Strategy

Message from the Board

Eventful year

Eneco Group looks back on an eventful and busy year. A year in which we redefined our strategy and established the first outlines of our new business model. It is our conviction that we can enhance our relevance with our redefined strategy. At the same time, we have been aware since the end of 2015 that we can no longer give structure to our future as an integrated energy company.

We have redefined our strategy in 2015. Our mission continues to be the central focal point: Sustainable energy for everyone. Our ambition is that Eneco, in its new role as a service provider, will be the preferred company for both its customers and partners in 2020. We are developing cooperative partnerships that offer products and services that enable both customers and companies to generate, use, exchange and store their own energy. More than ever before, we are focusing on collaboration aimed at the best possible local solutions. We work together with our customers and put their interests first. There is a good basis for this customer confidence, as is demonstrated by rising satisfaction figures.

Progress achieved

We set three conditions on the choices we wish to make for the years ahead: what we do is relevant to the customer, it contributes to the energy transition, and we are achieving sufficient acceleration. This latter condition means that we only introduce propositions that can quickly be scaled up and made profitable. Our focus lies on three growth areas: we will only build sustainable production facilities like wind farms at the request of or in collaboration with customers, which we refer to as Client Sources, we are developing Smart Sustainable Solutions, and we offer Energy as a Service. In each of these growth areas we have already achieved promising results this year.  

In 2015, we made good progress in the area of Client Sources. Contracts were concluded with large-volume energy users like Google, NS, AkzoNobel and KPN aimed at controlling their sustainable energy consumption. At the request of these types of partners, we build facilities such as wind or solar farms to fulfil their sustainable energy needs. In addition, we are working on a range of Smart Sustainable Solutions. These include smart grids, which enable electricity feed-ins on the existing grid. Another recent example is the Smart Solar Charging project, a residents’ initiative in the Utrecht district of Lombok hat involves the installation of solar power plants on the roofs of schools and charging stations for electric (shared) cars that are able to recharge vehicles with solar energy and can also discharge power from the cars’ batteries. Stedin is involved closely in this initiative. The smart thermostat Toon is clearly a product that falls within the Energy as a Service growth area. We have now sold 225,000 Toon thermostats, in part through other, indirect channels, thus reaching a wider public.

A new direction

Performance in connection with to the new business model relates to the development of new products and services. For this area, we are currently developing indicators that will enable us to show our stakeholders what progress we are making. In the meantime, we are accelerating. Setting up the Innovation & Ventures business unit shows that we are convinced that we are moving in the right direction. We have made a budget a € 100 million available for investment in new products and services and participation in start-ups. In November 2015, we combined our activities involving the smart charging of electric cars in the new start-up Jedlix. Tests involving drivers of Tesla cars and the use of the smart charging app SlimLaden, which was developed by Jedlix, were completed successfully. Our intention is to enter the European market with this app. The first steps will be taken in the Netherlands: a public app will be introduced that can be used at 1,700 privately used Eneco charging stations. We are making even more progress with Jedlix. At the climate conference in Paris, we signed an agreement with Renault for the development of a smart charging app for ZOE, the manufacturer’s 100% electric car. Jedlix will be responsible for developing this app.

In 2015, we acquired the remaining interest in Quby, developer of the Toon intelligent thermostat with which customers can make their homes increasingly smarter. The software will also be made available to other developers as open source, which will enable us to quickly add new user features and services.

Striving to be the preferred service provider

While we have been applying ourselves to the transition to the new business model, we continued to provide around two million customers with electricity, gas and/or heating. Our challenge is working with both models in parallel. Due to the fact that more and more customers purchase a variety of products and services, we have decided that, from now on, we will report the number of contracts rather than the number of customers. This is a better indicator of how successful we are in the transformation process. Good performance in our provision of basic services continues to be essential if we are to be regarded as the preferred service provider for the group of progressive customers who want more than just buying electricity or gas. Our performance with respect to the quality of our traditional services is measured in terms of customer satisfaction and supply interruption durations, which improved compared with 2014. This demonstrates that we are still strongly committed to focusing on the interests of our customers. Our safety performance is an indicator of the quality of our work in connection with the energy grids and sustainable production facilities. Even though the number of occupational accidents was within our target range, we believe it is still too high. The number of accidents resulting in absence from work in relation to the number of productive hours, was too high in terms of our standard. This figure says something about working in a disciplined manner, the attention devoted to safe working conditions, and the safety awareness among management and employees. We are not satisfied with this year’s performance; in some areas there is room for improvement. However, our performance in the collaboration with subcontractors on major, complex projects like the offshore grout project at the Prinses Amalia wind farm was excellent: zero accidents in 350,000 hours worked.

Other non-financial results

Eneco applies the principle of One Planet Thinking: our aim is to keep our own energy consumption and that of our customers within the limits of our planet. This focus is bearing fruit. Although we still impose too much of a burden on the planet, our footprint is getting smaller year by year. Seeking innovative solutions to improve the sustainability of our customers' energy consumption also enables us to make our own supply chain more sustainable. This contributes to the energy system as a whole in the Netherlands and beyond and, thus, to society.

It was agreed during the climate conference in Paris that global warming should stay well below two degrees Celsius. Eneco Group has brought its emissions of greenhouse gases and its targets up to 2020 in line with the path towards the 2˚C objective in 2050. For us, this is a logical objective as it is in line with our mission ‘Sustainable energy for everyone’ and is monitored by us on the basis of the One Planet Thinking initiative. This makes Eneco one of the first companies in the world that demonstrably contributes to the realisation of the global climate objective across its entire supply chain.

Our employees prove to be enthusiastic advocates of our mission. The resulting dynamics are reflected in better alignment with our strategy and in the motivation figures. It is essential that our employees feel connected and that they want to make the effort to achieve acceleration. In a period in which there is a great deal of uncertainty for them about their jobs or futures with our company, it’s encouraging to see how they press ahead and are fully committed to the success of our company. We support them in this by investing in their development and opportunities within our company.

