the Annual General Meeting of Shareholders. HEDGING RESERVE

The hedging reserve comprises the effective portion of the cumulative net change in fair value of cash-flow hedging in-struments in respect of hedged transactions that have not yet occurred.

DIVIDEND

After the balance sheet date, the Board of Directors put for-ward the dividend proposal indicated below.

(in €) 2011 2010

Per ordinary share entitled to dividend 1.47 1.40

At the General Meeting of Shareholders on 10 May 2011, the Board of Directors approved payment of a gross dividend of €1.40 per share, which will yield a net dividend of €1.05 per share or a net dividend of €1.19 per share with a VVPR strip, yielding a total amount of €84.5 million.

The Board of Directors’ meeting of 28 February 2012 proposed a gross dividend of €1.47 per share. This dividend is subject to approval by shareholders at the Annual General Meeting on 15 May 2012 and was not included as a liability in the consolidated financial statements of the Group. The total dividend will be calculated on the number of shares outstanding on 28 February 2012 which correspond to a total of €88.7 million.

The net profit includes also the realised surplus as a result of decommissioning of fixed assets of €16.1 million to be booked in equity. The Board of Directors’ meeting of 28 February 2012 decided to suggest to the Annual General Meeting that this amount be allocated to the legal reserve. The amount has not yet been posted in the reserve on 31 December 2011.

6.11. Interest-bearing loans and borrowings

A general overview of loans and accrued interest is given below:

(in million €) 2011 2010

Long term borrowings 2,850.2 2,848.9

Accrued Interests 68.3 68.4Subtotal non-current borrowings 2,918.5 2,917.3

Short term borrowings 0.0 0.1Accrued Interests 0.0 0.0Subtotal current borrowings 0.0 0.1

Total 2,918.5 2,917.4

Information concerning the terms and conditions of the outstanding interest-bearing loans and borrowings is given below:

(in million €) Maturity Amount

Interest rate before

hedging

Interest rate after hedging

Current proportion of

the interest (%)

% % Fixed Variable

Shareholders Loan tranche A 2022 495.8 2.76 4.99 79.83 20.17Eurobond issues 2004 / 10 years 2014 499.4 4.75 4.75 100.00 0.00Eurobond issues 2004 / 15 years 2019 498.9 5.25 5.25 100.00 0.00Eurobond issues 2009 / 7 years 2016 498.7 5.63 5.63 100.00 0.00Eurobond issues 2009 / 4 years 2013 499.6 4.50 4.50 100.00 0.00Eurobond issues 2010 / 10 years 2020 297.8 3.88 3.88 100.00 0.00European Investment Bank 2016 40.0 4.27 4.27 100.00 0.00European Investment Bank 2017 20.0 4.79 4.79 100.00 0.00

TOTAL - 2,850.2 - - 96.72 3.28


Information concerning the contractual maturities of the Group’s interest-bearing loans and borrowings (current and non-current) is given below:

(in million €)Face value

Less than 1

year1-2

years3-5

years

Morethan 5 years

Shareholders Loan tranche A

495.8 0.0 0.0 0.0 495.8

Eurobond issues 2,300.0 0.0 500.0 1,000.0 800.0European Investment Bank

40.0 0.0 0.0 40.0 0.0

European Investment Bank

20.0 0.0 0.0 20.0 0.0

Total 2,855.8 0.0 500.0 1,060.0 1,295.8

6.12. Employee benefits

In Belgium collective agreements regulate the rights of com-pany employees in the electricity and gas industries.These agreements provides so called “pension supplements” based on the annual salary and the career within the company of the employee. If the employee deceases, the supplements are partially revertible to the heritor (wife/orphan). The benefits granted are linked to Elia’s operating result. There is neither an external pension fund nor group insurance for these liabilities, which means that no reserves are constituted with third par-ties. The obligations are qualified as a defined benefit.The collective agreement determines that active staff hired from 1 January 1993 to 31 December 2001 and all managerial/executive staff hired prior to 1 May 1999 are granted the same guarantees via a defined-benefit pension scheme. Obligations under these defined-benefit pension plans are funded through a number of pension funds for the electricity and gas industries and through insurance companies.

‘Salary scale’ personnel recruited after 1 June 2002 and man-agement staff recruited after 1 May 1999 are covered by de-fined-contribution pension plans. For payments made after 1 January 2004, the law requires an average annual return over the career of at least 3.25% for the employer’s contributions and at least 3.75% for employees’ contributions, with any defi-cit being covered by the employer. Given that the actual return on plan assets has been above the guaranteed minimum re-turn, no provision has been established to cover any deficit.

Elia Transmission Belgium also has early-retirement schemes and other post-employment benefits such as reimbursement of medical expenses and price subsidies, as well as other long-term benefits (seniority payments). Not all of these benefits are funded.

50Hertz Transmission (Germany) has pension schemes and early-retirement plans, mainly based on collective bargaining or works council agreements. The level of benefits or contribu-tion to be provided depends on the salary and years of service of the participants.

The total net liability for employee benefits obligations are as follows:

(in million €) 2011 2010

Defined benefit plans 53.7 52.6Other employee benefits 53.8 50.2

Subtotal 107.5 102.8

Others (restructuring) 0.6 1.0

Total provisions for employee benefits 108.1 103.8


In following tables the detail is shown of the outstanding provision for employee benefits, with the split between pension cost and non-pension costs. In this annual report the same split has been made for the 2010 figures. In last year’s annual report this split was not yet disclosed.

DEFINED BENEFIT PLAN FOR COMPLEMENTARY PENSIONS (in million €) 2011 2010

MOVEMENT IN THE PRESENT VALUE OF THE DEFINED BENEFIT OBLIGATIONS

Defined benefit obligation at the beginning of the period (172,3) (180,3)Acquired by business combinations 0,0 (11,9)Service Cost (4,3) (4,0)Interest Cost (7,4) (7,5)Contributions from plan participants (0,5) (0,6)Gains (losses) on changes of plans 0,0 0,0Gains (losses) on curtailments or settlements of plans 0,0 0,0Special termination benefits 0,0 0,0Actuarial gains (losses) (7,6) 17,0Benefits paid 15,0 14,9

DEFINED BENEFIT OBLIGATION AT THE END OF THE PERIOD (177,1) (172,3)

MOVEMENT IN THE FAIR VALUE OF PLAN ASSETS

Fair value of plan assets at beginning of the period 119,7 94,4Acquired by business combinations 0,0 7,1Expected (not actual) return on plan assets 5,6 5,1Company contributions 17,5 19,5Plan participants contributions 1,0 1,0Gains (losses) on curtailments or settlements 0,0 0,0Actuarial gains (losses) (5,5) 7,4Benefits paid (14,9) (14,8)

FAIR VALUE OF PLAN ASSETS AT END OF PERIOD 123,4 119,7

FUNDED STATUS

FUNDED STATUS OF THE PLAN (53.7) (52.6)

EXPENSE RECOGNISED IN PROFIT OR LOSS

Service Cost (4,3) (4,0)Interest Cost (7,4) (7,5)Plan participants contributions (0,1) (0,1)Expected return on plan assets 5,6 5,1Actuarial gains (losses) 0,0 0,1Gains (losses) on changes of plans 0,0 0,0Special termination benefits 0,0 0,0

TOTAL NET PERIODIC BENEFIT COST (6,2) (6,4)


POST-EMPLOYMENT BENEFITS OTHER THAN PENSIONS

(in million €) 2011 2010

MOVEMENT IN THE PRESENT VALUE OF THE DEFINED BENEFIT OBLIGATIONS

Defined benefit obligation at the beginning of the period (54,8) (56,7)Acquired by business combinations 0,0 (5,0)Service Cost (2,1) (1,8)Interest Cost (2,1) (2,5)Contributions from plan participants 0,0 0,0

Gains (losses) on changes of plans 0,0 0,0Gains (losses) on curtailments or settlements of plans 0,0 0,0Special termination benefits (1,9) 1,5Actuarial gains (losses) (4,0) 5,3Benefits paid 4,7 4,4

DEFINED BENEFIT OBLIGATION AT THE END OF THE PERIOD (60,2) (54,8)

MOVEMENT IN THE FAIR VALUE OF PLAN ASSETS

Fair value of plan assets at beginning of the period 4,6 0,8Acquired by business combinations 0,0 3,4Expected (not actual) return on plan assets 0,0 0,0Company contributions 4,6 4,1Plan participants contributions 0,9 0,1Gains (losses) on curtailments or settlements 0,0 0,0Actuarial gains (losses) (0,3) (0,1)Benefits paid (3,4) (3,8)

FAIR VALUE OF PLAN ASSETS AT END OF PERIOD 6,4 4,6

FUNDED STATUS

FUNDED STATUS OF THE PLAN (53,8) (50,2)

EXPENSE RECOGNISED IN PROFIT OR LOSS

Service Cost (2,1) (1,8)Interest Cost (2,1) (2,5)Plan participants contributions 0,9 0,1Expected return on plan assets 0,0 0,0Actuarial gains (losses) (1,3) 0,0Gains (losses) on changes of plans 0,0 0,0Special termination benefits (1,9) 1,5Gains (losses) on curtailments or settlements 0,0 0,0

TOTAL NET PERIODIC BENEFIT COST (6,5) (2,7)


ACTUARIAL ASSUMPTIONS

Pension plans (%) 2011 2010

Elia Transmission (Belgium)

Inflation rate 2.00 2.00Discount rate at 31 December (not including inflation) 2.00 2.36Future salary increases (not including inflation) 2.00 2.00Expected return on plan assets (not including inflation) 4.50 5.25Future pension increases (not including inflation) 0.00 0.00Medical cost trend rate 1.00 1.00

50Hz Transmission (Germany)

Inflation rate 2.50 1.75Discount rate at 31 December (not including inflation) 2.10 3.25Future salary increases (not including inflation) 3.50 2.50Expected return on plan assets (not including inflation) 5.00 5.00Future pension increases (not including inflation)

1.00 / 2.50 / 3.00 / p.a.

1.00 / 1.75 / 2.00 / p.a.

Medical cost trend rate n/a n/a

The expected return on plan assets is determined by asset cat-egory, with each asset category having its own estimated rate of return.

SENSITIVITY ANALYSIS

The impact of a change of 1% on medical costs is as follows:

(in million €)

Increase of 1%

Decrease of 1%

Aggregate of the service and interest costs (0.2) 0.2Defined benefit obligation (2.9) 2.3

The impact of increase of 1% on discount rate and inflation medical costs is as follows:

(in million €) Discount rate Inflation

Defined benefit obligation 16.8 (17.4)

DETAILED SUMMARY OF PLAN ASSETS

(%) 2011 2010

Equity securities 23.28 23.78Bonds 55.90 54.34Property 5.37 5.54Other (cash included) 15.45 16.34

Total plan assets 100.00 100.00

ACTUARIAL GAINS AND LOSSES RECOGNISED

IN OTHER COMPREHENSIVE INCOME

(in million €) 2011 2010

Cumulative amount at 1 January 10.4 (15.7)Recognised in the period (10.8) 26.1

Cumulative amount at 31 December (0.4) 10.4

The following table presents the historical overview of the key indicators of the last five years :

(in million €) 2011 2010 2009 2008 2007

Defined benefit obligation (237.4) (228.4) (236.9) (240.0) (258.9)Fair value of plan assets 128.7 124.3 95.2 98.5 116.9(Surplus) / Deficit (108.7) (104.1) (141.7) (141.5) (142.0)

Recoverable amount in future tariffs

In accordance with a study report issued by the CREG, it is virtually certain that some of the liability related to the pension scheme total of €70.1 million will be accepted by the CREG as reasonable expenses and will therefore be passed on in future tariffs. Since this amount can be recovered by Elia from third parties, in accordance with IFRS principles (IAS 19), it will be classified as an asset item. The amount is included under other financial assets (see Note 6.5).


