Events after the reporting date

See Note 34 to the consolidated financial statements for events after the reporting date.

Profit appropriation

According to the company’s articles of association the Board of Management may, with the approval of the Supervisory Board, increase the reserves by an amount equal to, at most, half of the profit available for distribution. The remaining portion is at the disposal of the General Shareholders’ Meeting. The General Shareholders’ Meeting can decide to distribute all or part of the remaining portion. Undistributed profit is added to the reserves.

Proposal for appropriation of profit for 2015

A proposal will be put to the General Shareholders’ Meeting to pay a dividend of 50% of the profit after income tax attributable to the shareholders of Eneco Holding N.V. This would represent a total distribution of € 98 million for 2015 or € 19.72 per share. The dividend will become payable on the customary date: 21 April 2016.

Independent auditor’s report and assurance report

To: The shareholders and the Supervisory Board of Eneco Holding N.V. and all other stakeholders

Report on the financial statements 2015 and assurance report on the Strategic Key Performance Indicators included in the annual report 2015

Our opinion

Regarding the financial statements

We have audited the financial statements 2015 of Eneco Holding N.V. (the “Company”), based in Rotterdam. The financial statements include the consolidated and the company financial statements.

In our opinion:

  • the consolidated financial statements give a true and fair view of the financial position of the Company as at December 31, 2015 and of its result and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (“EU-IFRS”) and with Part 9 Book 2 of the Dutch Civil Code; and
  • the company financial statements give a true and fair view of the financial position of the Company at December 31, 2015 and of its result for the year then ended in accordance with Part 9 Book 2 of the Dutch Civil Code.
Regarding the Strategic Key Performance Indicators

In our opinion:

  • the Strategic Key Performance Indicators on pages 4-5, with numbers 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13 and 14 (the “KPIs”) in the Management Report 2015 are, in all material respects, a reliable and adequate reflection of the policies of the Company with respect to Corporate Social Responsibility and the business operations, the events, and the performances in that area during 2015; and
  • the Management Report on pages 2-85 and 151-166 (the “Report”) has, in all material respects, been prepared in accordance with the Sustainability Reporting guidelines Version 4, level “Core” of the Global Reporting Initiative (the “GRI”).

What we have audited

Regarding the financial statements

The consolidated financial statements comprise:

  • the consolidated balance sheet as at December 31, 2015;
  • the following statements for the year ended December 31, 2015: the consolidated income statement, the consolidated statement of comprehensive income, the consolidated cash flow statement, and the consolidated statements of changes in equity; and
  • the notes comprising a summary of the significant accounting policies and other explanatory information.

The company financial statements comprise:

  • the company balance sheet as at December 31, 2015;
  • the company income statement for the year ended December 31, 2015; and
  • the notes comprising a summary of the significant accounting policies and other explanatory information.
Regarding the Strategic Key Performance Indicators

We have audited the KPIs in the Report and we have established that the G4 Guidelines of the GRI have been applied correctly to the Report. This report includes a description of the policies of the company with respect to Corporate Social Responsibility and the business operations, the events and the performances in that area during 2015.

As regards 2013 and 2014, we have not audited KPI number 10.

Basis for our opinion

General

We are independent of the Company as required under the Regulation on Auditor Independence in Assurance Engagements (“Verordening inzake de onafhankelijkheid van accountants” – ViO) and other relevant independence requirements in the Netherlands relevant to the engagement. Furthermore, we have complied with the Regulation Code of Conduct and Professional Practice Auditors (“Verordening gedrags- en beroepsregels accountants” – VGBA).

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Regarding the financial statements

We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the “Our responsibilities for the audit of the financial statements and the Report” section of our report.

Regarding the Strategic Key Performance Indicators

We conducted our audit in accordance with Dutch law, including the Dutch Standard 3810N, “Assurance engagements regarding reports on corporate social responsibility”. Our responsibilities under those standards are further described in the “Our responsibilities for the audit of the financial statements and the Report” section of our report.

