Dear shareholders and Supervisory Board of Alliander N.V.,
We were engaged by the Supervisory Board as auditor of Alliander N.V. as of the audit for year 2016 and have therefore audited the financial statements 2016. The Supervisory Board was given a mandate hereto by the shareholders. Furthermore the Management Board engaged us to provide assurance on a selection of non-financial information in the Annual Report 2016.
Our reports in relation to both assignments, namely the auditor’s report on the financial statements 2016 and the assurance report on the non-financial information, are included below.
Independent auditor's report
To the shareholders and the Supervisory Board of Alliander N.V.
Report on the financial statements 2016 included in the annual accounts
We have audited the financial statements 2016 of Alliander N.V., based in Arnhem. The financial statements include the consolidated financial statements and the company financial statements.
In our opinion:
The consolidated financial statements included in these annual accounts give a true and fair view of the financial position of Alliander N.V. as at 31 December 2016, and of its results and its cash flows for 2016 in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code.
The company financial statements included in these annual accounts give a true and fair view of the financial position of Alliander N.V. as at 31 December 2016, and of its result for 2016 in accordance with Part 9 of Book 2 of the Dutch Civil Code.
The consolidated financial statements comprise:
The consolidated statement of financial position as at 31 December 2016.
The following statements for 2016: the consolidated income statement, the consolidated statements of comprehensive income, changes in equity and cash flows.
The notes comprising a summary of the significant accounting policies and other explanatory information.
The company financial statements comprise:
The company balance sheet as at 31 December 2016.
The company profit and loss account for 2016.
The notes comprising a summary of the accounting policies and other explanatory notes.
Based for our opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the “Our responsibilities for the audit of the financial statements” section of our report.
We are independent of Alliander N.V. in accordance with the Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten (ViO) and other relevant independence regulations in the Netherlands. Furthermore we have complied with the Verordening gedrags- en beroepsregels accountants (VGBA).
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Based on our professional judgement we determined the materiality for the financial statements as a whole at € 10 million. The materiality is based on 0.75% of total expenses. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons.
We agreed with the supervisory board that misstatements in excess of € 0.5 million, which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.
Scope of the group audit
Alliander N.V. is at the head of a group of entities. The financial information of this group is included in the consolidated financial statements of Alliander N.V.
Our group audit mainly focused on significant group entities Alliander N.V. and Liander N.V.
By performing the procedures mentioned above at group entities, together with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence about the group’s financial information to provide an opinion about the consolidated financial statements.
Our key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements. We have communicated the key audit matters to the supervisory board.
The key audit matters are not a comprehensive reflection of all matters discussed.
These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matters
Our audit procedures
Initial audit engagement
Initial audit engagements involve a number of considerations not associated with recurring audits. Additional planning activities and considerations necessary to establish an appropriate audit strategy and audit plan include:
• Gaining an initial understanding of the Group and its business including its control environment and information systems sufficient to make audit risk assessments and develop the audit strategy and plan;
• Obtaining sufficient appropriate audit evidence regarding the opening balances including the selection and application of accounting principles; and
• Communicating with the previous auditors.
After being appointed as the Company’s auditors in 2015, we developed a comprehensive transition plan starting in the fall of 2015 to understand the connection between the Company's strategy, the related business risks and the way this impacts the Company's financial reporting and internal controls framework. Our transition plan included amongst others:
• Close interaction with the previous auditor, including a process of file reviews and formal hand over procedures as prescribed by our professional standards;
• Active knowledge sharing with the financial, risk and Internal Audit departments to understand their perspectives on the business, identified risks and key observations from their work;
• Attendance of clearance meetings with senior management and the Audit Committee during the 2015 year-end financial closing and reporting process;
• Evaluation of key accounting positions and audit matters from prior years;
• Evaluation of management’s documentation with regard to internal control to support obtaining an understanding of the financial reporting process and business processes; and
• We discussed and agreed our audit plan with the Company's Audit Committee in May 2016 and we reported status, progress and key findings from our audit process regularly during the year.
Divestment Endinet Groep B.V. and acquisition of Aktivabedrijf Enexis Friesland B.V.
The disclosures to these transactions are included in the accounting policies, note 1 and note 33.
On 1 January 2016 Alliander sold the shares of Endinet Groep B.V. to Enexis Holding N.V. and purchased the shares of Aktivabedrijf Enexis Friesland B.V. from Enexis Holding N.V. with an additional payment by Enexis of € 365 million.
The valuation of the exchanged networks determines the book gain on the divestment of Endinet Groep B.V. and the goodwill on Aktivabedrijf Enexis Friesland B.V. The fair value of Endinet Groep B.V. was determined at € 708 million, which resulted in a book gain of € 176 million. The purchase price of the shares of Aktivabedrijf Enexis Friesland B.V. amounts to € 335 million.
External experts have supported Alliander N.V. in allocating the purchase price to the individual assets and liabilities.
As part of our audit procedures we reviewed the agreement between Alliander N.V. and Enexis Holding B.V. and other legal documents underlying the transactions. Furthermore we considered the Company’s internal procedures with regard to the determination of the fair value.