6.13. Provisions

(in million €) Environment LitigationRights use

of lines Total

BALANCE AT 1 JANUARY 2010 13.9 4.8 0.0 18.7

Acquired by business combinations 2.1 8.3 39.8 50.2During financial year: increase in provisions 3.8 20.4 1.5 25.7During financial year: utilization provisions (0.4) (2.2) (0.4) (3.0)During financial year: reversals of provisions 0.0 (3.4) 0.0 (3.4)

BALANCE AT 31 DECEMBER 2010 19.4 27.9 40.9 88.2

Long-term portion 1.9 7.3 35.4 44.6Short-term portion 17.5 20.6 5.5 43.6

BALANCE AT 1 JANUARY 2011 19.4 27.9 40.9 88.2

During financial year: increase in provisions 1.7 4.8 2.7 9.2During financial year: utilization provisions (1.8) (0.3) (2.1) (4.2)During financial year: reversals of provisions (0.3) (14.8) 0.0 (15.1)

BALANCE AT 31 DECEMBER 2011 19.0 17.6 41.5 78.1

Long-term portion 7.7 9.5 36.5 53.7Short-term portion 11.3 8.2 4.9 24.4

The changes in provisions for environment are mainly related to further soil research and remediation on certain sites in Flan-ders and to the results of the preventive screening and detailed analysis of sites in the Brussels-Capital Region and the Wal-loon Region. The estimates are based on the appraisal of an external expert bearing in mind the BATNEEC (Best Available Techniques Not Entailing Excessive Costs) principle.

The provision for litigation has been established to cover po-tential payment as a result of cases in which legal proceedings have been instituted against Elia by a third party or in which Elia is involved in a legal dispute.

The provision ‘Rights of use of land’ consists of potential pay-ment to landowners for easement rights related to overhead lines built in the past by the former owners of 50Hertz Trans-mission.

These estimates are based on the value of claims filed or on the estimated amount of the risk exposure.The expected timing of the related cash outflow depends on the progress and duration of the associated procedures.

The changes in provisions are discussed in Note 5.3.3.

6.14. Other non-current liabilities

(in million €) 2011 2010

Investments grants 8.1 7.0Other 12.3 13.6

Total 20.4 20.6

6.15. Trade and other payables

TRADE AND OTHER PAYABLES

(in million €) 2011 2010

Trade debts 223.1 298.1VAT, other taxes 4.5 12.7Remuneration and social security 24.3 24.3Dividend 3.3 3.1Levies 79.4 75.3Other 31.5 35.2

Total 366.1 448.7

The decrease is mainly related to the decrease of ‘unpaid in-voices to suppliers’.


6.16. Accruals and deferred income

(in million €) 2011 2010

Accruals and deferred income 89.9 61.1Balance settlement mechanism Belgium 15.2 49.9Balance settlement mechanism Germany 71.7 68.3

Total other current liabilities 176.8 179.3

The following table presents overview of 2011

(in million €) Belgium Germany

To be refunded to the tariffs of current period 0.0 9.1Balance period prior years to be refunded into the tariffs - period to be determined (9.4) 62.6

Discount future tariffs (9.4) 71.7

Moratorium interest on income tax 24.6 0.0

Balance settlement mechanism 15.2 71.7

7. Miscellaneous

7.1. Effect of new acquisition

ACQUISITION OF 10% OF ATLANTIC GRID IN 2011

Description of the deal

On 22 July 2011, Eurogrid International, in which Elia has a 60% stake, joined partners Google, Marubeni, Good Energies and Atlantic Grid Investments (AGI) in the Atlantic Wind Connec-tion project. Atlantic Wind Connection aims to develop the first high-voltage DC offshore grid in the USA, which should make it possible to integrate up to 7,000 MW of offshore wind power into the grids of New Jersey, Delaware, Maryland and Virginia. Eurogrid International acquired a strategic minority stake of 10% in the first segment of the project and a minority stake of 5% in the four other segments. Eurogrid International acquired the participation via its newly established, wholly owned sub-sidiary E-Offshore A LLC. Elia’s stake was €1.2 million (part in consolidated figures 60% or €0.8mio).

Contribution to the result of the Group

Eurogrid International holds through its subsidiaries a stake of 10% in Atlantic Grid A.

ACQUISITION OF 50HERTZ TRANSMISSION IN 2010

Effect of acquisition in 2011

In 2011 no further modifications are needed for the 2010 PPA.

Description of the deal

On 12 March 2010, Elia and IFM announced the acquisition of 50Hertz from the Vattenfall Group. This was completed on 19 May 2010.It comprised all shares held by 50Hertz Transmission, includ-ing the wholly owned subsidiary 50Hertz Offshore and its two minority shareholdings EMCC (20.0%) and CAO (12.5%).With a view to this acquisition, Elia and IFM set up the holding company Eurogrid International SCRL/CVBA. In total, 60% of Eurogrid International’s shares are owned by Elia System Op-erator NV/SA and Elia Asset NV/SA (the latter holding a single share), and 40% of them are held by IFM Luxembourg.The shares held by 50Hertz Transmission were acquired via Eurogrid GmbH, a private German limited-liability company es-tablished on 2 March 2010. Eurogrid GmbH is a wholly owned subsidiary of Eurogrid International.The acquisition price for all shares held by 50Hertz was €464.6 million. Via Eurogrid GmbH, Elia paid €278.8 million for a 60% stake. Following the shareholders’ agreement with IFM, the 50Hertz figures are included in the Elia figures at a rate of 60% using the proportionate consolidation method.


Total (in million €)

Pre-acquisition carrying amounts

Fair value adjustments

Recognised values on acquisition

Intangible assets 32.4 0.0 32.4Property, plant and equipment 1,413.8 (8.6) 1,405.2Other financial assets 0.3 0.0 0.3Inventories 2.9 0.0 2.9Trade and other receivables 222.6 0.0 222.6Deferred tax assets 0.0 2.5 2.5Cash and cash equivalents 0.0 0.0 0.0Other current assets 88.2 0.0 88.2Employee benefits (10.8) 0.0 (10.8)Provisions (84.0) 0.0 (84.0)Loans and borrowings 0.0 0.0 0.0Trade and other payables (402.6) 0.0 (402.6)Deferred tax liabilities (131.8) 0.0 (131.8)Other current liabilities (182.8) 0.0 (182.8)

Net identifiable assets 948.2 (6.1) 942.1

Gain on bargain purchase - - (477.5)

Consideration paid - - 464.6

Cash acquired - - 0.0

NEW BUSINESS COMBINATION - - 464.6

Gain on bargain purchase (2010)

Owing to the acquisition of 50Hertz Transmission, the corre-sponding purchase price has to be recorded in the financial statement. Under IFRS an allocation of acquired goodwill or a gain on bargain purchase needs to be made by executing a Purchase Price Allocation or ‘PPA’. In a PPA, all separately identifiable assets and (contingent) liabilities are measured at fair value. This PPA exercise was carried out for Eurogrid GmbH (German financing and acquisition structure above 50Hertz Transmis-sion), whereby the value of the equity of 50Hertz was deter-mined to €942,1 million, and finally resulted in a gain on bargain purchase of €477.5 million of which 60% is reflected in the in-come statement of the Group.

Gain on bargain purchase (in million €) 100% 60%

Parent's company value of investment (1) 464.6 278.8

Equity 50Hertz per 31/05/2010 (2) 942.1 565.3

Gain on bargain purchase at 31/12/2010 = [(2)-(1)] 477.5 286.5

Acquisition costs 50Hertz (13.3) (8.0)

Total non-recurring items 464.2 278.5

This amount is compliant with the estimation of the fair value of the net assets of 50Hertz to be within a range of €890.3 million and €984.1 million. This fair value exercise was performed with the assistance of an independent valuation expert based on three methodologies and applying the following assumptions:

• discounting of future free cash flows (“FCF”) using the “Reg-ulated Asset Base” or “RAB” as basis for the estimation of the terminal value FCF (“DCF method”) due to the nature of the business the net cash flow can be negative due to expected investment plans;

• discounting of future expected dividends as estimated by the Company (“DDM method”).

These analyses are based on financial prospects (business plan) prepared by management (not certified by the inde-pendent expert) for the period 2010 -2028 taking into account the current regulatory framework as described under chapter ‘Regulatory framework and tariffs’.The business plan takes into account the expected positive impact of• the implementation and entry into force as of 1 January

2010 of the AusgleichMechV compensation mechanism for the compensation of public services obligations in respect of the promotion of renewable energy sources (EEG), which allows to treat certain costs related to this mechanism as pass through costs and to include those costs in the tariffs;

• an expected positive impact of the implementation of the “Korridor model” as of 1 January 2010, providing for a new treatment of the major part of system services (regulat-ing power, compensation of network losses, re-dispatch), which allows to include most of these costs in the revenue cap;

• a further optimisation of the costs relating to various sup-port services (IT, insurance, cash pooling, consulting and various support services).


The future cash flows and future dividends are based on the business plan prepared by the management during the first quarter of 2010 applying the current German tariff mecha-nism for the period 2010-2028 as and using the following as-sumptions: • period 2010-2018 mainly driven the management’s invest-

ment schedule which includes more capital expenditures than in the past years;

• for the period 2019 -2028 driven by Elia’s and IFM’s invest-ment schedule at a level which is closer to or even below the operating cash flow. The net RAB is nearly on a constant level in the years after 2021. The terminal value is based on the net RAB value which is assumed to be in a steady state in 2028. Basic assumptions are therefore that depreciation expenses balance capital expenditure and that there is no change in working capital.

As the activity as ‘TSO’ is an activity with a long term perspec-tive, the cash flows have been projected over the period 2010-2028. The applied discount rate of 5.7% (cost of equity 7.2% and the cost of debt of 5.1%) is in line with the WACC that results from applying the after-tax cost of equity and cost of debt rates set by the regulator BNetzA to 50Hertz (which amounts to 5.8%) and also with the WACC (weighted costs of capital) used by financial analysts for peer group companies. For purposes of the DDM method a pay-out ratio of 100% of the profit under German GAAP was assumed (which is not binding for the actual future pay-out ratio), market approach on the basis of prospective EBIT and EBITDA multiples (“Market approach”) and those used by some comparable West European listed companies, such as Red Electrica corpororation SA, Enagas, Terna, Fluxys, Snam Rete Gas, National Grid and Redes En-ergiticas Nacionais S.A.

