Annual report 2023

Clean watercourses for future generations and a living environment in harmony with water Annual

About this annual report

This is the annual report of Aquafin NV, with registered offices at Dijkstraat 8 – 2630 Aartselaar.

Aquafin has a subsidiary called Aquaplus that valorises the expertise of the organisation for industrial clients and on the private market. The figures for Aquaplus have been consolidated in this annual report.

SCOPE

This annual report contains the main financial figures and notes on these, an overview of business activities and sustainable projects in 2023, as well as a look ahead to the future. The report also contains a number of elements within the framework of the Corporate Sustainability Reporting Directive but is not in line with this yet.

The financial report was audited by BDO.

Reporting period: 01 January 2023 – 31 December 2023

Publication date: 16 April 2024

Foreword

With the first working year within the new cooperation agreement with the Flemish Region and the major steps that we have taken to increase synergy in the water sector, 2023 really was a challenging year for Aquafin. The large degree of autonomy that the new cooperation with the Region has given us has enabled us to apply our holistic perspective on the whole waste water and stormwater infrastructure in Flanders much more effectively. And that is something that we need to do as we still have a lot of hurdles to overcome.

In recent months, we have noticed growing concern among our stakeholders and the surrounding area regarding the achievement of good water quality in Flemish streams and rivers. The European Water Framework Directive is therefore lurking around the corner. We believe the best opportunities to get as close as possible to the targets lie in an integrated approach to the municipal and supra-municipal infrastructure. During our initial discussions with local councils and sewer operators in our role as matchmaker, we generally saw enthusiasm regarding the alignment of investment portfolios in order to realise both an economic and ecological win-win. However, we are convinced that we can achieve even faster and better results by taking a properly coordinated approach in which we work with local policymakers to determine which expansion and renovation projects and which replacement investments are a priority for Flanders. It seems logical as the municipal and supra-municipal sewage systems form an indivisible whole, just like the veins in the human body.

We are therefore extremely pleased with the structural cooperation for municipal sewer management with drinking water company Pidpa that we ratified in 2023. Nearly half of Flemish cities, towns and municipalities are currently collaborating with Aquafin for their sewer management via Pidpa, water-link or De Watergroep with whom we have similar partnerships. With our knowledge and experience, we can make the most of the available resources for them, just as we do for the supra-municipal infrastructure. For instance, as we have done in previous years, we managed to allocate the whole of the agreed delivery budget of 188 million euros for supramunicipal projects.

In addition, the revision of the EU Urban Waste Water Treatment Directive (UWWTD) brings new significant challenges for the sector. In this annual report, you will read how Aquafin has long been preparing for new stricter legislation on emission standards and the removal of micropollutants, for example, through research and innovation. In the meantime, we are also continuing to innovate in order to broaden our social impact and also be a growth company in addition to our task as stipulated by decree. On 8 February 2024, Aquafin set up a second subsidiary in addition to Aquaplus for this purpose. 'Aqcelerator' will invest in sustainable projects that are in line with our vision as an 'impact investor'. The future looks extremely exciting!

Alain Bernard Chairman

About Aquafin

Who we are

Aquafin has been responsible for the expansion, management and pre-financing of the supra-municipal water treatment infrastructure in Flanders for more than 30 years. We collect domestic waste water from the municipal sewers in our collector sewers and from there, we transport it to one of our 329 waste water treatment plants. After going through a mechanical and biological treatment process, it is able to be discharged into the surface water.

At supra-municipal policy level, we cooperate with towns, cities and municipalities on working towards good water quality in our watercourses, as stipulated by the European Water Framework Directive. Aquafin was given the role of matchmaker between the two policy levels by the Flemish Government. In that role, we align supramunicipal investments for expansion and optimisation of the sewer system as closely as possible with the planned investments of towns, cities and municipalities. A 'match' between the projects means that together, they can produce ecological results quicker.

With Aquafin in an even more coordinating role, we could move up yet another gear. Indeed, our helicopter view of the whole Flemish water management system means that we are well-placed to define and prioritise targeted actions for safeguarding water quality. The municipal and supra-municipal infrastructures are interwoven to such an extent that an intervention in respect of one often affects the functioning of the other. For instance, the separation of rainwater and waste water at a business park may seem like a low priority locally. However, doing this can result in a reduced load on the sewer system downstream, thereby reducing the risk of untreated waste water entering the watercourse via an emergency outlet.

SOLUTIONS TO CHALLENGES FACED BY SOCIETY

Anyone who reads our ambition – Clean watercourses for future generations and a living environment in harmony with water – will quickly discover that we are a lot more than just a waste water treatment company. By responding to social challenges that we can have an impact on, we expand our added value for society and the environment.

With significantly different weather patterns of intense showers and periods of drought, climate change has a direct impact on water management. We also use our expertise in all aspects of the water cycle in order to design adaptive solutions to reduce the risk of flooding and drought at a local level. Containing rainwater as much as possible is our starting point. We prefer to let it soak into the ground, ideally combining this solution with the natural landscape or local reuse.

Thanks to intensive research and innovation, we have succeeded in making waste water treatment an economically viable link in the energy transition and the recovery of certain raw materials. We are currently doing this by encouraging the production of green energy from waste water and sludge and the upgrading and reuse of our treated waste water, for example. We are also busy investigating which other substances we can recover cost-efficiently from the process.

MUNICIPAL SEWER MANAGEMENT

Flemish towns, cities and municipalities are responsible for the expansion and management of the local waste water and rainwater infrastructure. Because that knowledge is so specific and they often lack the capacity required, the majority of them work with a sewer manager. More than 150 Flemish municipalities are currently customers of Aquafin, mostly via a partnership with one of the drinking water companies – water-link, De Watergroep (Riopact) and Pidpa – with which we cooperate systematically for municipal sewer management. Our ambition for the future is to set up the same type of structural partnership with the 4 other municipal sewer operators too. Having the implementation of municipal and supra-municipal projects and maintenance of the infrastructure under one roof can deliver significant efficiency gains, on both an ecological, economic and organisational level.

In accordance with the provisions of the cooperation agreement with the Flemish Region, Aquafin strictly monitors the separation of charges and revenues relating to activities for the Flemish Region and those for the municipalities.

ADVICE AND SUPPORT FOR COMPANIES

Aquaplus is a wholly-owned subsidiary of Aquafin and the right place to go for companies with a water-related query, problem or challenge. From renovation to process optimisation, operation and maintenance, reuse of water or the whole process from design to realisation of their own water treatment: Aquaplus can take care of all this for its industrial clients, enabling them to focus on their business activities. 2023 is the year in which sewer management for the private market saw a breakthrough. More and more companies are becoming aware of the need for proper management of their underground pipe network. Preventive asset management is crucial for preventing risks and damage. Water and environmental advice for companies is a new addition because smart rainwater management presents a challenge, especially in an industrial context where typically, there are a lot of paved surfaces. For all the services that Aquaplus offers, it can count on Aquafin’s expertise.