Continuing investment in sustainability

Every year, a number of NGOs, including Greenpeace, the Dutch environmental organisation Natuur en Milieu and the consumer organisation Consumentenbond, rate all the Dutch energy providers. The organisations evaluate the providers on the basis of the environment-friendliness of the power provided, power production assets and investments. With a score of 6.6, Eneco achieved seventh position in 2015, out of the 37 suppliers in the Netherlands. The report from the NGOs notes that there was some confusion in connection with the submission of our data this year. Consequently, several positive figures about the origin of our power were not incorporated, resulting in Eneco's score dropping a tenth of a point this year. Because small suppliers cannot be compared to large energy companies, the NGOs also provide a ranking of the five largest companies, in which Eneco takes top position.  

Eneco invested € 715 million in sustainable energy generation and infrastructure in 2015. We realised a number of sustainable production facilities, including the installation of 23,000 solar panels on the roof of the KYOCERA stadium and the completion of the wind farms Luchterduinen and Delfzijl-Noord. Of the total volume of electricity we supplied to customers, 25% (4.4 TWh) was produced sustainably, an increase compared with the 20% of 2014. The wind energy capacity in the Netherlands increased by 535 MW (473,000 households) in 2015, 225 MW of which was installed by Eneco.

Higher acceptance levels for smart meter

Stedin and Joulz Service Provider were combined in a new grid management organisation that was further structured during the course of the year. The merger is intended to yield lower costs and higher productivity and quality on a structural basis. The unit of Stedin Meetbedrijf that serves the private market became part of Stedin Netbeheer in 2015 with the aim to better streamline the project involving the large-scale rollout of smart meters. There is now a well-oiled machine ready for the task of equipping millions of homes with a smart meter in the years ahead. From April 2015, Stedin has made offers for the installation of a smart meter to 238,000 customers in its grid area. 80% of these customers have accepted the offer. The government is aiming for higher figures. Combined in the sector organisation Netbeheer Nederland, all grid administrators are making an effort to raise the acceptance levels with a new communications initiative.

Financial results

We look back on our financial results with satisfaction and note that the various cost-saving programmes have contributed to the result and have enabled extra investment in innovation. Even though the operating result of € 334 million was 8% lower than in 2014, the net profit of € 208 million is comparable to the previous year (€ 206 million). Eneco maintained its stable A- credit rating in 2015.

Shareholders

We are a company that is rooted in the local environment. This forms a good combination with our group of shareholders, consisting of 53 municipalities. It is also in the interest of our shareholders that Eneco achieves good results. The dividend we pay out often makes up a significant part of the municipal budget. Furthermore, almost all municipalities have a sustainability policy, which is also an area in which we collaborate.

Risks and dilemmas

Eneco is part of a system in which many stakeholders have a role or a voice. Sometimes these interests conflict. Local residents may object to the construction of an onshore or offshore wind farm, while such solutions are essential to making the energy system as a whole sustainable. The call for realistic pricing of polluting substances such as CO2 may be an advantage to one party and a hindrance to another. Eneco continues its dialogue with the various parties in order to have a voice in the decision-making process. We limit our own risks by making focused choices. This is reflected in the Client Sources growth area. Customer initiated construction means that we will only develop new sustainable production facilities together with or at the request of customers that will purchase the energy produced and if there is sufficient support in the immediate vicinity. An example of such a project is the Delfzijl-Noord wind farm that we constructed for Google.

There have also been setbacks in the development projects. The Navitus Bay offshore wind farm (UK), the preparations for which started in 2012, was refused a permit by the British Ministry of Energy and Climate Change. After careful consideration, we decided not to dispute this decision. The Board of Management thanks all the municipalities on the British south coast that were involved, and all the stakeholders, including the potential suppliers, for their efforts towards this project. There was also a setback with respect to the Prinses Amalia wind farm in the form of a fault in the design, which had to be repaired to prevent any future damage or possible hazardous situations. All 60 wind turbines have been repaired. The repair, which was carried out entirely at Eneco’s expense and did not result in any production loss, has resolved the problem fundamentally. The Prinses Amalia wind farm has generated a very predictable high production in recent years.

Eneco concluded a renewed contract with the company Air Liquide for the purchase of energy produced by Pergen. This is an efficient, reliable and flexible power plant, which converts gas into electricity and steam for industrial use. This contract formed a satisfying solution for both parties that ended a dispute about guarantees.

The future

The future of our company has changed since regulator ACM announced, by means of an enforcement decree, that Eneco is required to unbundle its production and commercial activities and the grid administration operations, no later than 31 January 2017, in accordance with the Independent Network Management Act. On 13 January 2016, Eneco Holding N.V. submitted a statement of objections regarding this enforcement decree, the result of which is not yet known at the time of publication of this annual report. The procedure referred to the Court of Appeal in Amsterdam is also continuing. As part of this procedure, the Court of Appeal must assess whether the group prohibition is an infringement of the right to the protection of property described in the First Protocol to the European Convention on Human Rights. It is expected that Court of Appeal will issue a ruling in this matter within one to two years, as a result of which the unbundling may still be declared unbinding. Nevertheless, we have to start preparations to effectuate unbundling in accordance with the ACM's enforcement decree. To this end, Eneco is preparing an amended unbundling plan that shall be submitted to the ACM in the first half of 2016.

On behalf of my colleagues in the Board of Management, Guido Dubbeld, Kees-Jan Rameau and Marc van der Linden, I invite you to read about our performance in 2015 in more detail.

Jeroen de Haas
Chairman of the Board of Management Eneco Holding N.V.

Trends and developments

Relationship with our strategy

The energy world is changing. We are moving from a centrally and conventionally organised energy system to a system that is decentralised and sustainable. More and more, customers feel the need to take their energy supply into their own hands. Smart technologies increase the possibilities to fulfil specific customer needs.

The energy transition is progressing in line with the expectations shared by Eneco in earlier analyses. We are currently at the second stage (see figure). The share of sustainable energy has increased, in particular as a result of large-scale sustainable projects, and the production of energy is still largely organised centrally. In addition to the plans to achieve a sustainable energy supply by means of big projects, such as the plans for large-scale offshore wind energy included in the Agreement on Energy for Sustainable Growth (Energieakkoord), we now notice a parallel trend involving the decentralisation of energy systems (stage 3). Achieving the goal of a truly sustainable energy supply presents a number of challenges as well as a range of opportunities, the most relevant of which are described below.