• The market approach method was primarily used to vali-date the results of the DCF and DDM valuation methods.

The Company agrees with the conclusions of its independ-ent expert to consider that the DCF method better reflects the steady state of the asset base with regard to terminal value. In particular, the P/E multiple was not retained due to a lack of comparability to peers as a result of (amongst other things) different regulatory regimes, depreciation methods and non-regulated income. In addition, due to 50Hertz’ investment schedule and one-off costs, forecasted net income, EBIT and EBITDA differ significantly and especially net income shows a high fluctuation from year to year, resulting in a wide overall value range which limits the relevance of the market approach method. As such, the preliminary range of fair value of the net assets is consistent with the valuation range resulting from the DCF method.

The purchase price paid for the acquisition of 50Hertz results from negotiations between the parties following a competitive sale process. Vattenfall has released no information as to the reasons why 50Hertz has been sold with a bargain on purchase price. However, as stated in its annual report 2009, Vattenfall’s

debt position has increased over the past few years, while its cash flow decreased, and Vattenfall AB announced in that con-text that it intended to improve profitability through concrete measures, amongst other things by re-prioritising and reduc-ing its investments and divesting non-core assets. In addition, Vattenfall is subject to certain unbundling requirements under the Third Energy Package.

7.2. Deconsolidation of Belpex NV/SA

In October 2010 Elia sold its whole participation of 60% in its subsidiary Belpex NV/SA, the Belgian power exchange. The figures of Belpex NV/SA were fully consolidated in the figures at 31 December 2009. Elia and the Dutch transmission system operator TenneT BV both sold their shares in Belpex to APX-ENDEX Holding BV, the Dutch power exchange, as part of the integration of power exchanges in the North-Western Europe region.

EFFECT OF DISPOSAL OF BELPEX NV/SA

ON THE FINANCIAL POSITION OF THE GROUP

Total (in million €) 2010

Intangible assets (1.3)Trade and other receivables (9.3)Cash and cash equivalents (0.1)Non controlling interests 2.0Loans and borrowings 5.0Trade and other payables 1.9Other current liabilities 0.1

Net identifiable assets and liabilities (1.7)

Consideration received 11.4Cash and cash equivalents disposed of (0.1)

Net cash inflow 11.3

7.3. Financial risk and derivative management

PRINCIPLES OF FINANCIAL RISK MANAGEMENT

The Group aims to identify each risk and set out strategies to control the economic impact on the Group’s results. The Internal Audit & Risk Management Department defines the risk management strategy, monitors the risk analysis and re-ports to the management and the Audit Committee. The finan-cial risk policy is implemented by determining appropriate poli-cies and setting up effective control and reporting procedures.Selected derivative hedging instruments are used depending on the assessment of risk involved. Derivatives are used ex-clusively as hedging instruments. The regulatory framework in which the Group operates considerably restricts their effects on profit or loss (see the ‘Regulatory framework and tariffs’ chapter). The major impact of increased interest rates, credit


risk, etc. can be settled in the tariffs, in accordance with the applicable legislation.

CREDIT RISK

Credit risk encompasses all forms of counterparty exposure, i.e. where counterparties may default on their obligations to the company in relation to lending, hedging, settlement and other financial activities. The company is exposed to credit risk from its operating activities and treasury activities. In respect of its operating activities, the Group has a credit policy in place, which takes into account the risk profiles of the customers. The exposure to credit risk is monitored on an ongoing basis, re-sulting in a request to deliver bank guaranties from the coun-terparty for some major contracts.

At the end of the reporting period there were no significant concentrations of credit risks. The maximum credit risk is the carrying amount of each financial asset, including derivative fi-nancial instruments.

(in million €) 2011 2010

Loans and receivables 196.2 287.0Cash and cash equivalents 385,6 366.0Balance at bank 13,6 13.4

Interest rate swaps used for hedging

Assets 0.0 0.0Liabilities (35.2) (31.4)

Total 560,2 635.0

The movement in the allowance for impairment in respect of loans and receivables during the year was as follows:

(in million €) Doubtful debtorsImpairment

lossesRemaining

balance

BALANCE AT 1 JANUARY 2010 3.7 (3.4) 0.3

Changes during the year 11.5 (11.5) 0.0

BALANCE AT 31 DECEMBER 2010 15.2 (14.9) 0.3

BALANCE AT 1 JANUARY 2011 15.2 (14.9) 0.3

Changes during the year 6.8 (6.8) 0.0

BALANCE AT 31 DECEMBER 2011 22.0 (21.7) 0.3

Trade and other receivables are recorded without taking into account receivables which have been impaired. The impair-ment loss recognised in 2011 is mainly related to a settlement of receivables, which finally could be recovered in the future tariffs.

CURRENCY RISK

The Group is not exposed to any significant currency risk, ei-ther from transactions or from exchanging foreign currencies into euro, since it has only limited foreign investments or activi-ties and less than 1% of its costs are expressed in currencies other than the euro.

LIQUIDITY RISK

Liquidity risk is the risk that the Group may not be able to meet its financial obligations. The Group limits this risk by constantly monitoring cash flows and ensuring that there are always suf-ficient credit line facilities available.

The Group’s objective is to maintain a balance between con-tinuity of funding and flexibility through the use of bank loans, confirmed and unconfirmed credit facilities, commercial paper program, etc. For medium- to long-term funding, the Group uses bonds. The maturity profile of the debt portfolio is spread over several years. The Group Treasury frequently assesses its funding resources taking into account its own credit rating and general market conditions.


Referring to the bond issues in 2009 and 2010, access to sources of funding should sufficiently be available.

(in million €)

Carrying amount

Expected cash

outflows6 mths or less

6-12 mths

1-2 years

2-5 years

> 5 years

Non-derivative financial liabilities

Unsecured bond issues 2,293.1 (2,916.0) (106.1) (5.8) (112.4) (1,237.0) (1,454.7)Unsecured financial bank loans and other loans 555.8 (726.8) (8.6) (6.7) (16.0) (48.0) (647.5)Trade and other payables 439.4 (439.8) (439.4) 0.0 0.0 0.0 0.0

Derivative financial liabilities

Interest rate swaps used for hedging 31.4 (49.9) (6.2) (5.6) (8.7) (17.7) (11.8)Of which cash flow hedges 31.4 (49.9) (6.2) (5.6) (8.7) (17.7) (11.8)

BALANCE AT 31 DECEMBER 2010 3,319.7 (4,132.5) (560.3) (18.1) (137.1) (1,302.7) (2,114.0)

Non-derivative financial liabilities

Unsecured bond issues 2,294.4 (2,806.1) (101.0) (11.6) (597.0) (1,187.8) (908.7)Unsecured financial bank loans and other loans 555.8 (711.8) (9.6) (6.8) (16.0) (87.1) (592.4)Trade and other payables 450.1 (450.3) (450.1) 0.0 0.0 0.0 0.0

Derivative financial liabilities

Interest rate swaps used for hedging 35.2 (40.5) (5.4) (5.6) (5.9) (17.7) (5.9)Of which cash flow hedges 35.2 (40.5) (5.4) (5.6) (5.9) (17.7) (5.9)

BALANCE AT 31 DECEMBER 2011 3,335.5 (4,008.7) (566.1) (24.0) (618.9) (1,292.6) (1,507.0)

Details of the used and unused available credit facilities are given below:

Credit line facilities (in million €) MaturityAvailable

amountAverage

basic interest Amount

used not used

Confirmed credit line 31/03/2014 150.0 Euribor + 0,55 % 0.0 150.0


Confirmed credit line 01/06/2014 75.0Euribor + margin

when concluding the deal 0.0 75.0


Confirmed credit line not limited 72.0Monthly average

of EONIA + 0,4% 0.0 72.0

Uncommitted Credit Line Facility - 70.0Euribor + margin


Uncommitted Credit Line Facility - 100.0Euribor + margin


European Investment Bank - 125.0 Euribor + 0,05 % 60.0 65.0

Belgian dematerialised treasury notes - 250.0Euribor + margin


TOTAL 1,127.0 60.0 1,067.0


INTEREST RATE RISK

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating interest rates.The Group manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings. To manage this, the Group enters into interest rate swaps, in which the Group agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount. These swaps are designated to hedge underlying debt obligations.

The table (see Note 6.11) shows the average interest rate at the balance sheet date.

SENSITIVITY ANALYSIS

Changes in the interest rates will not affect the consolidated result in the short and long term as the Group operates within a regulatory framework where the consequences of fluctuations in financial expenses are mainly recovered in tariffs, except for the items which are directly recognized through OCI.

HEDGING

All financial derivatives the Group enters into relate to an un-derlying transaction or forecasted exposure, depending on the expected impact on the income statement, and if the stringent IAS 39 criteria are met, the Group decides on a case-by-case basis whether hedge accounting will be applied. The following sections describe the transactions whereby hedge accounting is applied. At 31 December 2011 the Group has no transac-tions which do not qualify for hedge accounting.

Fair value

In accordance with the hedge accounting rules, all derivative financial instruments are accepted as cash-flow hedges and valued at fair value. Consequently, the portion of the gain or loss on the derivative financial instrument that can be consid-ered an effective hedge is reflected directly in equity (hedging reserves net of tax).

Interest-rate swaps have an interest rate varying from 4.23% to 4.41%. As at 31 December 2011, the Group held hedging in-struments with a contracted reference value of €395.8 million.The net fair value of the swaps as at 31 December 2011 to-talled €35.2 million and was entirely composed of liabilities. The amounts are included as derivatives at fair value. As at 31 December 2011, no financial expenses resulting from ineffective cash-flow hedges are included in profit or loss.

The overview below shows the fair values and carrying amounts of derivative financial instruments. As the loan has a variable interest rate, the carrying amount of the loan is equal to the fair value.

(in million €)

Carrying amount

Fair value

Carrying amount

Fair value

2011 2011 2010 2010

Financial assets Sicav 13.6 13.6 13.4 13.4

Total 13.6 13.6 13.4 13.4

Financial Liabilities Derivative financial liabilities (Interest rate swap) (35,2) (35,2) (31,4) (31,4)Interest bearing loans and borrowings (395,8) (395,8) (395,8) (395,8)

Total (431,0 (431,0) (427,2) (427,2)

Fair-value hierarchy

The above fair value of ‘sicavs’ belongs to level 1, i.e. valuation is based on the (unadjusted) listed market price on an active market for identical instruments.

The above fair value of interest rate swaps belongs to level 2, which entails that valuation is based on input from other prices than the stated prices, where these other prices can be ob-served for assets or liabilities. This category includes instru-ments valued on the basis of listed market prices on active markets for such instruments; listed prices for identical or simi-lar instruments on markets that are deemed less than active; or other valuation techniques arising directly or indirectly from observable market data.

Estimate of fair value

DerivativesBrokers’ statements are used for interest-rate swaps. The statements are controlled using valuation models or tech-niques based on discounted cash flows.

Interest-bearing loansThe fair value is calculated on the basis of the discounted future redemptions and interest payments.