Our subsidiary has clients in a wide range of sectors, including food and beverage, chemicals and the pharmaceutical industry.

 www.aquaplus.be

What we do PROJECT MANAGEMENT & MATCHMAKING

Aquafin defines projects that it carries out for the Flemish Region based on ecological objectives in order to keep the infrastructure in good condition, and aligns these with municipal investment plans. Finding a 'match' delivers the best result both financially and ecologically. Every project that we carry out we manage from start to finish, from the feasibility phase to implementation. Right from the start of a project, we take into account the nuisance it will cause for the surrounding area and try to keep it to a minimum as much as possible. During implementation, we focus on safety, quality, information and communication.

FINANCING OF PROJECTS

All the projects Aquafin carries out for the Flemish Region are also pre-financed by us. As the drinking water companies in Flanders are obliged by decree to decontaminate the drinking water they supply, they pay Aquafin back for the project after delivery over a period of 15 or 30 years. Thanks to excellent creditworthiness and an extremely diverse range of sustainable projects, it is not difficult for us to find financing. Via a Green Finance Framework, we respond to the growing interest from investors in investments with added value for the environment and society.

TRANSPORTING AND TREATING WASTE WATER

In our large collector sewers, we collect domestic waste water from the municipal sewers. From there, we transport it downstream to one of our 329 waste water treatment plants spanning the whole of Flanders, where it undergoes a mechanical and biological treatment process and is discharged into a stream or river. The treated water complies with Flemish and European standards for surface water but it is not drinking water! However, with additional stages of treatment, it can be upgraded to any quality, even drinking water quality which is already being carried out by drinking water company Aquaduin in Koksijde. Upgrading projects are currently in the process of being launched or investigated as a possibility for various WWTPs.

2023 in figures

ASSET MANAGEMENT

The reinvestment value of the infrastructure that Aquafin manages for the Flemish Region currently stands at around 7 billion euros. In order to extend the service life of the existing infrastructure and continue to guarantee that the treatment process will continue to work efficiently, close monitoring and timely renovation or replacement are crucial. We are also proactive in seeking optimisations of the transport and treatment of waste water that bring economic, ecological and social improvements.

DEVELOPING A VISION

Aquafin has strong local knowledge and a clear helicopter view of water management and how different water systems have an effect on each other. We seek optimisations that will improve the performance of the infrastructure by using sewer databases and hydraulic computer models, for example.

We also draw up stormwater and drought plans for towns, cities and municipalities, with a vision for a smart approach to stormwater in their territory. With an eye to climate adaptation, containing stormwater as much as possible is the best option. That can be done by allowing it to soak into the ground more easily or by buffering it for reuse. In our stormwater and drought plans but also when formulating concrete projects, we therefore look at a lot more than just water. Possible opportunities to connect for a higher amenity value, biodiversity or social cohesion are included in the scope.

720 MILLION EUROS OF TURNOVER

329 WWTPS

7,298 KM OF PIPES

MILLION EUROS INVESTED IN INNOVATION Finance Infrastructure

1.6

1.9 BILLION EUROS

WORTH OF CURRENT SUPRAMUNICIPAL INVESTMENT PROJECTS (DESIGN + IN PROGRESS)

4.8 MILLION EUROS OF PROFIT TO BE APPROPRIATED

2,057 PUMPING STATIONS AND STORAGE SETTLEMENT TANKS

96.34 % OF ASSESSED WWTPS MET ALL STANDARDS

142 MILLION EUROS

WORTH OF SUPRAMUNICIPAL INVESTMENT PROJECTS DELIVERED

1,213 EMPLOYEES

Results Sustainable and impactful growth

Operational management

As of the end of 2023, Aquafin was managing 329 waste water treatment plants for the Flemish Region. One of these was only put into operation during the second half of the year, which meant that it was not included in the treatment results. Of the 328 WWTPs assessed, 316 or 96.34% complied with all the applicable standards.

The treated waste water has to comply with European and Flemish quality standards. It is assessed based on 3 to 5 parameters, depending on the capacity of the plant (see box). For most parameters, there are both concentration limits as well as removal percentages to be attained according to Flemish standards. Concentration limits indicate how many milligrams per litre of a substance can be present in the treated waste water. Removal percentages specify how many percent of that substance we have to remove in the treatment process annually.

In Flanders, the sewers are still predominantly of the combined type which lie underground and transport both waste water and rainwater. In a wet year like 2023, the removal percentage is therefore difficult to achieve for WWTPs that receive highly diluted sewer water. That is because when it rains a lot, the concentration of substances to be removed in the incoming sewage water is often below the concentration limit that applies to discharging into the watercourse. For 9 of the 12 WWTPs that failed last year, the reason for this was not achieving 1 removal percentage. If we do not count the failure to achieve a single removal percentage due to the dilution problem, 99% of the WWTPs assessed were compliant in 2023.

In the past, Aquafin has made enormous efforts to achieve the standards for effluent even in difficult circumstances. For instance, extra and more complex controls and alarms were implemented in the treatment process, analysers were installed in order to detect the slightest deviations quickly and very close monitoring is carried out by our operational workforce. We will remain committed to this in the future too.

In the graph above, the impact on the treatment results of 2019, 2020 and 2022 – which were dry years – and 2021 and 2023 –which were much wetter years – is clearly visible.

Parameters for clean water

> BOD: biological oxygen demand – the amount of oxygen required to break down the pollution biologically.

> COD: chemical oxygen demand – the amount of oxygen required to break down the pollution via a chemical process.

> Suspended solids: all undissolved substances in a volume of waste water.

> Nitrogen & Phosphorus: nutrients present in domestic waste water. Excessive quantities of these in the watercourse lead to too strong algae growth, which reduces the oxygen content.

50 WWTPS REMOVE EXTRA PHOSPHORUS

Flemish watercourses still contain too much phosphorus, which has a negative impact on aquatic life. It leads to increased algae growth, which reduces the oxygen in the water as well as light incidence. Phosphorus is present in domestic waste water and every year, Aquafin removes 85% on average in the treatment process. There are still other ways in which the substance can end up in the surface water. After comparing various measures, the Coordination Committee on Integrated Water Policy (CIW) concluded that the targeted dosing of iron and aluminium salts in the water treatment process is the most cost-effective measure for reducing the phosphorus burden. That applies to WWTPs which discharge their effluent into vulnerable streams and brooks that are already close to the targets from the Water Framework Directive.

In 2023, Aquafin installed a phosphate monitor at 46 of these 50 WWTPs and the last 4 are to follow in 2024. That way, exactly the right amount of product can be added in order to achieve the target value of 0.3 mg/l on an annual basis, while the standard for most WWTPs is 2 mg/l. As a result of this adjustment, the WWTPs will proactively comply with the new standard of 0.5 or 0.7 mg/l that will be imposed by the revised EU Urban Waste Water Treatment Directive (UWWTD) for WWTPs between 10,000 and 150,000 PE from 2039. Aquafin currently has an investment program in place for equipping all WWTPs with a capacity from 10,000 PE with phosphate monitors over the next few years.

SLUDGE AS AN ENERGY SOURCE

In the biological treatment process, the microorganisms in the active sludge grow continuously. A particularly wet year when a larger flow is treated will therefore always be accompanied by a higher volume of sludge produced. In 2023, the total volume of sludge produced was 108,918 tons, around 3,000 tons more than the previous year. That translates into more chemicals for thickening and dewatering, more transportation by road and more sludge to be processed.