Obstacles to sustainability

In 2020, 14% of energy should be generated from sustainable resources, rising to 16% in 2023. According to the most recent calculations in the National Energy Outlook 2015 published by the Energy Research Centre of the Netherlands (ECN), the target of 14% in 2020 will not be met. It is expected that the share of sustainable energy will not exceed 12.4%.

The main obstacles for speeding up the process of increasing sustainability are the complex and lengthy procedures for the construction of onshore wind turbines and the installation of district heating grids. Another factor is the lack of a concrete long-term perspective in the Netherlands, which makes it difficult to make choices about the necessary innovations. Furthermore, the industry sector, the transport sector and households have reduced their energy consumption to a lesser extent than the additional target set in the Agreement on Energy for Sustainable Growth.

Low electricity price

The economic crisis resulted in a substantial drop in energy demand and, consequently, a lower electricity price. This was to the advantage of customers, but was also reflected in the revenues of energy companies. Although the economy is improving, the price continues to be low. This is due, on the one hand, to the more efficient use of energy by customers and, on the other hand, to the increase in the supply of sustainable energy. The marginal costs for the production of solar and wind energy are relatively low. Therefore, the energy produced by these systems is sold on the market at low prices and replaces the energy produced by conventional energy plants. A large number of, for the main part, gas-fuelled energy plants, were shut down over the past few years.

Cheap coal causes increase in carbon emissions

At the international level, the prices of the resources coal, oil and gas dropped significantly. The price of coal is particularly low. Consequently, the majority of the plants in operation are coal fuelled, while the relatively expensive, but also cleaner, gas-fuelled plants are standing idle. Despite the substantial drop in the price of gas, the spark spreads on gas plants are still mostly negative, as a result of which even new gas plants are taken out of production. Following a decrease in carbon emissions in the Netherlands since 2010, the tide turned when the carbon emissions of energy companies increased in 2014. In the first two quarters of 2015, these emissions were even higher than in the corresponding period in 2014. Total carbon emissions in the Netherlands also increased in this period.

Low carbon price

The Emissions Trading System (ETS) is the European carbon emission rights trading system. Companies are required to pay for their carbon emissions by purchasing carbon emission rights on the market. This stimulates them to invest in production methods that lead to lower carbon emissions. However, at present, ETS does not perform as well as it should. The price of emission rights is far too low, resulting in insufficient stimulation of investment in sustainable energy, energy efficiency and innovation. In fact, the opposite is occurring: lately, the share of polluting coal in the Dutch energy mix has increased due to the low carbon price. According to the National Energy Outlook 2015, the carbon price will not exceed € 15 to € 20 per ton in 2030 if the policy does not change. The carbon price is a given that cannot be influenced by Eneco. As the current low carbon price means that coal will continue to be part of the energy mix, Eneco is lobbying to have coal-fuelled plants closed down earlier than anticipated.

Gas plants still necessary 

As long as the amount of sustainable energy produced is not sufficient to meet the energy demand of all customers, it will be necessary to use gas-fuelled plants. Furthermore, to guarantee security of supply, governments and national grid operators are striving for a comprehensive approach at the European level as well as a single European market, for example by expanding the interconnection capacity (grid connections with surrounding countries).

In 2015, the new international Flow-Based market coupling was introduced. Even though Flow-Based market coupling is intended to optimise cross-border capacities across Western European markets, it also leads to more market fluctuations in 'small' countries.

Price continues to be important

Each year, more and more people switch to a different supplier, mainly because of price differences: 13.3% in 2015 and 12.2% in the year before that, according to the ACM. Price comparison websites play an important role in this process, but, increasingly, energy companies also contact customers directly, for example at home or while they are shopping. By offering customers an immediate discount, they try to convince them to switch suppliers.

In addition to this form of price competition, customers negotiate discounts through collective energy purchasing initiatives. This kind of price-driven purchasing of energy does not sufficiently take into account the amount of support provided by the different energy companies to enhance the sustainability of the energy supply of their customers.

Opportunities for sustainability 

Despite the fact that, in many cases, a lower energy price is a reason to switch suppliers, more and more customers are willing to invest in generating their own energy. There is a strong increase in local actions taken by cooperatives, crowdfunding initiatives, businesses, households and others choosing to become self-sufficient in their energy supply (prosumers).  In particular, there was an exponential growth over the past years in the number of photovoltaic systems (PV systems) installed on roofs, the cost price of which decreased by no less than 70% since 2009. At present, the number of households in the Netherlands with registered solar panels is nearly 280,000.

We are getting closer to the moment where the cost of power generated by sustainable systems equals the cost of conventional energy supplied by the electricity grid. Even though, at present, the transition to sustainable energy is mainly driven by measures taken by the government, price competition could become the leading driver in the future.

Sustainability district heating improved

With the publication of the perspective on district heating (Warmtevisie) in 2015, the cabinet aimed to achieve a breakthrough to improve the sustainability of the supply of district heating. Gas will have a less dominant role. In the future, heating will be generated increasingly by means of sustainable resources such as residual heat, geothermal energy, biomass and thermal storage systems.

More and more households use electric heat pumps in addition to gas and sustainable heating. At many locations, fully electric heat pumps or hybrid versions (electricity in combination with gas) will replace the conventional central heating boiler. All-electric districts, where the houses do not have a connection to the gas grid, already exist in the Netherlands, such as the newly constructed Hoog Dalem district in the municipality of Gorinchem.

Currently, many of the gas pipes in the Netherlands are due to be replaced. It would be preferable to assess what the most appropriate local solution would be for each separate case: reinvesting in gas pipes, replacing gas pipes with sustainable heating pipes, a combination of these two options or all-electric city districts.

Different form of collaboration 

The combination of the trends towards decentralisation and electrification results in local differences. In each city district, the energy transition is manifested in another way. The result is a varying combination of local energy production systems in addition to variations in energy demand due to factors such as the use of electric cars and heat pumps and the presence of large industrial companies. These variations in local energy supply and demand within the clusters require a different, customer-oriented approach. Close collaboration between parties should result in the best solutions at the local level.

