Essent sen ANNU Holding Arnhem Businesspark Utrechtseweg 310 REPOR Gebouw B AR Arnhem The Netherlands P.O. Box 268

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1 ANNUAL REPORT

2 In Germany we don t use the name Essent. But we still feel part of the family because in the Netherlands they ve chosen the same core business as here in Bremen. We do, however, have to get used to using those English terms. Nicole Scheidenberger swb AG, Bremen

3 Contents Annual report 2 Key figures 6 Company profile 9 Report of the Supervisory Board 11 Composition of the Boards and Works Council 13 Report of the Board of Management 13 Preface 13 Summary of highlights 14 Privatisation 14 Deregulation 15 The development of Essent 15 Results 15 Finances 15 Summary of turnover and results 16 Cash flow and investments 16 Acquisitions and divestments 18 Equity structure and financing 18 Corporate income tax 18 Dividend policy 19 Integral risk management 19 Risks associated with energy trading 20 Personnel and organisation 20 Harmonising terms of employment 20 Recruitment and selection 20 Training and schooling 20 European Works Council 21 Works Councils 21 Culture changing project 21 Colourful business 23 Information and Communication Technology 23 Innovation 23 Uniform management and operating procedures 24 Results and developments per market segment 24 Energy 24 The Netherlands 24 Network developments 24 Network management 24 Quality improvements 24 Deregulation 25 Electricity and gas meters 25 Network tariffs 25 Generating, trading and sales developments 25 Wholesale and retail market 26 Decentralised generating 26 Sustainable energy 26 Conclusion of the MAP (Environment Action Plan) 27 The next phase of deregulation 27 The introduction of Inhome 27 Germany 27 Price erosion 28 Utility-plus supplier 28 Cablecom 28 New strategy 28 Investment pause 30 Internet 30 Cable television and radio 30 Legislation and regulations 31 Environment 31 The Netherlands 31 Governmental policy 31 Growth and re-structuring 32 Service via the Internet 32 Relationships with the authorities 32 Germany 32 Increasing concentration 32 Waste logistics and waste processing 34 Prospects 35 Financial statements 1 annual report

4 Key figures 2000 turnover of euros turnover 7,200 net turnover 6,644 5,065 6,000 of which: electricity 3,298 2,951 4,800 gas heat 2, , ,600 other cablecom ,400 environment , net turnover per segment of euros energy (5,953) cablecom (272) environment (419) total (6,644) 2 annual report

5 2000 operating profit per segment finances gross margin 2,547 1,707 of euros staff costs operating profit net profit on ordinary activities net profit cash flow (excluding extraordinary income and expense) 1, shareholders equity 1,993 1,878 total assets 9,012 7,489 energy (587.3) cablecom ( 41.7) environment (54.3) total (600) 2000 earnings per share information per share in euros earnings per share from ordinary activities including extraordinary income and expense dividend per share annual report

6 2000 solvency** financial ratios * % return on average total equity 36 from ordinary activities including extraordinary income and expense 11.1% 11.1% 10.2% 10.9% 30 return on average equity from ordinary activities 21.4% 16.3% 24 including extraordinary income and expense solvency 21.4% 25.1% 18.3% 27.6% 18 interest cover gearing 2.2 x 58% 2.3 x 56.8% return on average total equity (from normal operations)** % return on average equity (from normal operations)** % * Defined on page 66. ** Total equity excludes the receivable at year-end 1999 on the sale of the interest in EPON. 4 annual report

7 2000 staff number of staff at year-end number 12,245 10,246 FTEs 11,848 9,875 of which: energy segment FTEs 9,898 7,852 cablecom segment FTEs 1,138 1,010 environment segment FTEs 812 1,013 electricity sales number of customers * GWh x 1,000 52,089 2,409 43,896 2,389 decentralised generation GWh 8,830 7,439 gas sales number of customers * millions of m 3 x 1,000 11,767 1,750 7,188 1,731 heat sales number of customers * GJ x 1,000 x 1,000 16, , cablecoms number of audio/video service subscribers x 1,000 1,717 1,587 environment waste processing x 1,000 tonnes 5,356 5,311 The figures of NV Nutsbedrijven Maastricht have been included as from In the activities of Stadtwerke Bremen and Sturing Afvalwijdering Noord-Brabant were included (in the consolidation) while those of Elektriciteit- Produktiemaatschappij Zuid-Nederland EPZ were no longer included. * Excluding Stadtwerke Bremen. 5 annual report