Aquafin has a digestion plant at 13 WWTPs where half of the total biomass is digested. One digestion plant was out of operation for most of the year on account of renovations. However we digested more sludge at the other plants and therefore produced more biogas than the year before. We convert the biogas into green electricity and heat at 12 sites with cogeneration plants (CHP). At our AntwerpenZuid WWTP, we produce biomethane. In 2023, we injected 3,700 MWh of green gas directly into the natural gas grid at the site itself. That share will increase significantly in the future as last year, we decided to build biomethane units at 4 additional locations.

We also dried out one third of the total (digested and undigested) biomass in one of our own three sludge dryers in 2023. The remaining two thirds was incinerated as dewatered sludge. In the next few years, the three existing sludge dryers will be replaced by two new belt dryers to be built. These will run on residual heat from industry and operate at a lower temperature and without the use of fossil fuels. In 2023, further major modifications were carried out on the current dryers in order to ensure reliable and safe operation until the new dryers are started up.

According to the current schedule, we will also be able to put a new sludge treatment plant into operation at the Arcelor Mittal site at the Port of Ghent at the beginning of 2027. This will then initially incinerate two thirds of the sludge. Arcelor Mittal will use 100% of the steam produced in order to make its processes more sustainable. Because this will be a mono-processing plant where no other waste streams will be added, this will enable maximum recovery of energy and raw materials. In the long term, the plant will provide the opportunity to recover phosphorus from the incinerator ash on a large scale.

TOWARDS CLIMATE NEUTRALITY

Europe aims to be a climate-neutral continent by 2050. That will require efforts to be made in all member states and at all levels, not least by companies. The new EU Urban Waste Water Treatment Directive is aimed at energy neutrality for WWTPs from a capacity of 10,000 population equivalents.

With an ambitious energy and climate plan, Aquafin is also striving for climate neutrality. In 2023, we finalised a method for inventarising our greenhouse gas emissions and we also carried this out for 2022 as well as retrospectively back to 2013. The inventory takes account of supra-municipal sewers, waste water treatment plants and sludge processing, for both direct emissions (scope 1) and indirect emissions of energy purchased (scope 2), which are obligatory according to the Greenhouse Gas (GHG) protocol that we follow. Although it is not mandatory according to the said protocol, and it is currently still an extremely complex task, we did also try to map the indirect emissions in our value chain (scope 3) as best we could. In 2024, we will continue to develop and refine the inventarisation process. This first version is already a great starting point that sets us apart in the sector.

Our first greenhouse gas inventory is available on the website.

 www.aquafin.be/nl-be/milieu-impact

ENERGY TARGETS

An annual reduction in energy consumption of 1% compared with model consumption: just like in past years, we once again easily managed to achieve this in 2023. For instance, energy efficiency has increased by 17.7% compared with 2010. Whereas in previous years efforts were mainly focused on replacing energy-intensive blowers in the aeration basins, progress is now more in the major renovation works for which we include possible energy savings in the scope each time.

40% own renewable electricity by 2030: in 2023, we produced 22.4 GWh of green electricity in total which equates to 8.1% of our consumption. Just less than half of this came from the biogas produced as a result of the digestion of sewage sludge.

In 2023, we also made a big leap forward by installing solar arrays at no less than 19 additional WWTPs. This brings the total installed capacity of all our solar panels to approximately 15 MWp, enough to provide around 4,000 families with green power for a whole year. We are also planning to install a few more solar arrays in 2024 but by 2025, almost all potential sites will have been utilised. In addition, there is still the production of biomethane from biogas (see box again) which accounted for the production of 3,700 MWh of green gas in 2023. Meanwhile, there are also 4 ongoing feasibility studies relating to the installation of wind turbines at our sites.

The production of our own renewable energy continues to expand year on year but cannot carry on endlessly. However, Aquafin wants to use real green energy as much as possible, even if it has to be purchased. We regard electrical energy as truly green if production and take-off are simultaneous and of local origin.

That is why in 2023, we commissioned a study to explore how power purchase agreements (PPAs) could help us with this. With a PPA, we can purchase green energy from a specific wind energy project near to our sites when the energy is produced and also when we need it. What is more, we will also be helping encourage wind and solar energy projects in doing so.

An analysis was also carried out to establish how much of Aquafin’s energy requirement could be met by dark green electricity, taking account of its erratic consumption profile. It was subsequently found that it is not possible to cover our whole electricity consumption without systematic overproduction. If the amount of injected energy in the projections is limited to 5%, an intelligent combination of solar panels and wind turbines could lead to an ambitious target of making ~40% of Aquafin’s total electricity consumption dark green.

EXPANSION OF BIOMETHANE UNITS

At one site – Antwerpen-Zuid WWTP – we currently produce biomethane from the biogas generated by the digestion of sewage sludge. In a special unit, the methane and the CO2 in the biogas are separated from each other. The pure methane is then injected into Fluvius’ natural gas grid as green gas directly at the site. By upgrading the biogas to biomethane, we make use of the whole energetic value, unlike the process of conversion into green power when residual heat is lost. We have since launched projects to install biomethane units at our Ghent, Genk, Dendermonde and Deurne WWTPs too.

Removing nitrogen emissions through incineration

The first of the new planned biomethane units that we will put into operation is the one at Genk WWTP where we will handle the whole gas part. For the sludge digestion, we will be switching to a high-tech heat pump for extracting heat from the treated waste water and converting it into a high temperature heat pump. As a result, the nitrogen and CO2 emissions from incineration will be reduced to zero.

UWWTD BRINGS NEW CHALLENGES

Europe is currently preparing a revised version of the EU Urban Waste Water Treatment Directive (UWWTD). The current directive dates back to 1991 and aims to protect the environment against the detrimental consequences of waste water discharges. Once there is a definitive agreement at European level, the directive will still have to be converted into Flemish legislation.

What is on the table will have a major financial and organisational impact on the sector, both for Aquafin and for the towns, cities, municipalities and sewer operators. The field of application of the directive will be expanded to include smaller conurbations (> 2,000 PE) and there will be stricter standards for individual waste water treatment plants and for the removal and recovery of nitrogen and phosphorus. In addition, the new UWWTD will focus strongly on monitoring of WWTPs, the sewer system, overflows and rainwater runoff and actions to limit overflow operation. In addition, the removal of micropollutants at the largest WWTPs will become mandatory, with the pharmaceutical and personal care products industry being explicitly targeted for significant financial contributions in an additional stage of treatment. Finally, the UWWTD wants WWTPs > 10,000 PE to become energy-neutral.

Expansion and performance of the infrastructure

Flanders still has some way to go before all domestic waste water can be connected to a waste water treatment plant. The coordinating role given to Aquafin in the new cooperation agreement with the Flemish Region that came into effect on 1 January 2023 has made it possible to align supra-municipal and municipal investments with each other more effectively and thus achieve ecological results quicker. In the process, we start with the plans of the town, city or municipality and link supra-municipal projects to them. Even greater ecological and financial benefit could be gained by further expanding this coordination since the local and supra-local systems form a single whole. This means that an intervention in respect of one will inevitably have an impact on the other. With Aquafin’s helicopter view of the whole sewer system and our in-house expertise, we can pinpoint exactly where best to prioritise and carry out interventions.