Electrification stimulates new solutions

The advancement of electrification and local differences in electricity production and consumption lead to an overload in certain parts of the network. To solve this problem, many grid managers assess the electricity flows in their networks and market parties attempt to enhance flexibility in the local supply and demand of electricity in order to maintain the balance.

Tesla took a major step in this direction in 2015 with the introduction of the Powerwall, a home battery that stores power generated by solar panels, which is used for charging electric cars and to provide electricity for homes. At the central level, grid managers are investigating alternatives for dealing with the decrease in conventional flexibility.

Smart technologies also applied in the energy market

The terms 'smart' and 'energy' are becoming more closely associated. This is due mainly to the increase in the production of sustainable energy and the corresponding need for more flexibility and control over the (personal local) energy system. As a result of the introduction of smart meters and the installation of intelligent thermostats in buildings, customers and energy companies gain an increasingly better understanding of energy consumption. This leads to more control and significant energy savings on the part of the customer and a better balance of energy supply and demand.

The possibilities for adding value for customers are increasing. Added value is provided, in particular, in the form of new services that enhance the flexibility and integration of energy systems. Apps are available for smart charging of electric cars and intelligent solutions are used for battery storage of solar energy generated by rooftop panels.

Large companies use energy to achieve business objectives

A growing number of companies link energy to their underlying functional needs and business objectives. Examples include increasing the sustainability of their transport or creating workspaces with a comfortable indoor climate to increase the productivity of their employees. More and more, energy is expected to be sustainable as well as affordable and reliable and to contribute to business objectives by means of smart solutions.

New opportunities, new markets

The described developments create new opportunities and markets. New business models are emerging and old business models are being adapted to be able to follow these trends. However, in addition to the new opportunities presented by these new markets, it also means that new competitors are entering the energy market. To cope with this competition, energy companies all over Europe are changing their strategies and placing more emphasis on sustainable energy and customers.

Eneco has already been focusing on sustainable energy together with its customers for many years. In this respect, Eneco has an advantage over most European energy companies. In order to maintain and widen our lead, we are taking a further step forward on the basis of the developments and trends. At the beginning of 2015, Eneco redefined its strategic direction to place more emphasis on the development of innovative products and services. To ensure that we continue to be relevant for current customers and to be able to attract new ones, we focus on innovation, collaboration and acceleration. The updated and innovative strategy is presented in the section Redefined strategy.

Redefined strategy

Eneco helps customers to take a leading role in energy transition

Eneco Group adjusted its strategy in 2015. In collaboration with our customers and external partners, we are transforming from an energy supplier into a service provider and a platform for the coordination of the supply of and demand for sustainable energy at the local level. This provides citizens and businesses with the possibility to further increase the sustainability of their own energy supply.

Our mission – Sustainable energy for everyone

Our mission, Sustainable energy for everyone, has not changed since 2007 and still holds true. Only when the amount of energy consumed by our customers and our own organisation is reduced to within the limits of the regenerative capacity of our planet (One Planet Thinking), will we have succeeded.

In view of the trends in the energy market, our mission is more relevant than ever. With our vision Decentralised, Sustainable, Together, we had taken the lead in the energy market. It can be seen that the energy transition is now spreading more and more to the local level. This marks a new phase for our vision. We must adapt our role to meet the expectations of our customers in this new phase. This also requires a redefined strategy.

Strategic framework

Our redefined strategy

Up until now, we have concentrated our efforts on increasing the sustainability of our own central energy supply. From this moment onward, we shall sharpen our focus on collaboration and act as a partner in the search for optimal (local) sustainability-enhancing solutions for our customers. As a company that aims to operate within the spirit of cooperation, we develop products and services that enable our customers to generate, consume, exchange and store their own energy in collaboration with each other and with us. Eneco's aim for 2020 is to become the preferred partner of customers and partners in the area of increasing sustainability.

Our mission, which forms the core of our strategy, determines our direction. It is surrounded by our cultural values: 'Together', 'Instilling trust and taking responsibility' and 'Customer first'. These values steer our daily activities and our conduct and are the success factors for the realisation of our strategy. In combination, the strategic principles 'Customer relevance', 'Contribute to the energy transition' and 'Acceleration' are the motor of our transformation. The choices that we make must be in line with these principles. With our new business model, we focus on three growth areas: ‘Client Sources’, ‘Smart Sustainable Solutions’ and ‘Energy as a Service’. In this section, our strategy is explained in more detail on the basis of the three strategic principles.

Customer relevance

We add value for customers by meeting their needs with innovative products and services. We ensure that the energy supply to our customers is affordable and reliable. The advancement of smart technologies in the energy world allows us to not only provide flexibility, but also add value for our customers in a growing number of ways.

To this end, we focus on the following goals:

  • Customers want to have more control over their energy and increasingly see energy as a means that contributes to the achievement of other goals. We aim our attention at fulfilling these underlying needs.
  • We strengthen and accelerate the development of an innovative portfolio of products and services for and of our customers.
  • We ensure that energy contributes to the business objectives of companies.
  • We proactively seek to become stronger and improve in areas in which we wish to understand and support customers.
Enabling the energy transition

We focus on smart sustainable solutions in order to enable the energy transition and to keep the cost to society as low as possible.

Local energy production and the growing use of electric transport result in 'new' peaks in the electricity distribution networks. To safeguard the security of supply – and the corresponding comfort perceived by the customer - we create a good balance in the supply of and demand for energy within and between city districts. Without the use of intelligent (local) flexible solutions, this would require major investments in network upgrades.

We focus on the following goals:

  • For each area, we aim for the optimal combination of energy systems at the lowest cost to society.
  • We act as an energy platform and work together with stakeholders at the local level in order to achieve this optimal combination.
  • We are building strong relationships and strategic partnerships with customers.
  • We work together with customers on the basis of the cooperative spirit and equality.
  • We do not instantly regard newcomers on the energy market as competitors, but first assess if it is possible to benefit from and give shape to the energy transition by concluding strategic agreements with these parties.
Acceleration

The plans have been made, but increasing sustainability in the countries in which Eneco operates is not progressing as quickly as it should. In addition, the energy market is changing and new competitors are entering the market. We have the capacity to act and need to accelerate in order to stay in the lead in the transition to affordable and reliable sustainable energy.