Assisted by our valuation experts, we tested the fair value of Endinet Groep B.V., the purchase price of the shares in Aktivabedrijf Enexis Friesland B.V. and the valuation of the acquired individual assets and liabilities, and assessed the key assumptions.
We evaluated the competency and objectivity of the external experts. We also determined that the final settlement with Enexis with regard to these transactions has been completed.
Furthermore we tested whether the disclosures comply with the requirements of IFRS 3, are adequate and provide sufficient insight into the valuation as per acquisition date.
Report on the other information included in the annual accounts
In addition to the financial statements and our auditor’s report, the annual accounts contain other information that consists of:
Based on the following procedures performed, we conclude that the other information:
We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements.
By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is substantially less than the scope of those performed in our audit of the financial statements.
Management is responsible for the preparation of other information, including the Management Board’s Report in accordance with Part 9 of Book 2 of the Dutch Civil Code, and the other information as required by Part 9 of Book 2 of the Dutch Civil Code.
Report on other legal and regulatory requirements
We were engaged by the Supervisory Board as auditor of Alliander N.V. on 29 July 2015, as of the audit for year 2016 and have operated as statutory auditor ever since that date. The Supervisory Board was given a mandate hereto by the shareholders.
Description of responsibilities for the financial statements
Responsibilities of management and the supervisory board for the financial statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code. Furthermore, management is responsible for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, management is responsible for assessing the company’s ability to continue as a going concern. Based on the financial reporting framework mentioned, management should prepare the financial statements using the going concern basis of accounting unless management either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.
Management should disclose events and circumstances that may cast significant doubt on the company’s ability to continue as a going concern in the financial statements.
The Supervisory Board is responsible for overseeing the company’s financial reporting process.
Our responsibilities for the audit of the financial statements
Our objective is to plan and perform the audit assignment in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which means we may not have detected all material errors and fraud.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.
For an overview of our responsibilities we refer to NBA’s website www.nba.nl
Rotterdam, 6 March 2017
Deloitte Accountants B.V.
Assurance report of the independent auditor
To: The Management Board of Alliander N.V.
The Management Board of Alliander N.V. (‘the Company’) engaged us to provide assurance on a selection of non-financial information in the Annual Report 2016 (‘the Report’). Our engagement consisted of a combination of limited assurance (leading to a ‘conclusion’) and reasonable assurance (leading to an ‘opinion’).
We were engagement to provide limited assurance on the following chapters (‘the reviewed information’):
About this report (page 4-6)
Our story in 2016 (page 7-10)
About Alliander (page 11-32)
Our results in 2016:
- Customers (page 34-46)
- Employees (page 47-56)
- Shareholders and Investors (page 57-83)
The impact cases on pages 40 and 56
Furthermore we were engaged to provide reasonable assurance on the following information (‘the audited information’):
The column “Results 2016” presented in the table on page 20-21 in the chapter ‘Objective and Results’
The summarized materiality assessment presented in the chapter ‘About this report’ on page 5 and the extensive materiality assessment presented in the chapter ‘Materiality Test’ on page 202-215.
Based on our review procedures performed, nothing has come to our attention that causes us to believe that the reviewed information does not provide, in all material respects, a reliable and adequate presentation of the policy and business operations with regard to corporate social responsibility or of the events and performance of the company related to corporate social responsibility during 2016 in accordance with the Sustainability Reporting Guidelines version G4 of GRI and the internally applied reporting criteria as disclosed in the chapter ‘Other information’ of the Report.
In our opinion, the audited information is prepared, in all material respects, in accordance with the Sustainability Reporting Guidelines version G4 ‘comprehensive’ of GRI and the internally applied reporting criteria as disclosed in chapter ‘Other information’ on page 222-223 of the Report.
The Report includes prospective information such as ambitions, strategy, plans, expectations and estimates. Inherent to this information is that the actual results may differ in the future and are therefore uncertain. We do not provide any assurance on the assumptions and achievability of prospective information in the Report.
Basis for our conclusion and our opinion
We conducted our review and our audit of the aforementioned information in accordance with Dutch law, including Dutch Standard 3810N ‘Assurance engagements relating to sustainability reports’. A review is focused on obtaining limited assurance, while an audit is focused on obtaining reasonable assurance. Our responsibilities under this standard are further described in the ‘Our responsibilities’ section of this report.
We are independent of Alliander in accordance with the ‘Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten’ (ViO) and other relevant independence requirements in The Netherlands. Furthermore we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA).
We believe that the assurance evidence we have obtained is sufficient and appropriate to provide a basis for our opinion and our conclusion.
Area of focus
The most significant area of focus we identified in this assurance assignment is identified below, including a disclosure on how we have tailored our procedures to address this area.
We have communicated the area of focus to the Supervisory Board and Management Board. This area is addressed in the context of our assurance assignment in relation to the Report as a whole and in forming our opinion and our conclusion thereon, and we do not provide a separate opinion on this area.