Our audit approach

Regarding the financial statements

As part of our audit we have determined materiality and used it to assess the risks of material misstatements in the financial statements. We have specifically assessed risks of material misstatement related to account balances, classes of transactions and disclosures associated with a relatively high level of subjectivity, i.e., where significant estimates and judgement is used. We have likewise specifically focused on the risk of management override of controls and the risk of material misstatement due to fraud. In addition, our audit expressly took into account the continuity and reliability of the automated data processing.

Regarding the Strategic Key Performance Indicators

As part of our audit we have determined materiality per KPI and used it to assess the risks of material misstatement in the Report. During our audit we have specifically focused on the KPIs relating to One Planet Thinking (numbers 6 and 7) and we have ascertained whether the Report has, in all material respects, been prepared in accordance with the Sustainability Reporting Guidelines Version 4, level “Core”, of the GRI.

Materiality

General

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.

Regarding the financial statements

Based on our professional judgement we determined the materiality for the financial statements as a whole at EUR 33 million. This materiality is based on a weighing of several factors, the most significant of which are the following:

  • 0.8% of the revenues from energy sales and transmission and energy related activities over the last 3 years; and
  • 10% of the profit before tax over the last 3 years.

We also take into account misstatements and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons.

We agreed with the Supervisory Board that misstatements in excess of EUR 1.6 million, which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.

Materiality overview

Materiality for the financial statements as a whole

EUR 33 million

Basis for the materiality

0.8% of revenues
10% of profit before tax

Threshold for reporting uncorrected misstatements

EUR 1,6 million

Regarding the Strategic Key Performance Indicators

We have determined the materiality per KPI. This materiality per KPI is based on 5% of the value realized in 2015.

We also take into account misstatements and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons.

Scope of the group audit

The Company is the head of a group of entities (the “Group”). The financial information of the Group is included in the consolidated financial statements of the Company.

Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the group audit. In this respect we have determined the nature and extent of the audit procedures to be carried out for group entities (i.e., business unites). Decisive were the size and/or the risk profile of the business units. On this basis, we selected business units for which an audit or review had to be carried out on the complete set of financial information or on specific items.

Our audit has particularly focused on significant business units. We have:

  • performed a full audit of Stedin’s financial information; and
  • at other business units we have performed an audit of specific account balances, classes of transactions or disclosures, or we have performed specific audit procedures or review procedures. For Eneco Belgium we used the work of other auditors within the Deloitte network.

Audit coverage

Audit coverage consolidated revenue

84%

Audit coverage aggregate assets

85%

By performing the procedures mentioned above at business units, together with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence about the Group’s financial information to provide an opinion about the financial statements.

Our key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements. We have communicated the key audit matters to the Supervisory Board. The key audit matters are not a comprehensive reflection of all matters discussed.

These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Estimation uncertainty related to the energy reconciliation

Description of the key audit matter

How we have audited this key matter

The energy reconciliation for electricity and gas is where purchases and sales are reconciled. The following processes play a key part in preparing the energy reconciliation: allocation, reconciliation, gross margin modelling, reconciliation records, and grid loss estimation. The energy reconciliation thus forms the basis for (the completeness of) the revenues from energy sales. The estimation of revenues within the energy reconciliation was one of our key audit matters, because to some extent the estimation process is complex and subjective and it is based on assumptions, among which the customers’ consumption of electricity and gas. In this respect we also refer to Note 3Revenues from energy sales and transmission and energy-related activities”, where the estimation of revenues is explained in more detail.

We have tested the design and the implementation of the internal control measures of the Company in respect of the process for preparing the energy reconciliation. In addition, we have verified the arithmetic integrity of the energy reconciliation model, we have verified the reliability of the information on which the estimation of revenues has been based and we have assessed the reasonableness, relevance and consistency of the assumptions applied. In this respect we have specifically focused on the standard annual consumption and the estimation of the influence of weather conditions on this consumption. In addition, we have performed audit procedures on the revenues still to be invoiced after year-end, including subsequent review testing in 2016.