Acceleration means ensuring that we are able to put our existing knowledge and qualities, our customer base and our activities to use in the energy transition in a relevant manner and as quickly as possible. We accelerate by making propositions available on a large scale and ensuring that they become profitable in a short period of time.

We focus on the following goals:

  • We will continue to advocate and emphasise the necessity of the energy transition. This requires persuasive skills and thought leadership.
  • We seek partnerships and collaboration with other parties to increase our capacity to act.
  • In order to obtain sufficient economies of scale with respect to our services and products, we aim for the expansion of our activities to other countries.
  • We take the economies of scale of our products and services into account and seek to develop commercially viable and repeatable projects.
Growth areas

We are going through a transformation from a traditional energy company to being a service provider. We are becoming a developer of smart and innovative solutions. The interests of customers come first, which means that customers determine the direction.

Client Sources: customers drive construction

We will only construct assets and infrastructure at the request of or in collaboration with customers. This way, we enable our business customers to demonstrably increase the sustainability of their business operations in line with their business objectives. With the same financial means, we will expand sustainable production, instil more trust with respect to our investments and share risks with partners.

Important examples are our partnerships with the Dutch railway company NS and with Google, which were concluded in connection with the aim of these companies to increase the sustainability of their energy supply. For a description see New products and services.

Smart Sustainable Solutions

Within this growth area, we develop smart solutions that result in a better match between supply, demand and backup solutions in order to reduce the impact on the infrastructure and to enable consumers and businesses to make optimal use of sustainable assets.

Together with our business customers, we use available data to optimise processes and utilise the available flexibility. This means that the IT component of our activities is becoming part of our core business. Making systems smarter and the use and analysis of data is something that will be applied in every part of the Eneco organisation. We invest in innovation within our own company as well as through participations in start-ups. We will also join collectives similar to DE Unie.

An area in which we have already implemented smarter control of the energy demand is the horticultural sector. By means of smarter management of the heating buffers of a group of horticulture companies, we were able to lower the system costs for district heating in Rotterdam. For a description see the section New products and services.

Energy as a Service

The needs of our customers determine the demand for sustainable energy. They do not ask for energy as such; what they want is a comfortable home climate, predictable energy costs and a safe installation. Energy is more than the supply of electricity, gas or district heating. Energy is becoming a service product that is aimed at providing what customers want. By obtaining a better understanding of customer needs, we strengthen and accelerate the development of an innovative portfolio of products and services for and of our customers.

Eneco also focuses on Energy as a service for its business customers. With the use of data and smart technologies, we give our business customers more control over their energy supply. We provide services that ensure that the energy supply contributes to the achievement of the goals set by these companies.

The characteristic product that supports this growth area is our digital platform Toon. Toon was initially a smart thermostat, to which new functionality has been and will continue to be added. For a description see New products and services.

What do we need to be successful?

Our values 'Together', 'Customer first' and 'Instilling trust and taking responsibility' steer our daily activities. We work together with colleagues, entrepreneurs and experts. We are building strong relationships and partnerships with customers and shareholders. Thus, we increase our knowledge and impact. Trust placed in us by customers forms the basis. We focus on collaboration and offer quality products and services as directed by customers, and support them in achieving a sustainable energy supply. External leadership can only be achieved if we demonstrate internal leadership. New knowledge and skills are acquired at an increasingly higher pace. By instilling trust and taking responsibility, we are keeping each other alert and are transforming into a flexible, performance-driven organisation.

The trust placed in us by our partners and that we place in them forms an important basis for our mutual relationships. Eneco must be a solid partner in order to ensure that sustainable energy will continue to be affordable and reliable in the future. Consequently, profitability is very important, as this ensures that we continue to have sufficient access to the capital that we require. This is why we aim for a short-term return on investment on our activities. We also pay close attention to the economies of scale of the services that we develop on the basis of our strategy. Our focus is shifting from conducting field tests to developing commercially viable and repeatable projects.

To achieve additional acceleration, Eneco aims to expand its activities to other countries. Internationalisation is an important tool for achieving sufficient economies of scale for our products and services. Furthermore, it enables us to realise the desired spreading of risks in relation to regulations and also makes us better prepared to deal with differences between countries with respect to the moment at which customers are involved in innovative solutions.

Issues

What could be improved?

In our day-to-day activities, we are confronted with issues that limit us in achieving our objectives. When this happens, we search for solutions and contact partners in the supply chain to find alternatives together.

Customer satisfaction

Customers take energy for granted and think that it should always be available at the lowest possible price. With its sustainable approach, Eneco has demonstrated that affordability and unquestionable availability of energy can go hand in hand with making a contribution to a cleaner world. These efforts have been rewarded: in the past year, the Net Promoter Score rose from -21 to -12. The Net Promoter Score (NPS) is a method used by organisations to measure the degree to which our customers recommend Eneco to others. Traditionally, energy companies have a low NPS. Even though our increased NPS is a definite step in the right direction, the score is still relatively low compared with companies in other sectors. The opposite can be said about the NPS given by customers who have purchased a Toon thermostat, which is a positive number. Toon customers are also more loyal to the company. Eneco considers this to be a vote of confidence for the organisation's strategic course. Customers reward Eneco for the development of a product and related services that provide added value with respect to the manner in which, nowadays, customers wish to handle their energy system.

Acceleration

The energy sector is shifting rapidly from a centrally managed production, distribution and supply model to a decentrally managed model that involves local production, storage and exchange of energy. Customers are more and more in charge of their own energy supply, for which purpose they make optimal use of the available technological innovations. With its sustainability strategy, Eneco is one of the frontrunners in the energy transition. In order to maintain this lead, it is essential that the company accelerates. This is achieved not only by accelerating the development and marketing of new products and services, but also by combining all innovation-related activities into a new business unit, Eneco Innovation & Ventures. At the launch in August, we announced that 100 million euros have been made available for this business unit for investment in innovative products, services, start-ups, acquisitions and partnerships. The actions that have been taken so far give us confidence but, at the same time, they also make us aware that we need to move even faster.