8 Company profile Essent is a multi-utility group active in the energy, cable/telecommunications and environment/waste processing sectors with a local market covering the southern and northern and eastern regions of the Netherlands. Essent is the market leader in the Dutch energy market and is also active in the German market. The Company is the number-two cable television company in the Netherlands and occupies a prominent position in the Dutch waste processing market. Essent employs around 12,000 people. Essent comprises a Holding Company under which there are six divisions. Essent Retail Activities focussed on the consumer market have been clustered in the new Retail Division. This Division was formed from the existing supply companies Essent Energy North and Essent Energy South which operate in the traditional local market. The Retail Division companies supply gas, electricity and heat to homes and small businesses in the Dutch provinces of Groningen, Friesland, Drenthe, Overijssel, North Brabant, Limburg and Flevoland. The Retail Division is headquartered in Den Bosch. Essent Energy The Essent Energy Division generates electricity and heat in large-scale power plants and sustainable energy in smaller production units (bio mass plants, wind farms, hydro-energy and solar energy plants) and in its coal-fired power plants. The Energy Division s activities also include commodities trading and the sale of energy to customers in the deregulated large business segment and (since 1 January 2002) the medium-sized business segment. In addition, the Division looks after business customers water management and is also active in the field of industrial utilities. The Energy Division is headquartered in Den Bosch. Essent Networks Energy network management and maintenance have been clustered in the Networks Division. The network companies operating in this Division are totally independent. The Network Division constitutes the link between the energy purchasers and Essent s other activities. The relationship between the network companies and the other Group companies is laid-down in service level agreements on the basis of which the network managers (within the stringent regulations of the law) can offer services that are in-line with the market to third parties. The Network Division has formulated a number of target standards in the field of service provision, such as a rapid response to power failures, the fast execution of repair work and an acceptable level of costs. Essent Networks will also tender for infrastructure orders outside its traditional service areas. The Energy Division is headquartered in Waalre. Essent Cablecom Essent Cablecom is a young and fast-growing multi-media company that offers products and services via a (glass fibre) cable. The services are related to information, communication and entertainment. The information services are Internet via the cable and the linking of computer networks so that information can be exchanged between a company s different establishments. Communications covers services such as telephone and mail traffic and the development of Internet sites. Entertainment involves the supply of around thirty television and radio channels for the daily viewing and listening pleasure of aproximately three million people in the north, south and east of the Netherlands. The Cablecom Division is headquartered in Groningen. 6 annual report

9 Essent Environment Essent Environment is a national player in the field of waste processing. The Division concentrates on solving our society s waste problems: from collection and recycling to the end processing of waste. A great deal can be done with waste. Essent Environment separates waste into different streams, prepares it for recycling, turns it into products (fuels, building materials, compost) and generates energy from waste. The Division advises companies, municipalities and institutions about how to limit waste, how to collect it more efficiently and how to limit costs. The Environment Division is headquartered in Zwolle. Holding Company Whereas the divisions are focussed on operational issues, Essent Holding concentrates on the main policy guidelines. Essent Holding s responsibilities include Essent s overall strategy, mission and vision, financial consolidation, brand policy, sponsorship policy and house-style, strategic ICT activities, purchasing policy, risk management and regulatory affairs and tariffs. The head office of Essent is in Arnhem. Essent International Essent has clustered its German activities into a separate division: Essent International. With the acquisition of swb AG (in Bremen) in addition to the existing sales office in Dusseldorf Essent now has an important bridgehead in the German market. Via Stadtwerke Bremen Essent has now also acquired a 49.9% share in Stadtwerke Bielefeld. The Essent International Division is headquartered in Dusseldorf. The organisation Essent Holding Essent Retail Essent Energy Essent Networks Essent Cablecom Essent Environment Essent International 7 annual report