Financial lease obligationsThe fair value is estimated at the present value of future cash flows, discounted against the interest rate for uniform lease contracts. The estimated fair value reflects interest-rate changes.

CAPITAL RISK MANAGEMENT

The purpose of the Group’s capital structure management is to maintain the debt and equity ratios related to the regulated ac-tivities in line with the requirement of the regulatory framework (one-third equity and two-thirds debt capital). This approach allows the Group to manage the security of the liquidity at all times via flexible access to capital markets, so as to be able to finance strategic projects and to offer an attractive remunera-tion to shareholders.


The company’s dividend policy involves optimising dividend payments while still bearing in mind that there is a requirement to reserve a part of the profit resulting from including the sur-plus, caused by decommissioning property, plant and equip-ment, in the tariff. Reserving this part of the profit as equity boosts the company’s self-financing capacity needed to carry out its legal mission.

The company offers the employees the opportunity to sub-scribe to capital increases that are exclusively reserved for them.

7.4. Commitment and contingencies

OPERATING LEASE COMMITMENTS – GROUP AS A LESSEE

The Group entered into commercial leases on motor vehicles, IT equipment and office buildings. The leases related to leasing cars and IT equipment have an average life of three years; the contracts regarding the buildings have a normal term of nine years, with the possibility of renewing the lease after that.

Future minimum rentals payable under non-cancellable operat-ing leases are as follows:

(in million €)

<1 year

1–5 years

>5 years

Buildings 5.2 21.1 2.8Cars, IT equipment and others 6.2 13.5 0.0Total at 31 December 2010 11.4 34.6 2.8

Buildings 5.8 18.5 2.1Cars, IT equipment and others 5.9 9.9 0.2

Total at 31 December 2011 11.7 28.4 2.3

The following expenses related to these lease contracts were recognised in the income statement:

(in million €) 2011 2010

Buildings 6.6 4.7Cars, IT equipment and others 8.0 6.9

Total 14.6 11.6

These lease commitments include the commitments of the German segment for an amount of €12.4 million (at 60% stake of Elia).

OPERATING LEASE COMMITMENTS –

GROUP AS A LESSOR

The Group has entered into commercial property leases on certain elements of property, plant and equipment, mainly consisting of optimising use of sites and high-voltage pylons. These leases have remaining terms of a minimum of nine years.

Future minimum rental receivables are as follows:

(in million €)

<1 year

1–5 years

>5 years

Telecom 5.9 3.8 1.9Buildings 0.2 0.1 0.1Total at 31 December 2010 6.1 3.9 2.0

Telecom 4.7 13.4 19.5Buildings 0.3 0.4 0.1

Total at 31 December 2011 5.0 13.8 19.6

The following revenue related to these lease contracts was rec-ognised in the income statement:

(in million €) 2011 2010

Telecom* 11.1 10.3Buildings 0.5 0.4

Total 11.6 10.7

* The 2010 figures have been adjusted for comparison reasons (German segment - impact +300KEUR).

The lease contingencies include the contingencies of the Ger-man segment for an amount of €6.8 million (at 60% stake of Elia).

CAPITAL COMMITMENT

As at 31 December 2011, the Group has a commitment of €448.0 million relating to the purchase and installation of prop-erty, plant and equipment for further grid extensions. These capital commitments include the capital commitments of the German segment for an amount of €333.8 million (at 60% stake of Elia).

CONTINGENCIES

Settlement mechanism

• A calculation of the amount is given in the ‘Regulatory framework and tariffs’ chapter.

• Application of IFRS

The group operates in a regulated context which states that tar-iffs must make it possible to realise total revenue consisting of:

1. a reasonable return on invested capital;2. all reasonable costs which are incurred by the group.


Since the tariffs are based on estimated figures, there is always a difference between the tariffs that are actually charged and the tariffs that should have been charged to cover all reason-able costs of the system operator and to provide shareholders with a reasonable profit margin on their investment.

If the applied tariffs result in a surplus or a deficit at the end of the year, this means that the tariffs charged to consumers / the general public could have been respectively lower or higher (and vice versa). The group is convinced that a surplus or deficit arising from the settlement mechanism must not be classified as revenue or an expense, or as an item under equity.

On a cumulative basis, it could be argued that the public has made an advance payment (=surplus) for its future use of the network. As such, the surplus (deficit) is not a commission for a future loss (recovery) of income but instead a liability (receiv-able) to (with regard to) consumers. On the basis of the Regu-latory framework, the group believes that the surplus (deficit) does not represent an item of revenue (cost). Consequently, the group booked these amounts under section ‘Accruals and deferred income’ ‘see Note 6.16).

7.5. Related parties

TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL

The key management includes Elia’s Management Committee. They are hired as employees and the components of their re-muneration are set out below. Directors do not receive stock options, special loans or other advances from the Group.

(in million €) 2011 2010

Short term employee benefits

- Basic remuneration 1.9 1.6- Variable remuneration 0.7 0.6Post-employment benefits 0.4 0.4

Other variable remuneration 0.3 0.9

Total gross remuneration 3.3 3.5

Number of persons 7 7Average gross remuneration per person 0.5 0.5Number of shares 31,484 27,487

In addition Elia’s management also assessed whether transac-tions occurred with entities in which the directors of the Group exercise a significant influence (e.g. positions as CEO, CFO, vice-presidents of the Board, etc.). Significant transactions occurred in 2011, all at arms’ length, with some distribution system operators. The total amount of realized sales equals to €102 million. The total amount of expenses equals to €5 mil-lion. There are no significant outstanding balances as per 31 December 2011 on any of the above mentioned related parties.

The disclosures relating to the Belgian Corporate Governance Code are included in the Corporate Governance Statement of this annual report.

TRANSACTIONS WITH ASSOCIATED COMPANIES

Transactions between the company and its subsidiaries which are related parties were eliminated during consolidation and therefore are not recognised in this note.

In the 2011 and 2010 financial years, there were no transactions between Elia and HGRT. All transactions are at arm’s length.

Details of transactions with other related parties are explained below.

(in million €) 2011 2010

Transactions with joint venture and associated companies

Sales of goods 4.3 3.6Purchases of goods 1.5 1.6Interest and similar revenue 0.2 0.0

Outstanding balances with joint ventures and associated companies Trade debtors 1.0 1.7Trade debts 0.1 1.6


7.6. Subsidiaries, joint ventures and associates

SUBSIDIARIES

Elia System Operator NV/SA has direct and indirect control of the subsidiaries listed below:

All the entities keep their accounts in euro (except E-Offshore A LLC and Atlantic Grid Investment A Inc, whose accounts are held in USD) and have the same reporting date as Elia System Operator SA (except Eurogrid International CVBA).

NameCountry of

establishment Headquarters Stake %

2011 2010

Elia Asset SA BelgiumBd de l’Empereur 20

1000 Brussels99.99 99.99

Elia Engineering SA BelgiumBd de l’Empereur 20

1000 Brussels100.00 100.00

Elia Re SA LuxembourgRue de Merl 65

2146 Luxembourg100.00 100.00

JOINT VENTURES

Eurogrid International SCRL/CVBA BelgiumBd de l’Empereur 20

1000 Brussels60.00 60.00

Eurogrid GMBH GermanyEichenstraße 3a

12435 Berlin60.00 60.00

50Hertz Transmission GmbH GermanyEichenstraße 3a

12435 Berlin60.00 60.00

50Hertz Offshore GmbH GermanyEichenstraße 3a

12435 Berlin60.00 60.00

Gridlab GmbH Germany Sielowerstraße 503044 Cottbus 60,00 60,00

E-Offshore A LLC U.S.874, Walker Road, Suite C

19904 Dover, Delaware60.00 -

Atlantic Grid Investment A Inc U.S.1209 Orange Stree

19801 Wilmington, Delaware60.00 -

ASSOCIATED COMPANIES ACCOUNTED

FOR USING THE EQUITY METHOD

H.G.R.T S.A.S. (Holding de Gestionnaires de Réseaux de Transport)

France1 Terrasse Bellini

92919 La Défense Cedex24.50 24.50

Coreso SA BelgiumAvenue de Cortenbergh 71

1000 Brussels28.49 28.49

APX-ENDEX Holding BV NetherlandsStrawinksylaan 729

1077 XX Amsterdam20.00 20.00

OTHER PARTICIPATIONS

CASC-CWE SA Luxembourg 2 Rue de Bitbourg1273 Luxembourg-Hamm 8.33 9.46

EMCC European Market CouplingCompany GmbH

Germany Hopfenmarkt 3120457 Hamburg 12.00 12.00

CAO Central Allocation Office GmbH GermanyGute Änger 15 85356 Freising

7.50 7.50

Atlantic Grid A LLC U.S. 4445, Willard Av, Suite 1050 20815 Chevy Chase, Maryland 6.00 -


7.7. Subsequent events On Friday 23 December, the Brussels Court of First Instance ruled in favour of Elia in its tax dispute 8 with the Belgian tax authorities. As a result of the ruling, the tax authorities must re-imburse Elia €118.4 million, consisting of €80.2 million in taxes that were paid twice and which therefore must be reimbursed with 100% certainty, €5.1 million in prepayments, €8.5 million in administrative tax increase and €24.6 million in interest. How-ever, the tax authorities lodged an appeal on 6 February 2012, thus suspending the ruling by the Court of First Instance. The Court of Appeal is not expected to rule on the case until 2014 at the earliest.

7.8. Relationship with auditors

The General Meeting of Shareholders appointed the joint audi-tors KPMG Bedrijfsrevisoren Burg. CVBA (represented by Alex-is Palm) and Ernst & Young Bedrijfsrevisoren BCVBA (repre-sented by Marnix Van Dooren) for the audit of the consolidated financial statements of Elia System Operator NV/SA and the audit of the statutory financial statements of Elia System Op-erator NV/SA, Elia Asset NV/SA and Elia Engineering NV/SA.

The Elia Group paid to the joint auditors during the year 2011 an amount of €364,000.00 for the annual audit mandates, of which €197,500 has been paid to the statutory auditor of the German activities, Ernst & Young.

The fees paid to the joint auditors for other engagements pre-scribed by the Belgian Company Law and engagements other than those prescribed by the Belgian Company Law amounted to respectively €33,225.00 and €163,890.00 for the year ended 31 December 2011. The latter services related mainly to tax and VAT advice.

In addition an amount of €605,418.00 has been paid in 2011 for non-audit services in Germany. These fees can be detailed as follows:

(in million €) Ernst & Young KPMG

Attestation missions 34,900.00 0.00Tax advisory services 0.00 328,015.00IT advisory services 0.00 242,503.00

Total 34,900.00 570,518.00

The services were approved by the Audit Committee.

8 Elia’s tariffs are based on estimated income and costs as well as budgeted volumes. At the end of each tariff period, this results in tariff surpluses or deficits that must be factored into future tariffs. However, in 2008 the tax authorities ruled that tariff surpluses from the past (2003-2004) should be taxed immediately while Elia, in consultation with the regulator, considered this to be a debt in respect of future tariffs. All such tariff surpluses have actually been returned to consumers since the end of 2011.