Development of wind energy projects

Experience gained with the Navitus Bay offshore wind energy project in the United Kingdom, has taught us that such projects require us to be even more thorough in our preparations. Following several years of preparation for this project, we were at the verge of being given the green light to get started. Unfortunately, we were not able to obtain a building permission and were forced to cancel the project. The lesson that we have drawn from this, is that the opinions of stakeholders must play an even bigger role in our decision-making and preparation process. In connection with this setback, Eneco now applies a stricter policy for the development of wind farms. From now on, Eneco will take the question of whether the process of obtaining permits and subsidy takes place at a relatively early or late stage into consideration in its careful selection of offshore wind energy development projects. This means that Eneco focuses on minimising development costs in the period prior to the process of obtaining permits and subsidies. The offshore wind farms that are currently being developed by Eneco are compliant with the framework of the stricter policy.

Transparent communication on smart meters

Grid managers have a legal obligation to offer all households in the Netherlands the possibility to have a smart meter installed. This process must be completed by 2020 at the latest. The Agreement on Energy for Sustainable Growth states that smart meters and the energy consumption management devices connected to these meters should contribute substantially to higher energy efficiency. At the end of 2015, Stedin had already made more than 545,000 offers; this is approximately 25% of the total number of households in the area covered by Stedin. Customers are satisfied with the offer they have received. On 12 January 2016, Stedin installed the 500,000th smart meter. The logistics involved in increasing the number of installations did present a challenge. We have been able to bring the installation team to full strength by employing people with other professional backgrounds. The success of the roll-out of these meters is determined by the degree of acceptance by the general public as well as the possibilities for the development of useful applications.

In general, the degree of acceptance of smart meters is high. To a certain extent, there is also resistance among the public, mainly in connection with privacy and insufficient recognition of the usefulness and necessity of the meters. It is up to all parties involved to provide clear and transparent communication on smart meters.

Absence due to illness

Notwithstanding the high level of motivation of the majority of our employees and  their alignment with our mission and strategy, we also notice that some employees find it difficult to deal with the changes within the organisation. This is reflected in a higher than acceptable absence due to illness percentage (see Workforce). More attention will be paid to the prevention of absence due to illness by the Board of Management and at all other management levels. Regular discussions between managers and employees on this topic will enable both parties to take preventive measures.

Legislation and regulations

Eneco approaches politicians and participates actively in relevant consultation bodies with the aim to promote the adoption of regulations and measures that stimulate the use of renewable energy and make it more attractive.

Unbundling of energy companies

The Dutch Supreme Court issued a ruling on the forced unbundling of Dutch integrated energy companies on 26 June 2015. The Supreme Court ruled that the articles relating to the mandatory group prohibition in the Electricity and Gas Act, also referred to as the Independent Network Management Act (Wet Onafhankelijk Netbeheer), are not in conflict with European Union legislation on the free movement of capital and freedom of establishment. The Supreme Court referred judgement on whether the forced unbundling is an infringement of the right to the protection of property described in the First Protocol to the European Convention on Human Rights, to the Court of Appeal in Amsterdam. This Court must examine whether the Act is in contravention of that Article of the First Protocol. This procedure was brought before the Court of Appeal in Amsterdam in 2015. It is not known when the Court of Appeal in Amsterdam shall issue a ruling in this matter.

In the meantime, the Authority for Consumers and Markets (ACM) issued an enforcement decree as a consequence of which Eneco Holding N.V. must be unbundled by ultimately 31 January 2017. On 13 January 2016, Eneco Holding N.V. submitted a statement of objections regarding this enforcement decree, the result of which is not yet known. Even so, Eneco has to start preparations to effectuate unbundling in accordance with the ACM's enforcement decree. To this end, Eneco is preparing an amended unbundling plan that shall be submitted to the ACM in the first half of 2016.

Active role in legislation

STROOM, the bill that relates to the implementation of the Agreement on Energy for Sustainable Growth and was supposed to replace the existing Electricity and Gas Act, was adopted by the Dutch House of Representatives in 2015, but was rejected by the Senate. The STROOM bill contained a more detailed specification of the task description of grid operators. Group prohibition, which relates to the unbundling of energy companies, was also part of the bill. The group prohibition was the reason why the bill was rejected by the Senate, as the Senate's aim was that group prohibition would only take effect in the Netherlands when it is also implemented in other European countries to prevent a competitive disadvantage for Dutch companies.

During the preparation of and debate on the bill, Eneco also provided input on other aspects, including specification of the temporary tasks of grid operators and a plea for more transparency with respect to the origin of grey electricity (full disclosure).

Furthermore, the Offshore Wind Energy Act was put into force in 2015. This act is intended to stimulate offshore production of wind energy and includes a bidding system for offshore sites. It is expected that the first site will be auctioned during the course of 2016, after responsibility for the installation of an offshore grid has been assigned to TenneT in a separate Act.

In 2015, Eneco was again strongly committed to the implementation of the Agreement on Energy for Sustainable Growth: the company made many investments in sustainable energy, contributed to energy efficiency, in particular in offices and other business premises, and participated in various work groups of the SER energy agreement.

Conscientious data management

Grid operators are installing smart meters on a large scale. The increased use of these meters means that more and more data is exchanged between grid operators, suppliers and other market players. In addition, the meters enable the provision of flexible services such as demand-side management (switching devices on and off) and variable tariffs. In view of this development, proper sector agreements on the exchange of data that take into account costs, quality and innovation are becoming increasingly important. Eneco is a driving force for the sector in this area.

This is another area in which privacy is an important issue. Eneco has established an internal Privacy Board that focuses on an active privacy policy. Transparency forms the centre of this policy: customer must be aware of what happens with their data.

Enhancing financial benefits of sustainable energy

In 2015, the government published its vision on district heating in which it states its intention to opt for increasing the sustainability of the supply of district heating, irrespective of the technology that is used to supply the heat (for example gas, electricity, collective heating or individual heat pumps). For the long term, this means that there will be more attention for electrification and smart solutions. In addition, the District Heating Act will be adapted to remove current bottlenecks. One example of this is the fact that suppliers are not responsible the heating facilities in apartment buildings and buildings owned by housing corporations. This stipulation provides more clarity for Eneco in its role as supplier and also limits financial liabilities.

Electrification of the energy supply is also supported by a shift in energy tax in the tax plan for 2016, resulting in lower tax on electricity and higher tax on gas. This has a positive effect on the development of sustainable heating solutions, such as heat pumps and solar boilers. Taking energy saving measures will also become more interesting.