10 Although, according to the politicians, the networks must be put in a special position, it s still very important that we remain part of Essent. Together we have vast experience with supplying energy experience we must make sure is not lost. Willem Alting Siberg Essent Networks

11 Report of the Supervisory Board Annual Report It is with great pleasure that the Supervisory Board presents to you this Essent Annual Report. The first year of the new millennium a year of great promise for the future, but also full of new and unexpected developments not only in the economy and the energy sector but also in the legislation and regulations applicable to the Dutch energy companies. The Supervisory Board is satisfied with the results achieved by Essent in. Turnover rose by 31% and profit from normal business operations after tax rose by 26%. These figures are well above the targets announced the year before and very satisfactory in a world that is characterised by companies achieving disappointing results. The Financial Statements included in the Annual Report have been audited by Ernst & Young. The Supervisory Board has discussed the financial statements with the auditor. The auditor s favourable report is included elsewhere in this report. The Supervisory Board has adopted the financial statements and advises you to approve them in accordance with the Board of Management s proposal. The Supervisory Board endorses the Board of Management s dividend proposal and will present this proposal to the shareholders during the forthcoming General Meeting of Shareholders. Supervision During the seven Supervisory Board meeting in the new and unexpected developments, and Essent s response to them, obviously received a great deal of attention. At the beginning of the year the Board discussed the Focus and Growth strategy paper and during the year it considered the desired adjustment to the course of the Cablecom company. Privatisation and consultations with the shareholders regarding this issue also received a great deal of attention. It must be accepted that, due to the changed point-of-view of both the Minister of Economic Affairs and the Lower House regarding this issue, it would be senseless to invest a great deal of effort in the intended submission of an application for stock market introduction or other options for privatisation. More clarity regarding the preconditions for privatisation is needed before this subject can be put back on the agenda. In accordance with the current Corporate Governance policy the Supervisory Board met once in the absence of the Board of Management. During this meeting the composition and functioning of the Board of Management and the Supervisory Board were discussed. One or more members of the Supervisory Board in rotation attended the meetings of the Central Works Council. In the Supervisory Board s experience this exchange of points of view is useful and the Board appreciates the contact with the Central Works Council. The Board, supported by the Audit Committee, also monitored the achieved results. Committees The Audit Committee members, whose tasks include monitoring the quality of internal and external reporting, met three times during. The Committee paid a great deal of attention to the way Essent is working to further optimise its financial systems and procedures related to risk management. During the Supervisory Board s second committee the Remuneration and Selection Committee studied the short and medium-term profile and composition of the Board of Management. Personnel changes At the end of a vacancy arose in the Board of Management due to the resignation of Mr. G.J.M. Prieckaerts. Mr. J.P. Nieweg, the Financial Director, also made it clear that he wished to make use of the early retirement option as of 1 November The Remuneration and Selection Committee instigated a procedure to find a suitable solution for both vacancies. This resulted in the appointment of Mr. R. de Jong as the new Financial Director at the end of January The Board is grateful to Mr Prieckaerts, who retired on 1 December, for his role in the creation of Essent and in putting the new company 9 annual report

12 on the map. With his vast knowledge of the energy industry he focussed primarily on forging the various companies into one entity and on streamlining the internal processes. The adaptation of the organisation in response to the new regulations and the promotion of Essent s interests with the new monitor, the Electricity Supervisory Department (DTe) were very valuable contributions. During two members of the Supervisory Board were reappointed Mrs. W.H. Huijbregts- Schiedon and Mr. A.G. van Leersum. Finally, Mr. C.J.J.S Majoor resigned in accordance with the roster and due to his new appointment as Mayor of Weert and was succeeded by Mr. H.G. Vos. Mr. Vos is the Mayor of Meijel and was nominated as a member of the Supervisory Board by the Association of Municipal Shareholders in Limburg. On behalf of both the Supervisory Board and the Board of Management we would also like to thank Mr. Majoor for his efforts on behalf of Essent. Dividend policy development Although the payment of corporate tax has been obligatory for companies in the Dutch energy sector since 1 January 1998, the tax rate for taxable profit was set at zero for a four-year transition period. From 2002 onwards, however, Essent s profit will be taxed at the standard corporate tax rate, which is currently 34.5%. As a consequence, from now on the dividend that will be distributed to the shareholders will be determined on the basis of the (lower) profit after tax. Finally, the Supervisory Board would like to thank the Board of Management and the staff for their dedication and their contribution towards the results achieved in the past year. Arnhem, 25 April 2002 On behalf of the Supervisory Board J.V.H. Pennings, chairman 10 annual report