7.9. Declaration by responsible persons

The undersigned Chairman of the Executive Committee and Chief Executive Officer Daniel Dobbeni and Chief Financial Of-ficer Jan Gesquière declare that to the best of their knowledge:

a) the consolidated financial statements for the year ending 31 December 2011 have been prepared in accordance with the International Financial Reporting Standards (IFRS), and give a true and fair view of the consolidated financial position and results of the Elia Group and of its subsidiaries included in the consolidation;

b) the annual report for the year ending 31 December 2011 gives, in all material aspects, a true and fair view of the evo-lution of the business, the results and the situation of the Elia Group and of its subsidiaries included in the consolida-tion, as well as a description of the most significant risks and uncertainties with which the Elia Group is confronted.

Brussels, 22 March 2012

Daniel Dobbeni Jan GesquièreChairman and CEO CFO


Joint auditors’ report on the consolidated financial statements


1.1 Federal legislation

The Electricity Act, as amended from time to time, forms the overall basis of and contains the main principles applicable to the regulatory framework, such as the unbundling of the trans-mission activities, operation of and access to the transmission system, establishment of the Transmission System Operator’s legal mission, tariff-setting and creation of a regulatory author-ity. Several royal decrees provide more detailed information about the regulatory framework.

1.2 Regional legislation

The three Belgian Regions are responsible for the distribution and local transmission of electricity through grids with a voltage equal to or lower than 70 kv in their respective territories. The Regions are not responsible for the tariff methodology, which falls under federal jurisdiction. Their impact on the liberalisation process is similar to the impact of the Electricity Act at the fed-eral level. The regional decrees have been complemented by several other rules on matters such as public services, renew-able energy, system operators and authorisation procedures for suppliers.

1.3 Regulatory agencies

As required by EU law, the Belgian electricity market is moni-tored and controlled by independent regulators.

1.3.1 FEDERAL REGULATOR

The Commission for Electricity and Gas Regulation (CREG) is the federal regulator and its powers with regard to Elia include:

• approval of the standard terms of the three main contracts used by the company at the federal level: connection, ac-cess and ARP;

• approval of the capacity allocation system at the borders between Belgium and neighbouring countries;

• approval of the appointment of the independent members of the Board of Directors; and

• approval of the tariffs for connection and access to, and use of the Elia grid.

1.3.2 REGIONAL REGULATORS

Operation of electricity grids with voltages of 70 kv and less falls within the jurisdiction of the respective regional regulators. Each of them may require any operator (including the company when it operates such grids), to abide by any specific provision of the regional electricity rules under the threat of administra-tive fines or other sanctions. The regional regulators are not empowered to set electricity transmission tariffs, as this task falls under the sole jurisdiction of the CREG.

1.4 Tariff setting

TARIFF REGULATIONS

As the Belgian transmission system operator, Elia makes most of its income from the regulated tariffs charged for use of the transmission system (tariff income), which are approved in advance by CREG. A tariff regulation mechanism took effect on 1 January 2008 whereby the approved tariffs apply for a four-year period, barring exceptional circumstances. CREG approved the tariffs for the period 2008-2011 in December 2007. The tariff mechanism is based on accounts stated in ac-cordance with Belgian accounting regulations (Be GAAP). The tariffs are based on budgeted costs, less a number of sources of non-tariff income, and on the estimated volumes of electric-ity taken off the grid.

The costs taken into account include the forecast value of the authorised fair remuneration and the predicted values of vari-ous cost categories, including those over which Elia has direct control (‘controllable costs’) and those over which it has no di-rect control (‘uncontrollable costs’).

Regulatory framework and tariffs

1. Regulatory framework - Belgium


FAIR REMUNERATION

Fair remuneration is the return on capital invested in the grid. It is based on the average annual value of the regulated asset base (RAB), which is calculated annually, taking into account new investments, depreciations and changes in working capi-tal requirements.In that context, which has not changed since 2008, the follow-ing formula is used to calculate the fair remuneration, when consolidated capital and reserves account for more than 33% of the average regulated asset base, as is the case at present:

• A: [33% x average RAB x [(OLO n) + (Beta x risk premium)]] plus

• B: [(S - 33%) x average RAB x (OLO n + 70 base points)] minus

• C: adjustment of excessive depreciation rates in the past, where

- OLO n is the interest rate for Belgian 10-year linear bonds for the year in question;

- S = consolidated capital and reserves/RAB, in accord-ance with Belgian accounting standards (Be GAAP);

- Beta will eventually be calculated based on Elia share prices, compared with the Bel20 index, over a seven-year period. In a transitional phase, the tariff regulations stipu-late using Electrabel’s beta for the period preceding Elia’s flotation on the stock exchange. The value of beta cannot be lower than 0.3.

Part A

The rate of remuneration (in %) as set by CREG for year ‘n’ is equal to the sum of the risk-free rate, i.e. the average rate of Belgian 10-year linear bonds and a premium for share market risk, weighted using the applicable beta factor.The tariff regulations set the risk premium at 3.5%. For 2009, the applicable beta factor was calculated based on the historic beta factor for Electrabel, compared with the Bel20 index, over a seven-year period. CREG recommends that Elia’s solvency ratio (average capital and reserves/average regulated assets) should be as close to 33% as possible. This ratio (33%) is ap-plied to Elia’s average regulated asset base (RAB) to calculate Elia’s reference capital and reserves.

Part B

If Elia’s actual capital and reserves are higher than the refer-ence capital and reserves, the surplus amount is balanced out with a reduced rate of remuneration calculated using the fol-lowing formula: [(OLO n + 70 base points)].

Part C

CREG also decided that the annual fair remuneration margin should be reduced by €12.4 million (before taxes), due to overly rapid depreciations before Elia System Operator NV/SA was appointed transmission system operator, which it considers to be excessive. The tariff regulations also provide for the pos-sibility of setting higher remuneration rates for capital that is in-vested to finance projects of national or European importance. In the absence of a decree implementing this provision of the Electricity Act, this measure was not carried out in 2011.

UNCONTROLLABLE COSTS

The costs over which Elia has no direct control (‘uncontrollable costs’) are an integral part of the costs used to determine the tariffs. The tariffs are set based on forecasted values for these costs. The balances of such uncontrollable costs (whether positive or negative), i.e. the difference between the actual and forecast costs, will be established ex-post and their allocation will be the subject of a royal decree discussed by the Belgian Federal Council of Ministers.

CONTROLLABLE COSTS

The costs over which Elia has direct control (‘controllable costs’) are subject to an incentive regulation mechanism: in other words, they are subject to application of a productivity and efficiency improvement factor. This factor indicates the ef-forts that Elia must make to control such costs: the authorised costs used to determine the tariffs are established following application of this factor. The productivity improvement re-quired of Elia over the period 2008-2011 is stipulated in the Royal Decree of 18 December 2007. The amount for 2011 was €8 million. The balances of such controllable costs (whether positive or negative), i.e. the difference — established ex-post — between the actual and authorised costs, are in principle either added to or deducted from the fair remuneration.

CHANGES IN TARIFF REGULATIONS

During 2011, amendments were made to a number of regula-tions. This is likely to have a direct impact on the tariff frame-work currently in force for transmission tariffs. In particular, the transposition into Belgian law of the third European Directive on the organisation of the electricity market called for the revision of the Electricity Act, which entered into force in early 2012.Under the amended Act, CREG is in charge of establishing a methodology for setting transmission tariffs. In late 2011, CREG provisionally adopted such a methodology, which was used as a basis to draft the tariff proposal approved on 22 December by CREG for 2012-2015.


2.1 Relevant legislation

The German legal framework is laid down in various pieces of legislation. The key law is the German Energy Act 2005 (Ener-giewirtschaftsgesetz – EnWG), which defines the overall legal framework for the gas and electricity supply industry in Germa-ny. The EnWG is supported by a number of laws, ordinances and regulatory decisions, which provide detailed rules on the current regime of incentive regulation, accounting methods and network access arrangements, including:

• the Ordinance on Electricity Network Tariffs 2005 (Verord-nung über die Entgelte für den Zugang zu Elektrizitätsver-sorgungsnetzen (Stromnetzentgeltverordnung – Strom-NEV)), as amended from time to time, which establishes, inter alia, principles (Grundsätze) and methods for the grid tariff calculations and further obligations of system opera-tors;

• the Ordinance on Electricity Network Access 2005 (Verord-nung über den Zugang zu Elektrizitätsversorgungsnetzen (Stromnetzzugangsverordnung – StromNZV), as amended from time to time, most recently by Article 2(1) of the Ordi-nance of 17 October 2008, which, inter alia, sets out the further detail on how to grant access to the transmission systems (and other types of grids) by way of establishing the balancing amount system (Bilanzkreissystem), sched-uling of electricity deliveries, control energy and further general obligations, e.g. capacity shortage (Engpaßman-agement), publication obligations, metering, minimum re-quirements for various types of contracts and the duty of certain system operators to manage the ‘Bilanzkreissys-tem’ for renewable energy;

• the Ordinance on Incentive Regulation 2007 (Verordnung über die Anreizregulierung der Energieversorungsnetze (Anreizregulierungsverordnung – ARegV)), as amended from time to time, which sets out the basic rules for incentive regulation of TSOs and other system operators (as further described below). It also describes in general terms how to benchmark efficiency, which costs enter the efficiency benchmarking, the method of determining inefficiency and how this translates into yearly targets for efficiency growth.

2.2 Regulatory agencies in Germany

The regulatory agencies for the energy sector in Germany are the Federal Network Agency (Bundesnetzagentur – BNetzA) in Bonn for grids to which over 100,000 grid users are directly or indirectly connected and the specific regulatory authorities in the respective federal states for grids to which fewer than 100,000 grid users are directly or indirectly connected. The regulatory agencies are, inter alia, in charge of ensuring non-discriminatory third-party access to grids and monitoring the grid-use tariffs levied by the TSOs. 50Hertz and 50Hertz Off-shore are subject to the authority of the BNetzA.

2.3 Tariff setting in Germany

A new tariff regulation mechanism was established in Germany by ARegV. According to ARegV, from 1 January 2009, grid tar-iffs are defined to generate a pre-defined ‘revenue cap’ as de-termined by the BNetzA for each TSO and for each regulatory period. The revenue cap is principally based on the costs of a base year, and is fixed for the entire regulatory period, except when it is adjusted to account for specific cases provided for in the ARegV. The system operators are not allowed to retain revenue in excess of their individually determined revenue cap. Each regulatory period lasts five years, and the first regulatory period started on 1 January 2009 and will end on 31 Decem-ber 2013. Tariffs are public and are not subject to negotiation with customers. Only certain customers (under certain fixed circumstances that are accounted for in the relevant legislation) are allowed to agree to individual tariffs according to Article 19 of StromNEV (for example, in the case of sole use of a network asset). The BNetzA has to approve such individual tariffs.