The transmission tariffs for electricity and gas also have an effect on the energy bills of end-users. As the manager of a gas storage facility, Eneco continues to advocate transmission rates that are based on actual costs incurred to prevent unnecessarily high charges for customers. One of the results of our efforts in this respect is the fact that, at the end of 2015, the ACM ruled in favour of Eneco and other companies that transport LNG (liquid natural gas) on the matter of lowering of the rates charged by GTS (Gasunie Transport Services) for the use of the Gate terminal, an import terminal for LNG on the Maasvlakte.

Working together for energy transition

Eneco invested a lot of effort and energy in 2015 in the founding of the Dutch Association for Sustainable Energy (Nederlandse Vereniging voor Duurzame Energie (NVDE)). The association was founded on 15 July 2015 and represents around 1,000 companies and energy cooperatives.

This new organisation aims for an energy supply that is entirely based on renewable energy. NVDE forms the basis that enables sector organisations and companies with operations in the field of sustainable energy to bundle their forces. The business operations of the members of the organisation cover the entire supply chain: production of sustainable energy, grid management, supply of electricity, district heating and gas and the supply of applications and providing services such as energy storage, electric transport and heat pumps.

Eneco believes that the biggest challenges in connection with accelerating the energy transition lie in the interface areas between these different roles and tasks. Consequently, collaboration is an essential requirement, also with respect to representing interests.

United Kingdom

In 2015, the British government concluded the first contracts with producers of renewable energy under the new subsidy scheme. On the basis of these 'contracts for difference', the government pays producers a guaranteed price for their electricity. The first contracts relate to both onshore and offshore wind energy. The government is also investigating possibilities for the stimulation of investments in new technologies in areas such as energy storage, heat pumps and energy efficient lighting.

A number of other measures taken by the British government are aimed at limiting government expenditure on increasing the sustainability of the energy supply. The existing subsidy scheme of certificates for onshore wind energy will be discontinued a year early, in 2016, the subsidy for projects involving carbon recycling and storage has been cancelled and the compensation paid for electricity supplied to the grid by households, such as energy produced by means of solar panels, will be reduced significantly.

Belgium

The year 2015 was dominated by the redistribution of the costs relating to the preparation of the energy policy. Due to changes in the regulatory framework, costs in the form of unpaid invoices and administrative and IT expenses have increased. Eneco Belgium was one of the driving forces behind the development of several policy initiatives in Flanders, Wallonia, Brussels and at the federal level, aimed at redistribution of these costs among suppliers, grid operators and several government bodies. Furthermore, discussions are currently taking place in all regions relating to several public service obligations, restructuring of the social tariff and simplification of the subsidy on green electricity. As far as the government is concerned, the ultimate goal in each of these cases is to lower the total energy costs for end-users.

Eneco Belgium also played an important role in the development of several, for the main part Flemish, initiatives in the areas of solar energy and energy storage. Eneco shall continue to share its progressive views with the Flemish parliament. Another development initiated by Eneco was the restructuring and further professionalising of the Organisation for Sustainable Energy (Organisatie voor Duurzame Energie (ODE)). Eneco has been asked to assume the chairmanship of this association. Topics addressed by this organisation in 2015 include the issue of spatial planning and flexibility of the energy supply.

Stakeholders

What are the views of our stakeholders?

We attach great importance to establishing if mutual interests are adequately served and promises are met in our regular contact with stakeholders and we provide transparent information on this matter in this annual report.

We believe that it is essential to establish meaningful relationships and work together on making sustainable energy available for everyone. To be able to achieve this mission and, at the same time, continue to be relevant for our customers and society, our company is going through a rapid transformation. Both in this phase and in the future, the support and confidence of our stakeholders is crucial.  

For this reason, we maintain frequent contact with our stakeholders to find out what they consider important and to see how we can respond to this. In addition to our regular meetings with stakeholders, we also frequently communicate with industry sector organisations, partners and suppliers, politicians, the Ministry of Economic Affairs and the European parliament.

We carried out a materiality analysis again in 2015 to establish what is relevant for our stakeholders. They have indicated that, in general, they find the information provided in our annual report sufficient, but would welcome more detailed information on some items. These items are summarised by stakeholder group in the table below, with links to the locations in this report where the requested information can be found. The table also shows the types and frequencies of our contacts and dialogues with stakeholders. Additional information on dialogues that took place in 2015 can be found below the table.

Topics that stakeholders want to read about

Material themes

Regular meetings/exchange of information

Customers

 

Financial performance

Energy and emissions

Sustainable electricity

Customer satisfaction

Safety

Security of supply

Innovations

Customer panels

Round table discussions

Account management meetings

NPS survey Eneco (continuously)

Customer satisfaction survey Stedin (periodically and randomly)

Friends of Toon (website)

Environmental Dinners (annually)

Shareholders

 

Financial performance

Sustainable electricity

Safety

Shareholders' meeting (twice a year)

Meetings with large shareholders (several times a year)

Municipalities / local residents

 

This group includes municipalities in the capacity of 'competent authorities' for granting licences for wind energy projects in the municipality concerned and surrounding municipalities as well as residents in the vicinity of such projects in the municipality concerned and surrounding municipalities.

Environmental management is described in the section Investment in capacity and production

Energy and emissions

Sustainable electricity

Safety (in connection with the applicable laws and regulations)

 

Eneco takes residents in the vicinity of wind energy projects seriously and aims to establish a sustainable relationship with them that is based on trust. In connection with this, Eneco has also written a community engagement document for onshore wind energy projects.

Meetings take place when relevant in connection with a specific project.

Investors

 

 

Financial performance

Energy and emissions

Sustainable electricity

 

Consultation via Investor relations (annually)

Providers of capital

 

Financial performance

Sustainable electricity

Greening of grid losses

Innovation

Reports from rating agencies serve as the main source of information for this target group. Consultations with rating agencies take place at least twice a year.