13 Composition of the Boards and Works Council Supervisory Board J.V.H. Pennings, chairman J.A.M. Hendrikx, vice-chairman J.R.A. Boertjens D.D.P. Bosscher J.H.M. Bronckers F.J.M. Houben K. Hubée W.H. Huijbregts-Schiedon Sj. Kremer R. Lanning A.G. van Leersum C.J.J.S. Majoor (until 31 May ) P.W. Moerland H.G. Vos (as of 31 May ) Board of Management W.K. Wiechers, chairman J.W. van Bussel J.P. Nieweg G.J.M. Prieckaerts (until 1 December ) M.G. Edens, secretary Corporate executives A.C. van Huffelen, Strategy W.A. Keus, Corporate Control (until 1 December ) E. van Kogelenberg, Human Resources Division executives Essent Retail, H. Blommendaal Essent Energy, M.M. van t Noordende Essent Networks, L.P. de Vries Essent Cablecom, J.A.M.M. Michiels (until 3 April ), E. Meijer (as of 24 September ) Essent Environment, J. Dam Essent International, G.M. Feist (as of 1 October ) Works Council J.P.B. de Jong, chairman W. Camfferman, vice-chairman J. Schuiling, secretary J.W. Willems, 2nd secretary J. Kiers J. Raven W. Dekker L. van de Burgt J. Wermer T. Kollée F. Persoon J. Geurts R. Waverijn K.G. Heeringa E. van Timmeren-Hogewind G. van Diggelen D.H. Dümmer, administrative secretary 11 annual report

14 Essent is big, which can make it look a bit ponderous to the outside world. But in my experience it is, in fact, this size that creates the opportunities to change jobs within the company more often. Really challenging! Karen Smith Essent Environment

15 Report of the Board of Management Preface A turbulent year, both for society and for Essent: that is the best way to describe. It was the year of the economic down-turn, of 11 September, of the further deregulation of the energy market and of a renewed discussion about privatisation. There can be no doubt that these events of will have an effect on the Company s strategy and future. Summary of highlights The Government changed the preconditions for privatisation so radically that marking time in this area became necessary. The deregulation of the energy market led to the entry of many new players including Dot.com companies. Essent was able to amply counterbalance the pressure on prices and market shares in the business market by expanding and strengthening its position in the wholesale market. It became clear that the electricity market would continue having to contend with widely fluctuating bargain prices. This necessitates a re-orientation of Essent s position in this market and, possibly, a strategy adjustment. The opening of the sustainable energy market caused not only a frenzied demand for green energy, but also the first switches to new suppliers by non-business customers. This means that the green market can be seen as a pilot for the opening of the consumer market. The following phases of deregulation (medium and small companies in 2002 and the total market perhaps in October 2003) make new information systems necessary to underpin the organisation. Having these systems ready on time would appear to be a tall order. Developments in the cable and telecoms market dictated a reassessment of the strategy. The market launch of new products and services and the related equipment stagnated. This made it necessary to cut-back investments in network upgrades and to put the emphasis on making the already upgraded networks cost effective. The decisions of the Electricity Supervisory Department (DTe) regularly surprised the Company. The often unpredictable outcome of discussions with this monitor was one reason for the serious doubts regarding the quality of these decisions. As a consequence a considerable number of objections were submitted, not only by Essent but also by the other energy companies. Until judgements regarding these objections are forthcoming the situation will remain very uncertain. The first statements, which became available at the beginning of 2002, indicate not only that the objections are legitimate, but also that the legislation leaves something to be desired. Evidently the intentions of the legislator while patently obvious are not expressed with sufficient clarity in the wording of the legislation. On these grounds the professional bodies come out with comprehensible statements that do not, however, mesh with what the energy companies also acknowledge to be the intentions of the Electricity Act. Regulations are also continuing to exert considerable influence on the market and potential results in the waste processing sector. At the moment it looks as if the improvement in result achieved through considerable effort has been totally nullified by the unforeseen taxes levied on the dumping of a particular waste fraction from the separation plant in Wijster. Regulations also had a substantial influence on the result achieved in Germany. Expected, and budgeted, revenue on the basis of the regulations to support total power plants was not forthcoming. Rising purchasing prices meant achieving growth in the German market through the acquisition of energy companies ceased to be a sound strategy. New ways to achieve further growth in this market must, therefore, be sought. Continuing As a result of the economic down-turn, since fluctuating the beginning of there has been a gradual bargain prices slow-down in the growth of energy consumption. Up to now it has been possible to adjust market made a in the power purchasing and production in good time. reorientation of position necessary 13 annual report