As far as the implementation of projects is concerned, last year we managed once again to deliver the proposed budgets to the Flemish Region for both investment projects, asset management projects and energy-saving projects. We delivered almost 188 million euros in supra-municipal projects in total. In order to guide Flanders towards the objective of the Water Framework Directive, the Flemish Government has increased the delivery budgets for the expansion of new supra-municipal infrastructure to 200 million euros in 2028. That way, a fast pace can be maintained. Beyond that date, it will be necessary to increase the budgets by 10% every year in order to achieve Flanders’ planned targets for 2033.

FOCUS ON OVERFLOW OPERATION

Flanders has more than 8,000 overflows. These are emergency outlets from the sewerage system via which untreated waste water, possibly mixed with rainwater, escapes into a watercourse. Overflow operation can be caused by heavy rain when the sewer overflows or if the sewer becomes blocked. In small vulnerable water courses, it can wipe out the recovering water quality in one fell swoop. That is why it is important to find out the most critical locations and to know what impact overflows have, so that appropriate measures can be taken.

At the request of the Flemish Region, Aquafin is currently rolling out an overflow measurement network. As of the end of 2023, a water gauge had already been fitted at the sewer end of the overflow in 700 locations that map the ecological performance of the sewer network or have channelling structures susceptible to becoming blocked near to an overflow. In 2024, another 900 extra gauges will be installed at overflows which we know have been working regularly for a long time and are discharging into a vulnerable watercourse. Input from VMM, municipalities and sewer operators also helped determine the most relevant locations. 9% of the total of 1,600 overflow gauges will be installed in the municipal infrastructure. We are currently working on a method for sharing the measurement data with third parties. Using the level measurements, we can also calculate overflow flow rates while a tool (Cockle) that we have developed in-house even enables us to estimate the actual waste load emitted.

FIRST SEWAGE PIPE MADE OF GEOPOLYMER CONCRETE

For the second time we, as a major client for infrastructure works, used a test facility for the use of a sewage pipe in 2023, in which the cement was replaced with a more sustainable alternative. Geopolymer is a by-product of steel production which replaces cement – an extremely energy-intensive product – as the binder in Geoprime® pipe. In terms of the use of raw materials, this new type of 'green concrete' consequently brings no less than 78% less CO2 emissions than classic concrete. Tests with this material are still being carried out. That is why Aquafin used this pipe as a rainwater pipe in a sewage project because there was no risk of hydrogen sulphide (H2S) forming, a gas that can corrode the pipe.

Naturally, the next step will be to take measures to limit the number of overflow operations whereby priority will be given to watercourses that are already closest to the Water Framework Directive target. One extremely effective measure is real time control (RTC), where an algorithm controls mechanical structures such as slide valves and gates in the sewer system in order to make optimum use of underground storage capacity in the event of heavy rain. Aquafin is currently already using this technology at 14 locations within the supra-municipal system and another 11 have already been scheduled. In addition, sedimentation basins and the disconnection of large paved surfaces are also proving useful along with the after-treatment of overflow waste water as a reactive measure. The Cockle tool enables us to compare the impact and the cost price of the various measures.

SUSTAINABILITY SCORE FOR PROJECTS

Every project that we carry out has the objective of moving a step closer to 'clean watercourses and a living environment in harmony with water'. Exactly how much closer, we want to be able to demonstrate in the future with the help of the sustainability score that we are in the process of developing for our projects. Every stakeholder has different requirements and the public space within which we have to combine all the requirements is limited. The idea of a sustainability scoring system is to weigh up different design scenarios against each other and make a reasoned choice, thus demonstrating the added value for the neighbourhood.

ASSET HEALTH SCORES SHOW NEED FOR INCREASED INVESTMENTS

Not only is additional infrastructure needed, past investments must also continue to pay off. Moreover, because in the past, for understandable reasons, budgetary priority was given to the expansion of new infrastructure rather than to replacement or renovation, there is a historical backlog to clear.

In recent years, Aquafin mapped the state of the assets in pumping stations and the sewer system and translated the information into scores based on the asset health index in accordance with standard NEN 2767. In 2024, we will start to do the same for WWTPs, initially based on the age of the assets, and later on we will refine that information based on findings made during visual inspections. The results that are reflected in the scores based on the health index form the basis for long-term asset plans (LTAPs). This enables us to schedule investments in good time and look further into the future.

Timely investment means preventing the failure of critical infrastructure such as the formation of sinkholes or the loss of pump capacity. In addition, the further accumulation of an investment backlog should be avoided so that investment needs remain feasible in the future, not only in terms of budget but also in terms of market capacity. Consequently, this means that asset management budgets for renovation and replacement will need to increase at an accelerated pace over the next few years in order to cope with the ageing of assets in good time.

STATUS TOOL SHOWS PROGRESS OF SEWER INSPECTIONS

After Aquafin previously took the lead in order to devise standards and minimum requirements for sewer inspections in Flanders together with the sector, we also developed a digital status tool at the request of the Flemish Region. This dashboard visualises all the relevant information on the location, characteristics and management of the Flemish sewers. Via the dashboard, it is also easy to monitor whether municipalities and sewer operators are on track with the step-by-step plan to have a clear view of the state of the sewers by 2027. The dashboard is freely accessible via statustool.aquafin.be

Besides the status tool for sewer inspections for all municipalities, Aquafin also offers ROSI, the platform where our municipal customers have a transparent view of the schedule for and performance of inspections on their assets. Here, they can also find proposed measures, including timing and budget. We are already offering this support to 150 or more than half of all Flemish towns, cities and municipalities.

DIGITALISATION AS THE ANSWER TO SHARED CHALLENGES

The Internet not only connects people, it also connects billions of devices. The potential of data exchange and digitalisation in general is enormous and that includes the water sector. With the SlimNet program which is co-financed by the 'Vlaamse Veerkracht' (Flemish resilience) recovery plan, we are making our treatment processes ecologically high-performing, energy-conscious and budget-conscious.

Aquafin also took the lead in order to widen the promotion of partnerships on digitalisation within the water sector, in connection with the sharing of data, for example. That is because the more data we can make talk to each other easily, the more it will become possible to manage infrastructure efficiently.

Meanwhile, we were also involved in the 'Flemish Water Data Space' project of the Coordination Committee on Integrated Water Policy (CIW) with the use case within the 'Internet of Water' research project completed in 2023, for example. We installed water quality sensors which will transmit their data so that other parties can also use the information for smart applications with the help of algorithms.

SOLUTIONS TO CAPACITY SHORTAGE ON THE MARKET

A real risk with regard to the implementation of projects is the scarcity of contractor capacity on the market. Contractors for infrastructure works and sewer renovations but also companies that carry out sewer inspections are overburdened. As a result, the pace of investments is at risk of stalling and the inspection program that the Flemish Region demands from towns, cities and municipalities and sewer operators is in jeopardy. Aquafin is actively searching for solutions to prevent this.

For investment projects, joint contracting of the municipal and supra-municipal part can be part of the solution. Then only one specification and one contractor is required to carry out the whole project, which reduces the pressure on capacity.