For the purposes of the revenue cap, the costs incurred by a system operator are classified into two categories as follows:

• Permanently non-influenceable costs (PNIC): these costs are fully integrated into the ‘revenue cap’ and are fully recovered by the gridtariffs, albeit with a two-year time-lag. PNIC in-cludes return on equity, imputed trade tax, cost of debt, de-preciation and operational costs (currently at a fixed rate of 0.8% of the capitalised investment costs of the respective in-vestments). The cost of debt related to investment budgets is currently capped at the lower value of the actual cost of debt or cost of debt as calculated in accordance with a published BNetzA guideline. In addition, PNIC includes costs relating to ancillary services, grid losses and re dispatch costs. These costs are included in the revenue cap based on a procedural regulation mechanism set by the BNetzA in accordance with Article 11(2) ARegV (FSV) that provides system operators with an incentive to outperform the planned costs with a bonus and penalty mechanism. The grid services costs are based on planned costs (taking into account changes in both vol-

2. Regulatory framework in Germany


ume needs and prices) instead of incurred costs in the base year and, as such, only the productivity factor is applicable to such costs. While the mechanism for the current regulatory period is fixed for ancillary services and grid losses, for redis-patch costs it is still subject to approval from 2011 onwards. Furthermore, this model is subject to approval or change in the second regulatory period starting in 2014.

• Temporary non-influenceable costs (TNIC) and influenceable costs (IC): these costs include return on equity depreciation, cost of debt and of imputed trade tax and are subject to an incentive mechanism as set by the BNetzA, which contains an efficiency factor (only applicable to IC), a productivity fac-tor improvement and an inflation factor (applicable to both TNIC and IC) over a five-year period. In addition the current incentive mechanism provides for the use of a quality factor, but the criteria and implementation mechanism for such a factor are yet to be described by the BNetzA. The various defined factors give the TSOs a medium-term objective to eliminate what are deemed to be inefficient costs. As regards the cost of debt, the allowed cost of debt related to influence-able costs is capped at the lower value of the actual cost of debt in the base year or the implied cost of debt based on the 10-year average of the ‘Umlaufsrenditen festverzinslicher Wertpapiere inländischer Emittenten’ (10-year average yield of the domestic fixed income securities as published by the Bundesbank) in the base year.

• As for return on equity, the relevant laws and regulations set out the provisions relating to the allowed return on equity, which is included in the TNIC/IC for assets belonging to the regulatory asset base and the PNIC for assets approved in investment budgets. For the first regulatory period (2009-2013), the return on equity is set at 7.56% for investments made before 2006 and 9.29% for investments made since 2006, based on 40% of the total asset value regarded as ‘fi-nanced by equity’ with the remainder treated as ‘quasi-debt’. The return on equity is calculated before corporate tax and after imputed trade tax. For the next regulatory period, the German regulator has calculated 2011 return at a value equal to 9.05%, despite the current lowering of capital market in-dices to foster attractive enough conditions for grid invest-ment, vital for the timely implementation of energy policy. For the new tariff period, return on investment made before 2006 is set at 7.14%.

• In addition to the revenue cap, 50Hertz is compensated for costs incurred related to its renewable energy obligations, including EEG and CHP/KWKG obligations, subject to spe-cific regulatory mechanisms aimed at a balanced treatment of costs and income.

CHANGES IN TARIFF REGULATIONS

Progress was made in 2011 following discussions with the regulator to improve the regulatory framework for new invest-ments in grid infrastructure; the coverage of grid management and development costs; return on capital; and the conditions under which new offshore farms should be connected. On this basis, the ARegV is to be amended for the benefit of system operators in the first half of 2012.

The cap applicable in 2011 was 3% higher than in 2010. The cap used as a basis for tariffs, applicable since 1 January 2012, is some 15% higher than in 2011.

As at 31 December 2011, 50Hertz had obtained approval for 44 of the 75 investment budget requests made since 2008. The approved investment budget accounts for €2.501 billion.

50Hertz was also successful in a case brought before the High-er Regional Court of Düsseldorf regarding the organisation of investment budget approvals by the BNetzA. In its decision of 23 March 2011, the court ruled as illegal the ‘amount to prevent double recognition’ and the dismissal of interest charges on borrowed funds. Discussions on the regulation of this issue are due to conclude in the first quarter of 2012.

In the context of discussions to enhance the regulatory frame-work for grid investment, the legislator is also looking into the possibility of a target-cost (t-0) approach instead of the current time-frame of two years (t-2), enabling faster depreciation.


Extracts from the statutory annual accounts of Elia System Operator NV/SA, drawn up in accordance with Belgian ac-counting standards, are given hereafter in abbreviated form.Pursuant to Belgian company legislation, the full financial state-ments, the annual report and the joint auditors’ report are filed with the National Bank of Belgium.

These documents will also be published on the Elia website www.elia.be and can be obtained on request from Elia System Operator NV/SA, Boulevard de l’Empereur 20, 1000 Brussels, Belgium. The joint auditors made an unreserved statement with an explanatory paragraph in the statutory financial statements.

Information about the parent company

1. Statement of position after distribution of profits

ASSETS 2011 2010

(in million €)

FIXED ASSETS 3.612,7 3.612,7

Financial fixed asset 3.612,7 3.612,7

Affiliated companies 3.583,0 3.583,0Participating interests 3.583,0 3.583,0

Other enterprises linked by particpating interests 29,4 29,4Participating interests 29,4 29,4

Other participating interests 0,3 0,3

CURRENT ASSETS 859,3 942,3

Amounts receivable after more than one year 94,0 93,8

Other amounts receivable 94,0 93,8

Inventories and contracts in progress 5,0 4,7

Contracts in progress 5,0 4,7

Amounts receivable within one year 587,1 602,1

Trade debtors 120,1 165,4

Other amounts receivable 467,0 436,7

Investments 130,0 120,0

Other term deposits 130,0 120,0

Cash at bank and in hand 24,4 99,3

Deferred charges and accrued income 18,8 22,4

TOTAL ASSETS 4.472,0 4.555,0


EQUITY AND LIABILITIES 2011 2010

(in million €)

CAPITAL AND RESERVES 1.621,2 1.586,8

Capital 1.505,4 1.505,4

Issued capital 1.505,4 1.505,4

Share premium account 8,5 8,5

Reserves 83,7 67,6

Legal reserve 83,7 67,6

Profit carried forward 23,6 5,3

PROVISIONS, DEFERRED TAXES 3,0 3,0

Provisions for risks and charges 3,0 3,0

Other risks and charges 3,0 3,0

LIABILITIES 2.847,8 2.965,2

Amounts payable after one year 2.554,2 2.553,8

Financial debts 2.554,2 2.553,8Unsubordinated debentures 1.998,4 1.998,0Credit institutions 60,0 60,0Other loans 495,8 495,8

Amounts payable within one year 223,6 309,5

Current portion of amounts payable after more than one year 0,0 0,0

Financial debts 0,0 0,0

Credit institutions 0,0 0,0

Trade debts 45,5 128,4

Suppliers 45,5 128,4

Advances received on contracts in progress 11,6 8,9

Amounts payable regarding taxes, remuneration and social security costs 7,4 7,3

Taxes 0,0 0,2

Remuneration and social security 7,4 7,1

Other amounts payable 159,1 164,9

Accrued charges and deferred income 70,0 101,9

TOTAL EQUITY AND LIABILITIES 4.472,0 4.555,0


2. Income statement

(in million €) 2011 2010

OPERATING INCOME 760,0 723,2

Turnover 753,9 718,7

Increase (+), decrease (-) in inventories of finished goods, works ans contracts in progress 0,2 0,0Other operating income 5,9 4,5

OPERATING CHARGES (586,9) (563,6)

Services and other goods (551,6) (531,1)

Remuneration, social security costs and pensions (35,3) (32,8)

Provisions for liabilities and charges 0,0 0,3

OPERATING INCOME 173,1 159,6

Financial income 105,2 53,6

Income from financial fixed assets 93,4 46,7

Income from current assets 11,8 6,9

Financial charges (129,3) (133,7)

Interest and other debt charges (128,4) (132,0)Other financial charges (0,9) (1,7)

PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 149,0 79,5

Extraordinary income 1,5 9,7

Proceeds from sale of investments 0,0 9,7

Other extraordinary income 1,5 0,0

Extraordinary charges (8,9) (4,8)

Other extraordinary charges (8,9) (4,8)

PROFIT FOR THE FINANCIAL PERIOD BEFORE TAXATION 141,6 84,4

Income taxes (18,5) (10,9)

Income taxes (18,5) (10,9)

Adjustments of income taxes and write-back of provisions 0,0 0,0

PROFIT FOR THE FINANCIAL PERIOD 123,1 73,5


GRI Index

Indicator Description Page

1. STRATEGY AND ANALYSIS

1.1 Statement from the most senior decision-maker of the organization (e.g., CEO, Chair, or equivalent senior position) about the relevance of sustainability to the organization and its strategy. 1, 2

2. ORGANIZATIONAL PROFILE

2.1 Name of the organization. 1

2.2 Primary brands, products and/or services. 4

2.3 Operational structure of the organization, including main divisions, operating companies, subsidiaries and joint ventures. 4, 115

2.4 Location of organization’s headquarters. 165

2.5 Number of countries where the organization operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report. 4, 152, 153

2.6 Nature of ownership and legal form. 152, 160, 161

2.7 Markets served (including geographic breakdown, sectors served and types of customers/beneficiaries). 4

2.8 Scale of the reporting organization, including: number of employees; net sales); total capitalization broken down in terms of debt and equity and quantity of products or services provided. 4,152, 153

2.9 Significant changes during the reporting period regarding size, structure or ownership. 6 to 11, 87 to 89

2.10 Awards received in the reporting period. 7, 11, 17, 52, 65

3. REPORT PARAMETERS

3.1 Reporting period for information provided. 165

3.2 Date of most recent previous report. April 2011.

3.3 Reporting cycle (annual, biennial, etc). 165

3.4 Contact point for questions regarding the report or its contents. 165

3.5 Process for defining report content. 1, 4, 12, 13, 77 to 81, 165

3.6 Boundary of the report. 165

3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations and other entities that can significantly affect comparability from period to period and/or between organizations.

from 115 to 125 125 to 130

3.12 Table identifying the location of the Standard Disclosure in the report. 163, 164

Profile



4. GOVERNANCE, COMMITMENTS AND ENGAGEMENT

4.1 Governance structure of the organization, including committees under the highest governance body responsible for specific tasks, such as setting strategy or organizational oversight. 84 to 86

4.2 Indicate whether the Chair of the highest governance body is also an executive officer (and, if so, their function within the organization’s management and the reasons for this arrangement). 84

4.3 For organizations that have a unitary board structure, state the number of members of the highest governance body who are independent and/or non-executive members. 84

4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body. Include reference to processes. 78, 87, 88

4.14 List of stakeholder groups engaged by the organization. 22, 48, 62, 77 to 81

4.15 Basis for identification and selection of stakeholders with whom to engage. 74

Data on performance


ECONOMIC

EC1 Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments. 128, 129

EC2 Financial implications and other risks and opportunities for the organization’s activities due to climate change.