16 Regulations related to privatisation put Dutch energy companies at a disadvantage compared with European competitors Privatisation The most radical and time consuming issue was, possibly, the renewed privatisation debate. In the Lower House approved policy rulings that attach supplementary conditions to privatisation. These conditions include the re-structuring of the company such that the current public shareholders retain judicial ownership of the infrastructure for all time. The policy rulings also demand a far-reaching emancipation of the network company. A bill that will translate these policy rulings into statutory regulations is currently under consideration: these will not only be applicable to privatised energy companies but also to non-privatised concerns. The Netherlands has opted for a regulatory framework that goes far further than the regulations in other European countries. Even the new European guideline introduced in 2002 does not put such stringent demands on energy companies. This deviant approach not only puts companies such as Essent at a disadvantage compared with European competitors, it also makes one question whether bearing the responsibility for a network company is possible under these conditions. Essent has been active in disseminating its objections to this development. In Essent s opinion a renewed debate on this subject is necessary in order to arrive at a proper balance of public and private interests. Up to now discussions have been dominated by endless arguments instead of a proper appraisal of the heart of the issue. The legislator s change of course regarding the supplementary conditions for privatisation compelled Essent to postpone its privatisation plans until the preconditions for privatisation have been clarified. Deregulation In the wholesale market became totally free and the central management of electricity generation under the direction of the Sep came to an end. For the first few weeks of the year there were teething problems and noticeable price fluctuations in the wholesale market. As the year progressed it became clear that the price peaks should not be considered teething problems but rather as part and parcel of a well functioning wholesale market. If, when there is a shortfall, the price must restore the balance between supply and demand and the demand also has a low priceelasticity, price peaks are an inevitable result. Managing the risks related to a wholesale market with incidental large price fluctuations demands a high degree of professionalism. Years of intensive preparation for the liberalising of the wholesale market enabled Essent to also achieve a good result in this volatile market. In the meantime, during the year under review preparations continued for the following phase of market deregulation. On 1 January 2002 the intermediate segment was given the freedom to choose an energy supplier and the entire market will probably be open in October In the Netherlands it has become obvious, as it has elsewhere in Europe, that freedom of choice imposes considerable demands on the information systems. Not only must these systems be able to send separate invoices for energy transport and delivery, they must also have the flexibility to ensure a smooth processing of changes of supplier. This last demands clear rules of play, good systems and an organisation that is tuned to changes of suppliers. Despite careful preparation, practice brought constant surprises. This was certainly the case at the end of when all the details of clients who wished to change supplier as of 1 January 2002 had to be processed. Thanks to the considerable efforts of the staff involved, who ended up doing much of the work by hand, the problems this caused could be kept within manageable proportions. This experience did, however, demonstrate that for the following phase, when doing it by hand will not be the solution because of the large number of clients that may be involved, a date must be chosen that offers the certitude that the required regulations and systems are not only available but properly tested. 14 annual report