STRUCTURAL COOPERATION WITH SEWER OPERATORS

Aquafin has been systematically working with drinking water companies water-link and De Watergroep (Riopact) for towns, cities and municipalities that contract out their sewer management for some time now. In 2023, we also signed a similar cooperation agreement with Pidpa. Consequently at the start of 2024, the count for the number of municipalities cooperating with Aquafin via one of these partnerships went up to more than 150. Our aim is to also conclude similar contracts with AGSO KnokkeHeist, Aquaduin, Farys and Fluvius in the future in order to exploit potential synergies. We firmly believe that joint implementation of municipal and supramunicipal projects will enable available resources to be used even more efficiently.

We want to promote innovative techniques for sewer inspections with the aim of increasing the efficiency of implementation. This can be done by using damage image recognition with the aid of artificial intelligence (AI), for example. We are also investigating how we can increase the efficiency and output of inspections.

CONSTANT FOCUS ON SAFETY

Infrastructure works and works on Aquafin’s infrastructure involve specific risks. With a strict safety policy, we make every effort to ensure that everyone who works for us and with us is able to return home safely in the evening. In 2023, we once again took a number of initiatives to further increase safety awareness. For instance, we devised a methodology for work permits containing all the safety action points associated with the work. A pilot phase is currently underway for this. We are also working on a safety introduction film that everyone who works for us will have to watch. At a later stage, there will also be a test linked to this.

We know that our technical partners value Aquafin’s constant focus on safety. We are also noticing their increased awareness of safety and potential risks more and more. This has translated into a decrease in the number of very serious accidents and safety incidents involving third parties on our sites and infrastructure. It goes without saying that we will continue our efforts unabated by closely monitoring STOP alerts, for example. Everyone at an Aquafin site is mandated to say 'STOP' and temporarily stop the work if it cannot be carried out safely. If the infringement is repeated, we can escalate that STOP alert to the management of the company concerned and request the proposal of an action plan.

A CHARTER FOR BINDING COLLABORATION

Our technical partners are indispensable in the realisation of our ambition. Together with them, we are therefore working on creating long-lasting relationships in which connection, trust and inspiration are key while paying attention to the well-being and development of project team members.

In 2023, we started on a course with engineering firms to translate that collaboration model into reality. By means of co-creation, we devised a charter as a point of reference in difficult times and as a guide for each party to fall back on.

The charter was a starting point for a follow-up project with a training course on 'Binding collaboration'. The 'Partner Academy' was also set up where both the engineers from engineering firms and project managers from Aquafin follow a series of technical training courses.

The charter with the engineering firms also provides a good basis for discussions with contractors in 2024 regarding even better collaboration in the future.

Everyone at an Aquafin site is mandated to say 'STOP' and temporarily stop the work if it cannot be carried out safely.

Research and innovation broaden our impact

New legislation, changing ecosystems, social challenges, improvements in efficiency, the untapped potential of the water treatment cycle… There are so many reasons why Aquafin attaches great importance to research and innovation. With new knowledge and insights, we can turn Flanders into a frontrunner in the sector and create maximum added value for people and the environment. Thanks to our broad heritage and our strong practical knowledge, we are a prized partner in the world of research for the long-term testing of new technology on a large scale and subsequent implementation.

In 2023, Aquafin invested 1.6 million euros of its own funds in financing innovation projects. That is because currently, besides a limited budget for basic research, Flanders has not earmarked any funds for innovation aimed at creating solutions to directly tackle the challenges facing the sector.

RECOVERY OF RAW MATERIALS

It is perfectly possible to recover certain raw materials via the water treatment process. In the past, Aquafin has been involved in research projects on the recovery of phosphorus, nitrogen, cellulose and organic material. The new EU Urban Waste Water Treatment Directive (UWWTD) is also aimed at the recovery of phosphorus and nitrogen in the long term. However, the biggest challenge lies in making the circular concept cost-effective. It is therefore desirable for the UWWTD to facilitate possible outlets.

Because natural reserves are becoming increasingly difficult to access, the demand for phosphorus is expected to rise in the future. The mining of phosphorus is not ecologically sustainable and in addition to that, there is very little phosphate rock in Europe. Phosphorus ends up in plants – and thus the food chain – via fertiliser. It is present in human urine and is captured by sludge during the treatment process. In the long term, Aquafin is planning to recover phosphorus on a large scale from the fly ash from the sludge that will be incinerated in a new sludge mono-processor scheduled to be put into operation in 2027.

Activated carbon, a form of carbon that can bind substances to it through adsorption, is also expected to become scarce. Activated carbon is used in water treatment to remove so-called micropollutants that are not tackled via the classic treatment process. The UWWTD will also stipulate requirements for the removal of these micropollutants. Aquafin is currently exploring the possibilities for turning sewage sludge into biochar, a type of charcoal that can be used as activated carbon or as a soil improver, by means of pyrolysis (extreme heating) using thermal energy. Apart from the production of a scarce raw material, sludge pyrolysis has two further benefits: the sludge no longer has to be removed and becomes a completely circular product, and it is a form of carbon capture.

We will be investigating another form of carbon capture in the European project Fuelphoria which we are involved in. Fuelphoria explores cost-effective and sustainable technologies for the development of advanced biofuels and renewable fuels. One of the demos within the project will be set up from the end of 2024 at our Antwerpen-Zuid WWTP. At our site, the Bio Base Europe Pilot Plant pilot installation will use fermentation to turn the CO2 from the biomethane process into acetate or acetic acid. Acetic acid itself can be reused in the water treatment process as a source of carbon. It can also be further fermented to form fatty acids which can be used to produce biodiesel.

FOURTH TREATMENT STAGE LAUNCHED

Micropollutants are polluting substances which occur in low concentrations in waste water but can still be harmful to the environment. The classic treatment process was not designed to remove these, however removal is to become mandatory in the future due to new legislation. Aquafin and Vlaamse Milieumaatschappij (VMM) started a project in preparation for this. At the Aartselaar WWTP, a fourth treatment stage or quaternary treatment was built in order to remove micropollutants on a large scale. The setup consists of two already proven technologies – ozone treatment and treatment with activated carbon – which, when combined, can reduce the total ecological footprint. Aquafin will investigate the operation, cost and efficiency of the post-treatment and VMM will monitor the impact on water quality in the Grote Struisbeek which will receive the treated water.

Aquafin began the phased start-up of this quaternary treatment in the autumn and it is due to become fully operational during the first few months of 2024. Within the Interreg Flanders Netherlands research project 'Clean Watercourses', a life cycle analysis will also be carried out in order to determine the extent to which the environment can actually benefit from a quaternary treatment. A relevant course to take as it significantly increases the cost of water treatment. The intention of the UWWTD to put the burden of financing quaternary treatments largely on producers using micropollutants is therefore defensible.

INNOVATION FOR THE ENERGY TRANSITION

In the section entitled 'Operational management', we describe how we have expanded our own renewable energy production by converting biogas into biomethane. In addition, Aquafin also put sewer thermal energy on the map in Flanders. With sewer thermal energy, residual heat is extracted from waste water and upgraded for the purpose of cooling or heating buildings. Interest has been shown in both the application using untreated sewer water and the application using treated waste water. Following an initial successful implementation at our own campus in Aartselaar, sewer thermal energy using sewer water is set to be put into practice later this year in connection with the development of the Keerdok site in Mechelen as well as the construction of a new swimming pool and municipal pavilion in Sint-Niklaas.