Area of focus
One of the topics Alliander N.V. reports on [on page 26-30, 40, 56 and 222-223] relates to the social impact of Alliander’s activities on the environment.
Alliander applied the six capital model of the International Integrated Reporting Council (IIRC) as a basis for determining the relevant social impacts. Alliander has determined the social impacts based on the supply chain and has attempted to quantify these impacts in one unit (euro’s) to the extent possible.
As indicated by Alliander the identification, quantification and monetization of social impacts is still in the early stages of development. Therefore Alliander is obliged to make assumptions.
We observe that the calculated consumer surplus in particular is strongly dependent on the assumptions used, the expertise contributed by the external advisors and is based on complex calculations. Furthermore the monetization of the impact on prosperity and well-being, the balance between social profit and loss and the attribution to the various participants in the energy supply chain, are not yet generally accepted. Therefore the public acceptance of the selected assumptions and calculation methods have been tested only in a limited manner.
A summary of the key assumptions is presented in the ‘Other information’ on page 222-223 of the Report.
Our procedures regarding the area of focus consisted of evaluating the social impact measurement in chapter ‘Onze impact’ on page 26-30 and the impact cases on page 40 and 56.
Based on interviews with employees and management of Alliander N.V. and the external advisors, we obtained an understanding of the methods and assumptions on which the calculations of the social impacts are based.
Where Alliander used external advisors for performing the impact calculations (ic True Price), we obtained an understanding of the competency and objectivity of those advisors.
We obtained an understanding of the calculations and performed recalculations for the key elements. For the reperformance of the consumer surplus calculation we used a model validation expert.
For key assumptions as presented in chapter ‘Other information’ on page 222-223 of the Report we performed reconciliations with various sources such as sub-ledgers, external reports and research results.
For prospective information or estimates used we reviewed the underlying data.
Based on the procedures performed, we obtained and adequate understanding of the methods and assumptions used by management.
Responsibilities of the Management Board and the Supervisory Board
The Management Board of the entity is responsible for the preparation of the Report in accordance with the Sustainability Reporting Guidelines version G4 and the internally applied reporting criteria as disclosed in chapter ‘About this report’ , including the identification of stakeholders and the definition of material issues. The disclosures made by the Management Board with respect to the scope of the Report and the reporting policy are included in chapters ‘About this report’ and ‘Other information’ and on the website of Alliander.
Furthermore, the Management Board is responsible for such internal control as it determines is necessary to enable the preparation of the Report that is free from material misstatement, whether due to fraud or errors.
The Supervisory Board is responsible for overseeing the company’s reporting process.
Our responsibility is to plan and perform the assurance assignment in a manner that allows us to obtain sufficient and appropriate assurance evidence for our opinion and our conclusion.
A review is focused on obtaining limited assurance. The procedures performed in obtaining limited assurance are aimed at the plausibility of information which does not require the same exhaustive gathering of evidence as in engagements focused on reasonable assurance. The procedures performed consisted primarily of making inquiries of management and others within the entity, as appropriate, applying analytical procedures and evaluating the evidence obtained. Consequently, a review engagement provides less assurance than an audit.
Our audit of the audited information has been performed with a high, but not absolute, level of assurance, which means we may not have detected all material errors and fraud. We apply the ‘Nadere voorschriften accountantskantoren ter zake van assurance opdrachten (RA/AA)’ and accordingly maintain a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.
Misstatements can arise from fraud or errors and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this Report. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.
We have exercised professional judgement and have maintained professional skepticism throughout the audit, in accordance with the Dutch Standard 3810N, ethical requirements and independence requirements.
Limited assurance procedures
Our main procedures included the following:
Performing an external environment analysis and obtaining insight into relevant social themes and issues, and the characteristics of the organisation.
Evaluating the appropriateness of the reporting policies and their consistent application, such as assessment of the outcome of the stakeholder’ dialogue and the reasonableness of estimates made by management.
Interviewing management (or relevant staff) responsible for the sustainability strategy and policy.
Interviewing relevant staff responsible for providing the information in the Report, carrying out internal control procedures on the data and consolidating the data in the Report.
An analytical review of the data and trends.
Investigating internal and external documentation, including examination of information on a test basis, to determine whether the information in the Report is reliable.
Reasonable assurance procedures
Our main audit procedures included the following:
Identifying and assessing the risks of material misstatement of the Report, whether due to errors or fraud, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from errors, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Evaluating the design and implementation and operating effectiveness of the systems and processes for data gathering and processing of information as presented in the Report.
Evaluating the overall presentation, structure and content of the Report, including the disclosures.
Investigating internal and external documentation, including examination of information on a test basis, to determine whether the information in the Report is reliable.
Evaluating the underlying transactions and events
We determine the areas of focus in this assurance assignment in relation to the Report based on all matters as discussed by us with the Supervisory Board. We describe the areas of focus in our assurance report, unless such is prohibited by laws and regulations or in extraordinary rare situations where this is in the public interest.
Rotterdam, 6 March 2017
Deloitte Accountants B.V.