17 The development of Essent In Essent amended its strategy for the company in general and the cable activities in particular. Focus and Growth are key maxims for Essent s future. Focus to concentrate attention on the activities that can make a real contribution towards the Company s continuity and development. Growth because the consolidation of the international world does not permit companies to stand still. To achieve this in practice the International Division was not only given more substance but major steps were taken to cluster all the activities for the consumer and small business market in one Retail Division. The structuring of the Energy Division, which is responsible for electricity production, wholesaling and supply to large business clients, was also completed. All these organisational adjustments demanded a great deal of flexibility from the staff involved. It is a characteristic of Essent and its staff that they understood the need for the changes and could cope with them. Results Considering the many uncertainties confronting Essent in, a very satisfactory result was achieved. Turnover rose by 31%, profit before tax rose by 15% and profit from normal business operations after tax rose by 26%. The increase in turnover was due to the acquisitions in Germany and the significantly higher turnover from trading. The increase in result could be achieved by gradually putting the Company in order, by focusing on improving efficiency and through the margins achieved in energy trading. In the report it became clear that, with market conditions as they are today, foreseeing and managing setbacks is more important than ever before. Essent has learnt its lesson well: In 2002 the Company will concentrate on the further development of the requisite systems and skills. W.K. Wiechers Chairman of the Board of Management Finances Summary of turnover and results Financially, was a good year for the Essent Group which achieved a consolidated net profit of 414 million an increase of 12% compared with the profit for the previous financial year (2000: 369 million). In net profit corrected for extraordinary items was 26% higher than in 2000 ( 329 million). In the previous financial year cross-border lease transactions and the final settlement of the sale of the 50% interest in EPON resulted in a one-time income of 40 million. Gross earnings per share this is the result from normal business operations before tax calculated over the average number of outstanding shares amounted to 2.61, which means an increase of 15% compared with the previous year. The achieved earnings per share growth equals the target of 15% per annum. Net turnover rose by 31% to 6,644 million (2000: 5,065 million) and was, therefore, well above the growth target of 10% per annum. In the Energy and Cablecom segments turnover growth of 34.3% and 24.2% respectively was achieved. The turnover of the Environment segment was slightly higher than in the previous year. The increase in the Environment segment s turnover was caused by the combined effect of the deconsolidation of the collection and logistics companies and NV AZN plus the acquisition of Sturing Higher results achieved Afvalverwijdering by putting the Company in Noord-Brabant. order, by focusing on improving The interest achieved in energy trading efficiency and through the margins in Stadtwerke Bremen (swb AG) was consolidated integrally into the figures for the first time in. In 2000 this interest was included as a result of a non-consolidated interest. The effect of the consolidation of swb AG on the consolidated turnover figures for amounted to 889 million. 15 annual report

18 The deconsolidation of the Zeeuwse electricity generating power stations the nuclear energy plant and coal-fired unit in Borssele had a negative effect on turnover in. In the Environment segment Sturing Afvalverwijdering Noord-Brabant and landfill sites were acquired in and in the Cablecom segment four local (council) cable television companies were acquired. These acquisitions contributed 153 million towards the consolidated turnover for. Autonomous turnover growth in amounted to 25% and was, for the most part, achieved by the trading activities in the energy market. In the gross margin rose from 1,707 million to 2,547 million due to consolidations and de-consolidations particularly in the energy and environment sectors. The gross margin as a percentage of net turnover rose from 33.7% in the previous financial year to 38.3% in. This development could be attributed to the relatively high gross margin achieved on the other activities (drinking water, waste water and services) in Germany. The Group s operating result in the year under review amounted to 600 million an increase of 29% compared with the previous financial year (2000: 465 million). The improvement in operating result was entirely due to the Group s energy activities with the consolidation of swb AG making a positive contribution of 47 million. The negative balance of the financial income and expenses rose from 131 million in 2000 to 228 million in. Compared with the previous financial year financial expenses rose by 54 million in while financial income fell by 43 million. The increase in financial expenses was the result of a number of factors including the acquisitions and interest expenses for German pension provisions. Foreseeing and managing set-backs is vital for achieving the targeted results The tax expense in was the balance of tax payable on the taxable profits in Germany and the formation of an active tax latency due to fiscal losses in the Cablecom segment. The results for led to a further improvement in returns. The return on average invested capital rose from 10.2% in 2000 to 11.1% in. The return on average shareholder equity amounted to 21.4% (2000: 16.3%). Cash flow and investments In the cash flow from operating activities amounted to 1,726 million, which means a rise of 725 million compared with the year before. After deducting the balance of financial income and expenses and taking into account the results of the non-consolidated participations, third party interests in the result and corporate tax, the result was a cash flow from operational activities of 1,481 million. In a sum of 582 million was invested in tangible fixed assets. The investments were, amongst others, related to quality improvement and the extension of networks within the Cablecom segment ( 176 million) and the Energy segment ( 143 million). Acquisitions and divestments In Essent s acquisition of a 51% share in Stadtwerke Bremen (swb AG) was completed with the purchase of 16,590 newly issued shares in swb AG and the purchase of 3,275 shares held by the Bremer Versorgungs- und Verkehrsgesellschaft mbh. In the agreements between the shareholders in NV EPZ regarding the restructuring of the production capacity and the dismantling of EPZ were incorporated into the Essent group s figures. The assets and liabilities of EPZ, excluding the Borssele production site, were split off and brought under the newly established Essent Energie Productie BV (67% Essent and 33% Delta Nutsbedrijven NV) with retroactive effect to 1 January. In addition, as of the same date Essent reduced its interest in NV EPZ to 50% by selling an interest of 16.7% to Delta Nutsbedrijven NV. 16 annual report