Impairment of (in)tangible fixed assets

Description of the key audit matter

How we have audited this key matter

The (in)tangible fixed assets constitute a significant part of the balance sheet of the Company. Regulatory developments and circumstances on the energy markets may lead to impairment of (in)tangible fixed assets. Both (1) the examination of possible impairment triggers relating to the cash flow generating units of the assets, and (2) testing for an impairment - which the Company is obliged to perform under EU IFRS in respect of cash flow generating units to which goodwill has been allocated ‑ are significant to our audit given the volatility of electricity and gas prices and because to some extent the estimation process is complex and subjective and it is based on assumptions, among which the discount rate.

The regulated assets form the main part of (in)tangible fixed assets (61%). The regulated networks are valued in accordance with the EU-IFRS revaluation model, in which a periodical reconciliation is made with the standardized assets value (“SAV”).

Within the regulation, a grid operator is given the opportunity to recover the SAV through a (regulated) yield. Hence, the risk of impairment for this category of assets is limited. The non-regulated assets mainly comprise sustainable production assets (37%). Since these assets do not generate a cash inflow that is largely independent of other assets, these assets are reviewed for possible impairments together. Capitalization of expenditures on significant projects under construction (2%) takes place in accordance with Eneco’s “decision gate” model, in which the decisive factor is the extent in which the expenditures meet the EU-IFRS capitalization criteria.

We have assessed management’s examination of impairment triggers relating to the cash flow generating units of the assets. We have performed an impairment test on the goodwill, which is allocated to the group of cash flow generating units (CGUs) that forms the segment ‘Energy Company Eneco’, using our own valuation experts. We have evaluated the design and tested the implementation of internal control measures focused on the realization of the management’s impairment test. We have verified the reliability of the information on which the expectations have been based and assessed the reasonableness, relevance and consistency of the assumptions applied. In this respect we have specifically focused on the weighted average cost of capital (WACC) applied and the forecast of the cash flows in the value-in-use model. Furthermore, we have examined the disclosures regarding the assumptions used in and the outcome of the impairment tests as included in Note 14Intangible assets” of the financial statements, which specifically states that the recoverable amount (value in use) of this group of CGUs exceeds the carrying amount.

Reliability and continuity of the automated data processing

Description of the key audit matter

How we have audited this key matter

The Company heavily depends on the IT infrastructure for the continuity of its business operations and for the reliability of its financial reporting.

The accounting processes on which the financial reporting is based are fed and supported by a large number of systems, applications and interfaces (the “IT infrastructure”), which to some extent are mutually dependent on each other. The design, implementation and operating effectiveness of the IT controls through which these systems and applications are managed are critical for the reliability and continuity of Eneco’s accounting processes and, thus, for the realization of the financial statements. An example of this regards the IT infrastructure supporting the customer processes: this infrastructure processes large volumes of transactions. Impairment of the integrity of customer data or downtime of the systems, applications and interfaces used in respect of customer relatead processes, may lead to the fact that the invoicing of revenues is not being performed accurately, completely and timely. Another critical component regards the IT infrastructure supporting the Company’s trade activities. This is due to the large volume and complexity of the transactions and the significance of these transactions for the financial results of the Company. This is why change management and data protection were among the major focus areas when performing our procedures.

We have tested the reliability and continuity of the automated data processing, solely to the extent necessary within the scope of the financial statements audit. To this end we have included specialized IT auditors in our audit team. Our procedures comprised the assessment of the IT infrastructure developments and testing the internal control measures regarding IT systems and processes relevant to our financial statements audit. Our management letter to the Board of Management includes various relevant deficiencies that we have identified and recommendations for further improvements. Following additional, substantive procedures we have established that the deficiencies identified have not resulted in material misstatements in the financial statements. We refer to the paragraph “Risk clusters” on pages 159-160.

Responsibilities of the Board of Management and the Supervisory Board for the financial statements and the Report

The Board of Management is responsible for the preparation and fair presentation of the financial statements in accordance with EU‑IFRS and Part 9 of Book 2 of the Dutch Civil Code, and for the preparation of the Annual Report in accordance with Part 9 of Book 2 of the Dutch Civil Code.  Furthermore, The Board of Management is responsible for such internal control as The Board of Management determines is necessary to enable the preparation of the Report and the financial statements that are free from material misstatement, whether due to fraud or error.