Last year, the plans for rolling out sewer thermal energy using treated waste water as a feedstock for a heat network in Deurne became reality. The plant for this will be built in 2024 at our Deurne WWTP and in the first instance will supply heat for the nearby Slachthuis site that is under development. In the long term, the heat network will be expanded to serve around 8,000 families. Discussions are currently in progress regarding the use of treated waste water as a source of heat at 3 other WWTPs.

STORMWATER IN THE RIGHT PLACE

A changing climate with more intense rainfall and long periods of drought brings specific challenges for society in general and for public spaces in particular. Providing space for water and using it optimally are central in our vision. Through our new 'water and environmental consultancy' service, we can develop a scenario analysis or a concept for a specific location for a town, city, municipality or company. Water may occupy a prominent position but we take a holistic look at the surrounding area and seek opportunities to connect in order to create added value for the neighbourhood and the environment as much as possible.

Allowing stormwater to soak into the ground more easily is a good way of replenishing the water table – as long as it is not polluted, of course. However, water that runs off from heavily used roads or car parks usually is. Oil residues or particles from car tyres can be washed away and pollute the ground or the stream or brook where they end up. In the new EU Urban Waste Water Treatment Directive (UWWTD), the member states are asked to focus their attention on this type of impact. Technologies for the treatment of stormwater runoff are currently still predominantly in an academic phase. However, Aquafin has already tried out a number of systems in practice. As part of the European research project StopUP, for example, we are investigating the extent to which a gravel filter in Brialmont Park in Antwerp treats the stormwater runoff from the Singel ringroad before it soaks into this nature reserve. This use case was financed with Flemish subsidies ('Green and blue in the city' – Thematic urban renovation projects).

A FAIR CHANCE WITH REGARD TO 'COMMONS'

Heat from waste water, treated waste water (effluent), scope for the development of energy projects,… We like to give everyone a fair chance to make use of these because no-one owns them exclusively and that is why they are so-called 'commons'. In 2023, Aquafin developed a methodology to open up the availability of these commons. 'Open calls' were issued for the development of wind turbines and a battery storage system at our sites for which Aquafin itself took the initiative. When interested parties put themselves forward for sewer thermal energy or the reuse of effluent based on the potential maps on our website, we issued 'final calls'. By doing that, any other interested parties were also given the chance to subscribe for the offer.

In view of the growing interest in these commons, Aquafin developed a digital platform under the name 'AquaMarkt' where offers can be found from 2024.

SMART CONTROLS: FROM THE DRAWING BOARD TO PRACTICE

Digitalisation is advancing at an increasingly fast pace – at Aquafin too. After laying the foundations for turning the waste water and stormwater infrastructure into a 'smart network' in 2022, we have already put a number of concrete applications into practice since then. Whether it is the control of buffer basins in order to align their reuse and storage functions or the control of our renewable energy production based on supply and demand: in each case, it is algorithms in the cloud that combine measurement data with external data such as precipitation forecasts and energy prices. The result is always more efficient use of the infrastructure, ecologically and/or economically.

One example is the first flush control that we implemented for the first time at a pumping station at the end of 2023. A first flush is preceded by a long dry period when the suspended solids in the waste water settle and form a layer of sediment in the sewer. The next time it rains heavily, the layer will be stirred up and the dirt is washed away. This sudden, highly concentrated waste load can be transported via an overflow and end up in the watercourse or cause blockages. The first flush control ensures that waste water is still pumped regularly during a dry period so that little by little, the layer of sediment is carried along to the WWTP.

Taking care of our people

At Aquafin, we are fully aware of how important human capital is to the organisation. Our HR policy is therefore aimed at creating meaningful jobs within a caring, safe and healthy environment that also invites development.

ATTRACTING DIVERSE TALENT

To create a lasting impact and encourage innovation, we need diverse, heterogeneous teams and therefore a diverse influx of talent. That is one of the reasons why we are working towards an inclusive culture and focusing specifically on diversity and cooperation. We deem equal opportunities and equality extremely important at the same time.

For us, heterogeneous teams are made up of people with different thought profiles, backgrounds, personalities, experience,… As an employer, we want to have an insight into our employees’ talents and ambitions and we also want them to grow in self-knowledge with a view to agility in the future. We use our Future Proof Skillset as a framework for recruiting diverse talent and encouraging internal mobility so that employees are deployed based on their talents and can derive satisfaction from their job.

In 2023, all our recruiters received training on 'zero bias' recruitment and the method was also implemented in practice.

FINGER ON THE PULSE

Recruitment, personnel administration, training, encouraging internal talent… – an HR department has a lot of different specialisations. At Aquafin, these specialisations are organised into 4 multidisciplinary HR customer teams, each of which is the point of contact for a specific group of personnel. But they also actively keep their finger on the pulse through intensive communication and feedback with teams and individual employees. Because of their close involvement, they are a true ‘travel companion’ for every employee.

Vacancies filled in 2023

ENCOURAGING DEVELOPMENT

With the continuous broadening and deepening of our activities and digitalisation, the challenges continue to evolve. Because the knowledge is so specific, we organise our own 'Academies' for jobs such as a WWTP operator or project manager. We also facilitate 'lifelong development' by providing different forms of learning and letting employees have a say in the type of training they receive.

In 2023, more than half of all our managers received training in order to promote the growth and development of their team members’ talent.

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SAFE AND HEALTHY WORKING ENVIRONMENT

A safe working environment but also safetyconscious thinking and action are high on the agenda all year round. The aim is undeniably zero accidents. In 2023, we achieved our best ever score on this with a total of 256 days without a lost time accident. However, vigilance remains high with annual targeted actions. For instance, in 2023 works were carried out to increase the safety of sludge digesters and sludge dryers and in 2024, we will continue to work on new guidelines for working at height.

Commuting and travelling between workplaces remain major potential risks which is why in 2023, Aquafin launched a campaign called 'Roadwise' to encourage employees to adopt a safe attitude on the road both when driving a car or riding a bicycle. The campaign focuses on various aspects such as see and be seen, driving behaviour and vehicle control as well as the use of safety tools.

With our well-being policy, we strive for not only physical safety but also mental security and well-being. In a rapidly changing world in which we need to be extremely agile as an organisation, we want to strengthen the resilience of our workforce. We did so in 2023 by raising awareness in respect of disconnection and the importance of exercise, ergonomics and healthy eating, for example. Each team also formulated three objectives for themselves to improve well-being. Agreements were made regarding workable work, health and safety and creating connections with each other and with the organisation.

EXTERNAL APPRECIATION FOR OUR HR POLICY

Having been declared HR ambassador of the year by HR Gala in 2022, we were awarded the 'Human Strategy Prize' by ALES, the European Lean Managers Society, at the end of 2023. The prize is awarded to the company that stands out the most in terms of HR initiatives with a clear impact on business processes. Last year, we were also given the title of 'Pioneering Employer' for the second time in a row for our sustainable mobility policy and people-oriented personnel policy.