24, 30 to 33, 44 to 456

EC8 Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in kind, or pro bono engagement. 34, 35

ENVIRONMENTAL

EN5 Energy saved due to conservation and efficiency improvements. 49, 50

EN6 Initiatives to provide energy-efficient or renewable energy based products and services, and reductions in energy requirements as a result of these initiatives. 52, 54

EN7 Initiatives to reduce indirect energy consumption and reductions achieved. 52, 56 to 59

EN11 Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas. 51

EN12 Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas. 56

EN14 Strategies, current actions, and future plans for managing impacts on biodiversity. 51

EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved. 52

EN22 Total weight of waste by type and disposal. 53

EN26 Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation. 56 to 59

LABOR: PRACTICES AND DECENT WORK

LA1 Total workforce by employment type, employment contract, and region. 65, 68

LA7 Rates of injury, occupational diseases, lost days, and absenteeism, and number of workrelated fatalities by region. 72, 73

LA10 Average hours of training per year per employee by employee category. 67

LA11 Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings. 66, 67

LA12 Percentage of employees receiving regular performance and career development reviews. 66


Reporting parameters

Head office

This report is limited to Elia System Operator and Elia Asset, which operate as a unique economic entity under the name Elia, and 50Hertz Transmission.

The registered office of Elia System Operator and Elia Asset is located atBoulevard de l’Empereur, 201000 Brussels, Belgium

The registered office of 50Hertz Transmission GmbH is located atEichenstraße 3A12435 Berlin, Germany

The registered office of Eurogrid International is located atAvenue de Cortenbergh, 71 1000 Brussels, Belgium

Reporting period

This annual report covers the period from 1 January 2011 to 31 December 2011.

It incorporates the principles from the sustainable develop-ment report as required by the GRI.

Contact

Lise MulpasCorporate CommunicationBoulevard de l’Empereur, 201000 [email protected]. : 02 526 73 75Fax : 02 546 72 90


Notes



Annual Report 2011































kWh Kilowatt hour

MW Megawatt














Avril 2012

EL

IA

AN

NU

AL

RE

PO

RT

201

1

Lower Saxony

Schleswig-Holstein

Mecklenburg-Western-Pomerania

Brandenburg

Berlin

Saxony

Saxony-Anhalt

Hesse

Hamburg

Thuringia

Bavaria

PSE OperatorPoland

Energinet.dk Denmark

Denmark

TenneT

TenneT

C EPSCzech Republic

Güstrow

Gera

LeipzigHalle

Erfurt

Eisenach

Rostock

Schwerin

DresdenWeimar

Potsdam

Cottbus

Chemnitz

Zwickau

Jena

Magdeburg

Frankfurt (Oder)

Neu-brandenburg

110

380+220

220

110

Ourthe

Vesdre

Meuse

Sambre

Echelle Schaal

0 10 20 30 km

1 : 1 000 000Situation au

stand op 1-1-2012

Institut Géographique National Nationaal Geografisch Instituut

5˚50'4˚30'2˚40' E. Greenwich 2˚50' 3˚00' 3˚10' 3˚20' 3˚30' 3˚40' 3˚50' 4˚00' 4˚10' 4˚20' 4˚40' 4˚50' 5˚00' 5˚10' 5˚20' 5˚30' 5˚40' 6˚00' 6˚10' 6˚20' 6˚30' 6˚40' 6˚50'

50˚00'

50˚00'

3˚50' 5˚40'

49˚40'

49˚30'

49˚30'49˚40'

49˚50'

49˚50'

50˚10'

50˚10'

50˚30'

50˚20'

50˚20'50˚30'

50˚50'

50˚40'

50˚40'50˚50'

51˚00'

51˚00'

51˚20'

51˚10'

51˚10'51˚20'

51˚30'

2˚30' E. Greenwich 2˚40' 2˚50' 3˚00' 3˚10' 3˚20' 3˚30' 3˚40' 4˚00' 4˚10' 4˚20' 4˚30' 4˚40' 4˚50' 5˚00' 5˚10' 5˚20' 5˚30' 5˚50' 6˚00' 6˚10' 6˚20' 6˚30' 6˚40 ˚50' 7˚00'

51˚30'

6˚

Vesdre

Our

Eau

E scaut

G ileppe

Alzette

Moselle

S emois

V ierre

S ûre

Meu

se

Lesse

Ourthe

d’H

eure

S ambreAmblève

Warche

Holzwarche

Amel

Dendre

Dijle

Dyle M

euse Wes

er

IJ zer

S cheldeLeie

Dender

R upel

Demer

G rote Nete

Maas

Maas

(1)

(2)

E lia déc line toute responsabilité concernant les données relatives aux ins tallations appartenantà des tiers .E lia wijs t alle verantwoordelijkheid af voor wat betreft data i.v.m. ins tallaties van derden.

S ont représentées toutes les unités pour lesquelles un contrat C IPU a été conc lu avec E lia.S taan op de kaart alle productie-eenheden waarvoor met E lia een C IPU contrac t is afges loten.(C IPU = C ontrac t for Injec tion of P roduction Units ).

COURS D’EAU

R ivières et canaux

WATERLOPEN

R ivieren en kanalen

PRODUCTIE EENHEDEN (2)

220-150kV

70kV

UNITES DE PRODUCTION (2)

centrale nuc léaire

centrale hydraulique

centrale de pompage

exis tant

en projet

380kV

centrale thermique

parc d'éoliennes

centrale thermique en projet

avec injec tion de production

S TATIONS

thermis che centrale in ontwerp

waterkrachtcentrale

pompcentrale

POS TES

windmolenpark

bes taand

in ontwerp

380kV

220-150kV

70kV

MERCATOR

MOLENB EEK

Herbaimont

met productie injec tie

kerncentrale

thermis che centrale

ONDERGRONDSE KABELS

70kV

en cons truction ou en projet

2e terne en cons truction ou en projet 2de draads tel in aanbouw of in ontwerp

câbles en parallèle

câble appartenant à un tiers (1) kabel eigendom van een derde (1)

lignes à 2 ternes detens ions différentes

tens ion d’exploitation inférieureà la tens ion de cons truction

Tableau des compos itions deslignes à plus de 2 ternes :

3 91 x 150 + 2 x 70 (3 x 150)

2 x 150 (2 x 380 + 2 x 150)

2 x 150 (4 x 150)

CABLES SOUTERRAINS

380kV

220kV

150kV

2 4 x 150 8 3 x 70

ligne appartenant à un tiers (1)

S amens tellingtabel van de lijnenmet meer dan 2 draads tellen:

15 3 x 150 (4 x 150)

14 1 x 220 + 2 x 70

Nombre de ternes

ins tallés

1

1

2

(avec numéro de référence dansle tableau des compos itions )

4 1 x 150 + 3 x 70 (4 x 150)

56

2 x 150 + 2 x 70 (4 x 150)

1 x 150 + 1 x 70 (2 x 150 + 1 x 70)10 16 3 x 150 + 1 x 70 (4 x 150)

1112

1718

4 x 70

3 x 150

3 x 220

1 x 380 + 2 x 150 (2 x 380 + 2 x 150)

380kV

220kV

parallele kabels2

150kV

70kV

3dP

prévus

1

2

2

> 2

1 2 x 150 + 1 x 70 (3 x 150)

Aanta l draads tellen

voorzien uitgerus t

(met referentienummer inde samens tellings tabel)

1 1

2 1

2 2

> 2

lijn met 2 draads tellenvan vers chillende spanningen

uitbatings spanning lagerdan de cons tructiespanning

7 133 x 380 (4 x 380) 1 x 70 (4 x 150)

150 + 70

70(150)

4

in aanbouw of in ontwerp

lijn eigendom van een derde (1)3dP

St-AMAND

PERONNESC S MARC INELLE

Marchienne

F . DE FER

70(150)

Mais ières150 + 70

MAR CHE -LEZ-EC AUS S INNES

PETROCHIM

LA C ROYER E

La Louvière

BOEL HFBOEL TC C

GOS S EL IE S

AMER CŒ UR

Liberchies

K eumiée

150 + 70

B AUDOUR

AIRL IQUIDE

TER TR E

E louges

PETIT MARAIS

GHLIN

C iplyP âturages

J EMAPPES

B ous su

Mons

70(150)

70(150)

150+70

150 + 30

150 + 70

30(150)

70(150)

70(150)

16

1 : 150 000

C . S t-GHIS LAINOBOURG

HARMIGNIE S

VILLE /HAINE

TR IVIE R E S

B INCHE

BOELLL

BOELFOUR

150+70 150 + 70

150 +70

150 + 70

70(150)

E s tinnes

GOUY

BAS COUP

DAMPR EMY

MONC EAU

P iéton(S NC B )

Fontainel’E vêque

MALFALIS E

CAR ALFOC

70(150)

70(150)15

0+70

2Anderlues

220 +

150


2

3dP

3dP

70(150)

FLEURUS

MONTIGNIE S

TERGNEE

AUVELAIS

FAR C IENNES

B LANCHIS S ER IEC harleroi

G illy

LA PR AYEPONT-DE -LOUP

Heppigniessud

J umet

(30)70+30(150)

70(150)

5

LA PR AYEFOUR

70(150)

J EMEPPE -S OLVAY

Fos ses - la-Ville

S ambre

CHAMP -DE -COUR R IER E

FE LUY

COURCELLES

BUIS S ER ET

S eneffe70(

150)

12

2

CENTRALESENEFFE

S ombreffe

Marbais(S NC B )

C has sart

Gembloux

Wilrijk

S CHELLE

MHO

WOMMELGEM

MOR TS EL

B AS F

K ETENIS S E

OORDER EN

150+36

9

NOORDLAND

2

Degus saMonsanto

S t. -Niklaas

HE IMOLEN

Temse

MERCATOR

150+

70

WALGOED

S CHELLE DOR P

Hoboken

Aartselaar K ontich

WAAR LOOS7

L IE R

LINT

B EVER EN

S t. -PAUWELS

L ILLO

BAYER

F INA

EKER EN7e HAVENDOK

MER KS EMSCHELDELAAN

KALLO

ZUR ENBORG

BUR CHT

ZWIJ NDR ECHT

C . ZWIJ NDR ECHT

OeverB elliards tr.