(new) Employees / Works Council

 

Financial performance

Energy and emissions

Sustainable electricity Innovation

Employee development

Works Council meetings (several times a year)

Employee motivation survey (annually)

Alignment surveys (quarterly)

Environmental organisations / NGOs1

 

Energy and emissions

Sustainable electricity

Grid losses

Innovations

Regular meetings with these organisations via Public Affairs

Regular meetings with WWF in connection with Climate Saver

  1. 1These organisations include: Greenpeace (Netherlands + International), Natuur & Milieu, Friends of the Earth Netherlands, Wadden Association and various energy cooperatives as well as industry sector organisations such as VNO-NCW, Energie Nederland and NVDE.
Eneco Forum

Eneco Forum plays a central role in the dialogue with our consumer customers. With nearly 11,000 members and 7,000 enquiries, 73,000 unique visitors and a total of 204,000 page views per month, it is the biggest forum in the energy sector. Approximately 70% of the topics relate to our smart thermostat Toon. The forum is also used to invite customers to participate in pilot projects, for example to test the use of Toon in combination with an electric car or Toon functionality. Eight co-creation sessions were organised in 2015 through the Eneco Forum.

Other ways in which customers are involved by Eneco include operation 'clean sweep'. For this project, in which we take a close look at the way we communicate with our customers, customers literally join us at the table to provide input on how we communicate with them.

Collaboration with our shareholders

The open nature of the dialogue with our shareholders regarding Eneco and developments affecting Eneco contributes to establishing good relations with our shareholders. We collaborate with shareholding municipalities to achieve common goals and work together on strategic (sustainability-related) issues and issues that affect the general public. This includes the district heating supply in the province of Zuid Holland, a project in which we collaborate with our shareholders on the development of a Heat Cycle that transports residual heat from the port area to cities and greenhouse horticulture areas. Other examples are the stimulation of the implementation of sustainable energy (island of Ameland and Kyocera in The Hague) and the construction of sustainable residential districts (Couperus in The Hague, Hoog Dalem in Gorinchem).

The collaboration on the island of Goeree-Overflakkee and the Energetic Region are examples of partnerships that we create with the aim to enhance the sustainability of businesses and to establish business cooperatives. We also collaborate in areas such as smart city (Rotterdam, The Hague), tackling the illegal cultivation of hemp and the organisation of informative events (Energy Festival, Sustainability Conference).

Furthermore, we regularly invite civil servants of the shareholding municipalities to visit Eneco Group activities such as Eneco Innovation Day, an event during which we explained Eneco's redefined strategy in concrete terms.

Business customers become partners

More and more often, our relationships with business customers take the form of long-term commitments and partnerships. Our common interest is the ambition to enhance sustainability in our own business activities and in the supply chains in which we operate. This common ground forms a basis for investment, strengthening ties, collaboration and sharing knowledge. There is a continuous dialogue that goes beyond the supply of and demand for services. This is illustrated by Eneco's annual Environmental Dinner, which gives large and smaller companies the possibility to inspire each other and exchange experiences on the basis of the shared objective of creating value for society and companies by applying a strategy aimed at sustainability. In 2015, the ninety participants engaged in dialogues on topics such as innovation, collaboration, interaction and inspiration.

As part of the collaboration with railway company NS, a number of other front-runners and Eneco organised a round table session around the theme 'sustainable door-to-door mobility'. The Port of Amsterdam and Eneco both invited a number of business partners and contacts to attend the opening of our Windlab in Amsterdam. Guests were treated to an interesting programme that included contributions from the municipality of Amsterdam and Tesla.

At events organised by our partners, we presented Eneco's e-charging plaza to create awareness for electric charging. For purchasing officers in the public sector, we organised a seminar on sustainable procurement with keynote speakers from the scientific community. The aim of the seminar was to inform participants about the possibilities for sustainable procurement within the framework of tendering regulations.

Research

Eneco has provided financial and technical support to enable scientific research on new forms of tendering in the field of energy. This includes collaboration with the Technical University Delft on the research programme FLOW (Far Large Offshore Wind) for the dissertation research project 'Smart regulation for far and large offshore wind integration'. Another example is our collaboration with the Technical University Eindhoven and the University of Twente and others on DISPATCH (Distributed Intelligence for Smart Power routing and mATCHing). This research project relates to possibilities to combine the 15-minute schedules of the energy markets with the much shorter time schedules of grid operators. The development of such a method requires a multi-disciplinary approach that encompasses technology and ICT as well as appropriate legal and organisational instruments. The research institutes of the universities of Utrecht and Twente have published a white paper on new forms of tendering in the field of energy, in which government bodies take the lead in sustainable energy and contribute to the objectives of the Netherlands in this area.

Coordination of work activities

Stedin, the municipality of Rotterdam and water company Evides signed a covenant in 2015 regarding a closer coordination of activities relating to the underground installation of sewers, cables and pipelines. Coordinating the planning of activities at an earlier stage results in a higher degree of efficiency and requests of local residents and businesses for specific modifications can be taken into account. The closer collaboration also results in less inconvenience to local residents and businesses and better accessibility of streets and city districts.

During the planning stage of large projects, Stedin involves stakeholders in the vicinity of the project, for example by means of information sessions, as was the case in the municipalities Dordrecht and Zwijndrecht in connection with the installation of a new high-voltage cable. As soon as the plans of the grid operator were clear, they were shared with a large number of stakeholders, even though the final cable route had not yet been determined. At that stage, there was still room for negotiations with all parties, which assured them that they were being heard. Due to the fact that the stakeholders in Dordrecht were different than the ones in Zwijndrecht, this required an approach that was specifically adapted to this situation. Collaboration in combination with utilising the information that was available in the municipalities was the formula for success.

We also started the large-scale rollout of smart meters in 2015. Before sending out offers for installation of a smart meter - per postal code area - Stedin organises information sessions for all customers that will be approached. At these meetings, ample attention is given to privacy aspects and possibilities for customers to reduce their energy consumption.

Grid operator Stedin ensures the reliability and safety of energy supply facilities and energy transmission. Nevertheless, supply interruptions cannot be fully prevented. In order to adequately inform customers in the event of an interruption, our communication lines are open 24/7. Social media are used to provide information on interruptions that affect the surroundings. In addition, customers receive information via a newly developed app for mobile devices, which is also used to send notifications about minor interruptions that have only a slight impact on the surroundings. This information is also available on the Stedin website.

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