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Corporate sustainability

AMBITION AND VALUES

Aquafin is an organisation that is driven by values. We want our activities to turn our vision into reality: 'Clean watercourses for future generations and a living environment in harmony with water'. It is our dot on the horizon aimed at having a distinctly positive impact on the environment and society. The fact that most employees and applicants are attracted to Aquafin precisely because of that says a lot about how strongly the subject resonates with society.

OUR 6 CORE VALUES THAT FORM AQUAFIN’S DNA

Our clients can count on our expertise for high-quality, appropriate solutions. We respond to new trends and challenges and we innovate in order to maximise the social added value of our activities. In doing so, we connect people and organisations to create synergies and our empathetic approach ensures that we incorporate concerns and needs in our actions. We take action and launch new initiatives, always with the utmost care for the environment and the climate.

OUR SUSTAINABILITY STRATEGY

As an organisation that collects and treats domestic waste before it ends up in nature, our main mission has an intrinsically positive impact on the environment. In spite of this, the infrastructure and processes required have an ecological footprint that should not be underestimated. In addition, all kinds of factors such as climate change, new polluting substances in waste water, a growing population, etc. continue to put pressure on the water quality of streams and rivers. For us, working on solutions to all these challenges equates to Green Action

In an increasingly fast-moving technological world, we want to take care of people. We want to create a safe, ethical working environment where attention is paid to everyone’s well-being, not only for our own employees but also for those of our partners. We want to Let people grow by sharing knowledge and encouraging development.

As an organisation, we are At one with our environment and we are aware of the impact that we can have on it. For instance, we do everything we can to limit the nuisance caused by our work, we diversify our products and services to help enable social transitions and we dare to make risk-conscious sustainable choices.

In 2023, we refined our sustainability strategy and built a governance structure in which the roles and responsibilities were allocated for all themes. A conscious decision was made to delegate responsibilities relating to targets and KPIs within the business. Corporate Sustainability objectives form part of our business goals and annual targets.

PREPARING FOR THE CSRD

Participatiemaatschappij Vlaanderen (PMV) holds all the Aquafin shares. As PMV consolidates the annual figures for Aquafin, it is PMV that has to comply with the obligations from the Corporate Sustainability Reporting Directive (CSRD). However because we want to be transparent, we will also report in accordance with the CSRD ourselves.

At the beginning of 2024, we enhanced our impact analysis by adding a double materiality analysis. That way, this year we can determine the topics we want to report on annually. For the 2024 financial year, we will report the data points under ESRS E1 (climate change) and S1 (own workforce) in accordance with the CSRD.

Financial report

General information

HISTORY

Aquafin was established by the Flemish Region in 1990 in order to implement the EU Urban Waste Water Directive. Since the treatment of waste water in Belgium is a regional matter, Aquafin is responsible for the development, management and funding of the regional sewage treatment infrastructure. The company was established under the Law of 26 March 1971 on the protection of surface waters against pollution (Wet op de bescherming van de oppervlaktewateren tegen verontreiniging), which was converted into the Decree on Integrated Water Policy of 18 July 2003, coordinated on 15 June 2018

In 2023, we launched a new cooperation agreement with the Flemish Government which also involved us being assigned a coordinating role for the purpose of matching supra-municipal investments to those of towns, cities and municipalities.

Besides the contract for Flanders, Aquafin also offers its expertise to Flemish towns, cities and municipalities, either directly or via a structural partnership with drinking water companies water-link, De Watergroep and Pidpa. We also develop methods for valorising residual products from waste water and we are always on the lookout for innovative applications to offer both within and outside the company. Aquafin applies the principles of separate accounting in order to separate commercial activities from activities commissioned within the regional (supra-municipal) remit.

SUPERVISION

As the regulator, the Flemish Environment Agency (VMM) supervises the activities that Aquafin carries out for the Flemish Region. In addition, Aquafin is a private joint stock company with an autonomous Board of Directors, audit committee, auditor, etc.

According to the new cooperation agreement (CA), control of Aquafin’s operations will be result-oriented and directed by the objectives set by the Flemish Region. Aquafin is evaluated based on critical performance indicators.

Aquafin developed an internal control system that allows clear and transparent reporting within the framework of this result-oriented control. The control system is based on the basic concepts of the 3-line model:

1st line control

On this level, the business carries out controls itself. By means of collaboration with Deloitte, we defined 114 control actions for this purpose to ensure that good results are achieved in respect of the 23 KPIs. These include, for example, the use of checklists, the drawing up of reports and the taking of samples.

2nd line control

On this level, the business is controlled by the Portfolio Management department through the performance of operational audits. Suggestions are also made as to how processes could be improved. In addition, the Portfolio Management department is also responsible for external reporting on the 23 KPIs.

3rd line control

This control is carried out by the Internal Audit department through the performance of assurance audits. During these audits, checks are carried out in order to establish whether the 114 control actions have been performed correctly and documented accurately. It is also checked as to whether these control actions are actually effective, in other words whether they make a correct and satisfactory contribution to the realisation of the 23 KPIs. The Internal Audit department is also responsible for external reporting on the effectiveness of these control activities.

As provided for in the cooperation agreement, VMM will monitor the proper and adequate functioning of the internal control system.

FINANCE AND INVOICING

Since the launch of the new Cooperation Agreement, Aquafin itself has been responsible for selecting supra-municipal investment projects which it puts on the agenda in order to achieve the objectives set. Before projects on supra-municipal budgets are carried out, the Flemish Environment Agency assesses the supra-municipal character of the project. After delivery by the contractor, the Flemish Environment Agency can carry out random checks on projects for up to two quarters thereafter. After that, the costs incurred are finally approved and Aquafin has a contractual right to their repayment, spread over a maximum period of 30 years. On the other hand, Aquafin also draws up an asset management programme for the existing plants, based on LCP analyses (life cycle plans). The water companies are obliged by decree to treat the water they supply. They enter into an agreement for this with Aquafin, which assumes the task of treatment for them. Aquafin invoices the water companies for the investment costs over the specified term, along with the company’s operating costs. The drinking water companies pay part of Aquafin’s invoices via a grant from the MINA fund among other things. They pass on the remainder, currently around two thirds of the total bill, to drinking water consumers according to the principle of “the polluter pays”.

In this formula, the budget for operating costs, excluding financing costs, under the Management Agreement is related to factors including the pollution load treated, the assets managed, the flows handled and the investment budgets. A series of fixed packages are added to this. The budget calculated is a total operating budget for Aquafin, based on what is known as the performance budget formula. This gives Aquafin the freedom to focus on the areas it considers important and to allocate the performance budget internally according to these areas. A cumulative annual efficiency gain is assigned to several packages from the performance budget each year.

The Flemish Region is a co-debtor in the invoice flow between Aquafin and the water companies. The turnover invoiced is spread between the various Flemish water companies, based on an allocation formula annually updated by Aquaflanders and approved by the Flemish Environment Agency. As Aquafin’s investment expenditure is repaid spread over a period of time, the company has to raise financing for this. Long-term financing for a project is not possible until it has been delivered internally and is in the invoice stream to the water companies. These long-term investments therefore involve no construction risk for the financiers. Aquafin covers short-term funding during the projects’ construction phase with equity capital, commercial paper, lines of credit and general corporate purpose financing.