Hoveniers tr.Tabakves t

Moons tr.B erchem (NMB S )

150+36

2

3

DAMPLE IN2

PETROL

2

NOORDERDOKKEN (NMB S )

E S S O

2

2

Wilrijk IS VAG

3dP

3dP

BRABO

3

OELEGEM

Botermelk

ZANDVLIET

DOEL

380+

150

25

2

4

3dP

S OLVAY1 : 150 000

ZANDVLIE TPOWER

1 : 150 000

Hermalles /Huy

3dP

MARCHIN

TIHANGE

C ROIX-CHABOT

BOISL ' IMAGE

J emeppe

P rofondval

Ehein

R amet Vesdre

S aives

Hollogne

3dP CHER ATTE

150+70

S ocolie

B ERNEAU

NAVAGNE

GRAMME

Hte S AR TE

C LERMONT

Amps in-Neuville

Abée-S c ry

Les S pagnes

3dP

3dP

RIMIERE

Poulseur

E sneux

R ivage(S NC B )

Ourthe

Anthisnes

70 (150)

3dP

3dP

3dP

3dP

AWIR S

Ivoz

Fooz

Voroux(S NC B )

380+150

3dP

3dP

LA TROQUE

S ER AINGROMS ÉE

B R ES S OUX

J UP ILLE

CHER TAL

Ans

Alleur

G lain

Vottem

FNVottem

Montegnée

Tilleur

OugréeS c les s in

S art-T ilman

C . Angleur

F lémalleLE VAL

(C . S ER AING )

G rivegnée

C hênée

Magotteaux

B E LLAIR E

Mons in

FN

Hers tal

70(150

)

70(15

0)

70 (150)70(220)

220+15

0

8

17

14

16

16

164

3

150+70

Pouplin

Ferblatil

Inc in. Hers tal

R OMS ÉE-S NC B

Kuborn

3dP

3dP

3dP

LIXHE

C B R

Visé(S NC B )

Meu

se

13

2

70(150)

70(150)

70(150)

30(150)

70(150)

70(150)

70(150)

70(150)

70(150)

70(150)

70+30(150)

70(150)

70(150)

70(150

)

2

3

70 (150)

70(150

)

70(15

0)

70 (150)70(220)

8

13

3dP

3dP

70(150)

2

12(70)

70(15

0) 70kV 70kV

11

70 (150)

70 (220)

3dP

3dP

70(150)

70(150)

3dP

70(150)

2

70(220)

3dP

70(150)

70(150)

70(150)2

2

10(70)

15 (70)3dP

3dP

3dP

3dP

3dP

70(150)

70(150)

2

2

70(150)

2

70(150

)

3dP

3dP

3dP

3dP 3d

P

3dP

3dP

3dP

3dP

3dP

3dP

3dP

3dP

2

70 (150)

3dP

3dP

3dP

LIGNES AER IENNES


BOVENGRONDSE LIJNEN

Uitbatings spanning

150 + 70

150 + 70

150+70

150 + 30

150 + 70

16

150+70 150 + 70

150 +70

150 + 70

150+70

2

2 5

12

2

150+36

9

2

150+

70

150+36

2

2

2

2

3

25

2

4

150+70

16

16

164

3

150+70

15 0 +36

150+701

150+

70

150+70

150+36

150+70

150+ 70

150+ 70

70+

150

150+70

212

2

3dP

150 +

70

150+70

150 + 70

150+70

2

2

2

34

150

+70

150+70

2

150+70

150+70

2

3dP

150 + 70

1

32 2

2

150(380)16

15 2

150kV 150kV

6

3

2

2

2

3dP

22

2

2 2

2

3dP

LIGNES AER IENNES


BOVENGRONDSE LIJNEN

Uitbatings spanning

220 +

150

220+15

0

17

14

2

220+150

220+150

220+ 150

220kV 220kV

LIGNES AER IENNES


BOVENGRONDSE LIJNEN

Uitbatings spanning

7

380+

150

380+150

(2x38

0)

18

380+

150

L IGNES AER IENNES


BOVENGRONDSE LIJNEN

380+22

0

380+22

0(2x38

0)

380+22

0

380+220

380 +

150

27

380kV

Uitbatings spanning

380kV

2

380+15

0

380 + 150

S oignies

Fourmies

Fays - les -Veneurs

B onnert

Hatrival

C hiny Villers -s /S emois

MomigniesHatrival-S NC B

Pâturages

Froidchapelle

Lobbes-S NC B

HanzinelleC iney

B uis sonville

C iney-S NC B

S oy S ankt-Vith[S aint-Vith]

C arrièredu Milieu

Ath(S NC B )

B aulers

B raine- le-C omte-S NC B

S auvenière

Gembloux

S tatte(S NC B )

C roix-C habot

Wanze

Pepins terG ileppe

Vesdre

B evercé

B as -Warneton[Neerwaas ten]

S t. -Denijs -B oekel

Geraardsbergen

Kes sel- lo

Leuven(NMB S )

Heverlee

Ga s thuisberg

Lummen

Maasmechelen

B ornem

S t. -NiklaasHerenthout

Langveld

Gerdingen

R ijkevorsel

Arlon

Differd.Arbed

B elv. Arbed

S chif.

Arlon-S NC B

Monceau-en-Ardennes

Orgeo

R ecogne

Neufchâteau

Vierre

Longlier (S NC B )

Marbehan(S NC B )

R espelt

S olre-S t-Géry

C himay

C lermont

Thy- le-C hâteau

C ouvin

R omedenne

Pondrôme

Dinant

S ommière

Has tière

Herbaimont

Hogne(S NC B ) Marche-en-

Famenne

C harneuxOn

Forrières(S NC B )

C ierreux

Quevaucamps

Harchies

E louges

Thumaid e

Lobbes

C iply

Lens

Gerpinnes

Andenne

F lorée

S art-B ernard(S NC B )

G rands -Malades

Dorinne

Yvoir(S NC B )

Warnant

Namur

Marche- les -Dames

Waret

Leuze

B ois -de-Villers

S t-S ervais

Wierde

Namur-S NC B

F loriffoux

C omblain

B omalMiécret

Trois -Ponts

B ronrome

S paTuron

Heid-de-Goreux

Pepins ter-S NC B

Amel

[B utgenbach]

S tephanshof

B ütgenbach

[Amblève]

B landain

B ekaert

K ortrijk-NMB S

KortrijkOos t

R onse

Tournai

[R enaix]

Tournai-S NC B

Deux-Acren

R onquières

Enghien (S N C B )

B raine- le-C .

Hoves

Mes lin

Herfelingen

Appelterre

[Edingen (NMB S )]

C ourt-S t-É t.

Ottignies (S NC B )

C eroux

B aulers-S NC B

S t. -Truiden

Landen

J odoigne

G latigny

Ais che-en-R efail

Hannut

Landen-NMB S

Orsmaal

Tongeren

B orgloon

Ivoz

FoozS aivesMons in

S tembert

Welkenraedt (S NC B )

Les P lenes ses

Henri-C hapelle

Montzen(S NC B )

S oiron

Noordschote

Gavere

Zottegem

B aas rode

Welle E s seneDenderleeuw

(NMB S )

Hamme

Temse

Amylum

Oudegem

Willebroek

Tis selt

Duffel

Muizen

M echelen-NMB S

Geel/Oevel

Halen

K ersbeek

Aars chotDorenberg

Pellenberg

Dowchemical

Hechtel

Opglabbeek

B ilzen

Paals teens tr.

Has selt

(NMB S )

Alken

Maaseik

B ekaert

Lanaken

Zelzate TJ

Nijlen

K almthout

B recht

Turnhout

R avels

HerentalsOlen

Koekhoven

S t. -Huibrechts -L ille

OverpeltInfrax

HE IMOLEN HEZE

PETIT MARAIS

LATOUR

DOTTIGNIE S[DOTTENIJ S ] B AS S E -WAVR E

S CHIFFLANGE

ES CH-S UR-ALZETTE

HE INS CH

B ER TR ANGE

ROOS T

VIR EUX

BAS TOGNE

THUILL IE S

MAR COUR T

ANTOING

AIR L IQ.

NIVE LLE S

C LAB ECQ

OIS QUER CQ

C LERMONTLE VAL(C . S ER AING )

CHER TAL

S TADEN

IEPER NOORD

WES TROZEB EKE S t. -B AAFS -VIJ VE

WOR TEGEM

MOEN

TIE LT

DES S E LGEM

R ELEGEM

TER L INDEN

KOB B EGEM

MOLENB EEK

DILB EEK

Q. DEMETS K .

ZUID/MIDI

B UIZINGEN

HELIPOR TCHAR LES -QUINT

WIJ GMAAL

S APP I

HERDER EN

S L IJ K ENS

S IDMAR

KEER KEN

PAP IER FAB R IEK

GENT R ECHTEROEVER

C . KNIPPEGROEN

MALDER EN

BUR CHT

ZWIJ NDR ECHT

WALGOED

B ER INGEN

BALEN

BAS F

MALLE

MEER

ROUVROY

S t-MARDS t-MARD-S NC B

HER S ER ANGE

OXYLUX

LANDR ES

B ELVAL

MONT S t.MAR TIN

HE IS DOR F

LUMES

VILLEROUX

FLEBOUR

VIANDENS .E .O. B AULER

NIEDERS TEDEM

TR IER

J AMIOLLE

NEUVILLEPLATE -TAILLE

CHOOZ

MONT-LEZ-HOUFFALIZE

TER TR E

B AUDOUR

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HARMIGNIE S

V/HAINELA C ROYÈR E

BAS COUP

TR IVIÈ R E S

PÉRONNES

B INCHE

CHAMP -DE -COUR R IÈR E


J EMEPPE -S OLVAY

GOS S EL IE S

FLEURUS

AMER CŒ UR

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AUVELAIS

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LA PR AYEFOUR

S E ILLE S

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B RUME-S NC B

IE PER

MARQUAIN

HAR ELB EK E

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PEKKE

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[MOES KROEN]

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PACHECO TIENEN B RUS TEM

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NIEUWEVAAR T

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OELEGEM

MOR TS EL

S t. - J OB

DAMPLE IN

PETROL

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GUUT

BEERS E

POEDER LEEMOL

NYR S TAR

LOMMELOVER PELT

MHO

B LIGHBANK

THORNTONBANK

MAASBRACHT

MASTAING

CHIÈVR ES

GOUY

BRUEGEL

DROGENBOS

LIXHE

RODENHUIZEMERCATOR

C.DILSEN

KREEKRAK

ZANDVLIET

EINDHOVEN

AUBANGE

MOULAINE

VIGY

REVIN

MAZURES

LONNY

VESLE

ACHÊNE ACHÊNE-SNCB

AVELIN

CHEVALET

CENTRALE SENEFFE COURCELLES St-AMAND

TERGNEE

COGNELEE

CHAMPION

RIMIERETIHANGE

GRAMME

BRUME

COO

WARANDE

AVELGEM

MEKINGEN

AVERNAS

NAVAGNE

IZEGEM

HORTA

NEST

BUGGENHOUT

BAEKELAND

VERBRANDE BRUG

LINTMEERHOUT

OBERZIER

VAN EYCK

STEVIN

EEKLO NOORD

BORSSELE

DOEL

MASSENHOVEN

BRABO

DODEWAARD

GEERTRUIDENBERG


220 kV

380 kV


380 / 220 kV

Other companies

line 380 kV


line 220 kV



HVDC/DC link 400 kV





under construction

Pump storage plant



Legend

As

at :

Dec

emb

er 2

011


220 kV

380 kV


380 / 220 kV

Other companies

line 380 kV


line 220 kV



HVDC/DC link 400 kV





under construction

Pump storage plant



Legend

As

at :

Dec

emb

er 2

011

Situation au Stand op 1-1-2012

Grid 50HertzGrid Elia


Annual Report 2011































kWh Kilowatt hour

MW Megawatt














April 2012

EL

IA

AN

NU

AL

RE

PO

RT

201

1

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