19 It s exciting working for a company where nearly everything is about to change. Dorris Meesters Essent Networks

20 In the cable networks of the towns of Nuth/Margraten, Klundert/Zevenbergen, Oss and Best were acquired for a total of just over 16 million. In Essent purchased the remaining shares Benelux BV thus increasing its interest to 100% at the end of the year. On 18 December agreement was reached regarding the acquisition of all the shares in NV Sturing Afvalverwijdering Noord-Brabant. On 31 December Essent increased its interest in NV Nutsbedrijven Maastricht to 64.3% in accordance with the agreement with the Maastricht Council signed on 29 November The remaining 35.7% of the shares will be transferred in stages. On 31 December 2006 Essent will hold all the shares in NV Nutsbedrijven Maastricht. Equity structure and financing In Essent took steps to enter the international money and equity markets. Equity providers dictate that borrowers must have a credit rating before entering this market. This is one of the instruments through which the creditworthiness of the company to be financed can be assessed quickly. In May, Essent NV was given a stable-prospect rating by both Moody s Investors Services and Standard & Poor s. Moody s gave a long-term A-1 rating and a short-term P-1 rating; Standard & Poor s assessed Essent as A+ and A-1 respectively. On 21 August a Debt Issuance Programme was launched. With this Programme Essent NV and Essent Nederland BV have the option of financing via the international financial markets up to a maximum of 2,000 million. The policy of facilitating entry to the international money and capital markets will be continued in Corporate income tax Although Essent s Dutch energy activities have been subject to corporate income tax since 1 January 1998, the legislator declared that, on the basis of transitional measures taken in the context of the deregulation of the energy markets, the zero rate would be applicable for the first four years (up to and including ). From 2002 onwards the taxable profit of the energy companies will be subject to tax at the standard rate in force at the time currently 34.5%. The results of the environment and Cablecom activities are already subject to taxation at the standard corporate income tax rate. During the year under review the sector s consultation meetings with the tax authorities continued. The consultations revolve around the definition of the fair value that, under the Dutch Corporate Income Tax Act 1969, forms the basis for the valuation of assets and liabilities in the opening balance sheet for tax purposes. At the time of preparing this Annual Report agreement had still not been reached with the tax authorities, which means there is still a great deal of uncertainty regarding the book value for tax purposes. For this reason it was decided not to include a deferred tax liability on these grounds in the financial statements for. Dividend policy When Essent was established it was agreed with the shareholders that the Company would strive to distribute a dividend that conformed with the market. The market-conforming dividend will reflect the increasing risk faced by the Company s shareholders as a result of the advancing deregulation of the energy market. In this context a pay out ratio of 30% of the profit from normal business operations before tax is proposed. This equates to a sum to be paid out of million. In 2000 a dividend of 25% of the net profit from normal business operations amounting to 82.2 million was paid out. The resulting dividend per share of 0.78 is 42% higher than the 0.55 dividend per share in annual report