As part of the preparation of the financial statements, the Board of Management is responsible for assessing the company’s ability to continue as a going concern. Based on the financial reporting framework mentioned, the Board of Management should prepare the financial statements using the going concern basis of accounting unless the Board of Management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. The Board of Management should disclose events and circumstances that may cast significant doubt on the Company’s ability to continue as a going concern in the financial statements.

The Supervisory Board is responsible for overseeing the Company’s financial reporting process.

The Board of Management of the Company is also responsible for preparing the Report in accordance with the Sustainability Reporting Guidelines Version 4, level “Core”, of Global Reporting Initiative, including the identification of stakeholders and the determination of material topics. The choices regarding the scope of the Report and the reporting policy, made by the Board of Management, are explained in the chapter “Reporting policy”.

Our responsibilities for the audit of the financial statements and the Report

Our objective is to plan and perform the audit assignment in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion.

Our audit has been performed with a high, but not absolute, level of assurance, which means we may not have detected all errors and fraud.

For an overview of our responsibilities we refer to the appendix of this audit report as included on pages 149-150.

Report on other legal and regulatory requirements

Report on the annual report and the other information

Pursuant to legal requirements of Part 9 Book 2 of the Dutch Civil Code (concerning our obligation to report on the Annual Report and the other information) we report:

  • that we have no deficiencies to report as a result of our examination as to whether the annual report, to the extent we can assess, has been prepared in accordance with Part 9 Book 2 of the Dutch Civil Code, and whether the other information as required under Part 9 Book 2 of the Dutch Civil Code has been annexed; and
  • that the annual report, to the extent we can assess, is consistent with the financial statements.

Engagement

We were engaged by the general meeting of shareholders as auditor of the Company for the financial year 1997 and have operated as statutory auditor since that year.

Rotterdam, February 19, 2016

Deloitte Accountants B.V.

Signed on the original: 

J.A. de Bruin

Appendix: An overview of our responsibilities

Appendix: An overview of our responsibilities

Regarding the financial statements

We have exercised professional judgment and have maintained professional skepticism throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit included e.g.:

  • Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
  • Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control.
  • Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by The Board of Management.
  • Concluding on the appropriateness of The Board of Management’s use of the going concern basis of accounting, and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern.
  • Evaluating the overall presentation, structure and content of the financial statements, including the disclosures; and
  • Evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant findings in internal controls that we identify during our audit.

We provide the Supervisory Board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Supervisory Board, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.

Regarding the Strategic Key Performance Indicators

We have performed our audit on the Report in accordance with Dutch law, including Dutch Standard 3810N, “Assurance engagements regarding reports on corporate social responsibility”. This requires us to comply with the applicable ethical regulations and to plan and perform our audit such that reasonable assurance is obtained that the Report does not contain material misstatements.

The procedures selected depend on the auditor’s judgment, including an assessment of the risks that the Report contains a material misstatement due to fraud or errors. When assessing these risks the auditor takes into account the internal controls relevant for preparing the Report, aimed at designing audit procedures appropriate under the circumstances. These risk assessments do not, however, aim to provide an opinion on the operating effectiveness of the internal control of the entity. An assurance engagement to issue reasonable assurance likewise includes an evaluation of the appropriateness of the principles applied for the Report and of the reasonableness of the estimations made by the Management Board of the entity, as well as an evaluation of the overall presentation of the Report.

Our main procedures comprised:

  • performing an environmental analysis and obtaining an understanding of the relevant social topics and issues, relevant legislation and regulations and the characteristics of the organization;
  • evaluating the acceptability of the reporting policy and its consistent application, which includes an evaluation of the reasonableness of estimations made by the The Board of Management;
  • evaluating the application level according to the Sustainability Reporting Guidelines Version 4 of GRI;
  • evaluating the design and implementation and testing the operating effectiveness of the systems and processes for data collection and processing for the information in the Report;
  • conducting interviews with management responsible for the sustainability strategy and policy;
  • conducting interviews with relevant employees responsible for providing information for the Report, for performing internal audits in this respect and for consolidating the data in the Report;
  • verifying relevant data and internal and external documentation, based on sample tests, to establish the reliability of the information in the Report; and
  • performing an analytical evaluation of data and trends with respect to the KPIs.
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