COOPERATION AGREEMENT AND ALLOCATION AGREEMENT

Aquafin’s tasks are set out in a Management Agreement entered into between the company and the Flemish Region. This is a 20-year rolling agreement which specifies that, besides developing, managing and operating the treatment infrastructure, Aquafin is also responsible for financing this. The latest update to the agreement was made on 1 January 2023.

An allocation agreement exists between the Flemish Region, Aquafin, the European Investment Bank and Belfius Bank, with Belfius Bank acting as agent. The agreement stipulates that, should Aquafin find itself in financial difficulties, the water companies will no longer have to pay Aquafin for the treatment of the drinking water supplied by them, but Belfius Bank. As the agent for the allocation agreement, Belfius Bank will then pass on the sums to the financiers on the (interim) maturity dates of the financing agreements. According to the allocation agreement, the outstanding credit balance Aquafin has with the water companies must always be greater than the debt under the allocation agreement (the allocation ratio). The statutory auditor checks this ratio after each disbursement of financing under the agreement and confirms this to Belfius Bank. In turn, this bank communicates this allocation ratio to the financiers. It is also important for them to know that, according to the allocation agreement, any changes to specified articles from the Management Agreement with a financial impact must first be submitted to them for approval.

In order to participate in the allocation agreement, the financier first signs an agency agreement with Aquafin and Belfius Bank.

Report of the Board of Directors

STATUTORY AUDITOR’S REPORT

Statutory auditor’s report to the general meeting of Aquafin NV for the year ended 31 December 2023

The Financial Statements can be found via the Central Balance Sheet Office of the National Bank of Belgium.

AQUAFIN NV

Statutory auditor’s report to the general meeting for the year ended 31 December 2023

Free translation

STATUTORY AUDITOR’S REPORT TO THE GENERAL MEETING OF AQUAFIN NV FOR THE YEAR ENDED 31 DECEMBER 2023

In the context of the statutory audit of the annual accounts of Aquafin NV (“the Company”), we hereby present our statutory auditor’s report. It includes our report of the annual accounts and the other legal and regulatory requirements. This report is an integrated whole and is indivisible.

We have been appointed as statutory auditor by the general meeting of 18 April 2023, following the proposal formulated by the administrative body. Our statutory auditor’s mandate expires on the date of the general meeting deliberating on the annual accounts closed on 31 December 2023. We have performed the statutory audit of the annual accounts

of

the Company for one consecutive year.

REPORT ON THE ANNUAL ACCOUNTS

Unqualified opinion

We have audited the annual accounts of the Company, which comprise the balance sheet as at 31 December 2023, the profit and loss account for the year then ended and the notes to the annual accounts, characterised by a balance sheet total of 3.965.178.292 EUR and a profit and loss account showing a profit for the year of 4.877.315 EUR EUR.

In our opinion, the annual accounts give a true and fair view of the Company’s net equity and financial position as at 31 December 2023, as well as of its results for the year then ended, in accordance with the financial reporting framework applicable in Belgium.

Basis for unqualified opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs) as applicable in Belgium. Our responsibilities under those standards are further described in the 'Statutory auditor's responsibilities for the audit of the annual accounts' section in this report. We have complied with all the ethical requirements that are relevant to the audit of annual accounts in Belgium, including those concerning independence.

We have obtained from the administrative body and the officials of the Company the explanations and information necessary for performing our audit.

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

Other matters

The company's annual accounts for the financial year ended 31 December 2022 were audited by another statutory auditor who expressed an unqualified opinion on these financial statements on 1 April 2023.

Responsibilities of the administrative body for the drafting of the annual accounts

The administrative body is responsible for the preparation of annual accounts that give a true and fair view in accordance with the financial reporting framework applicable in Belgium, and for such internal control as the administrative body determines is necessary to enable the preparation of annual accounts that are free from material misstatement, whether due to fraud or error.

In preparing the annual accounts, the administrative body is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the administrative body either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Statutory auditor’s responsibilities for the audit of the annual accounts

Our objectives are to obtain reasonable assurance about whether the annual accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue a statutory auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists.

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 annual accounts.

When executing our audit, we respect the legal, regulatory and normative framework applicable for the audit of annual accounts in Belgium. However, a statutory audit does not guarantee the future viability of the Company, neither the efficiency and effectiveness of the management of the Company by the administrative body. Our responsibilities with respect to the administrative body’s use of the going concern basis of accounting are described below.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the annual accounts, whether due to fraud or error;

• Design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control;

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the administrative body;

• Conclude on the appropriateness of the administrative body’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our statutory auditor’s report to the related disclosures in the annual accounts or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our statutory auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern;

• Evaluate the overall presentation, structure and content of the annual accounts and whether the annual accounts represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the administrative body regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identified during our audit.

OTHER LEGAL AND REGULATORY REQUIREMENTS

Responsibilities of the administrative body

The administrative body is responsible for the preparation and the content of the director’s report, as well as for the compliance with the legal and regulatory requirements regarding bookkeeping, with the Code of companies and associations and with the Company’s by-laws.

Responsibilities of the statutory auditor

In the context of our mission and in accordance with the Belgian standard (version revised 2020) which is complementary to the International Standards on Auditing (ISAs) as applicable in Belgium, it is our responsibility to verify, in all material aspects, the director’s report, and compliance with certain provisions of the Code of companies and associations and of the Company’s by-laws, as well as to report on these elements.

Aspects related to the director’s report

In our opinion, after having performed specific procedures in relation to the director’s report, the director’s report is consistent with the annual accounts for the same financial year, and it is prepared in accordance with articles 3:5 and 3:6 of the Code of companies and associations.

In the context of our audit of the annual accounts, we are also responsible for considering, in particular based on the knowledge we have obtained during the audit, whether the director’s report contains any material misstatement, i.e. any information which is inadequately disclosed or otherwise misleading. Based on the procedures we have performed, there are no material misstatements we have to report to you.

Statement related to the social balance sheet

The social balance sheet, to be deposited at the National Bank of Belgium in accordance with article 3:12, §1, 8° of the Code of companies and associations, includes, both in terms of form and content, the information required by the said Code, including that relating to information on wages and training and does not present any material inconsistencies with the information that we have at our disposition during the performance of our mission.

Statement related to independence

Our audit firm and our network did not provide services which are incompatible with the statutory audit of annual accounts and our audit firm remained independent of the Company during the terms of our mandate.

Other statements

• Without prejudice to certain formal aspects of minor importance, the accounting records are maintained in accordance with the legal and regulatory requirements applicable in Belgium.

• The appropriation of results proposed to the general meeting complies with the legal provisions and the Company’s bylaws.

• We do not have to report to you any transactions undertaken or decisions taken in breach of the by-laws or the Code of companies and associations.

• We have reviewed the financial consequences for the Company of the decision regarding the conflict of interest as described in the resolutions of the administrative body and consider it sufficient that the situation was explained in the annual report.

Zaventem, 28 maart 2024

BDO Bedrijfsrevisoren BV

Statutory auditor

Represented by Bert Kegels*

Auditor

*Acting for a company

BDO Bedrijfsrevisoren BV

Statutory auditor

Represented by Ignace Robberechts*

Auditor

*Acting for a company

Main risks and uncertainties

There are no substantial risks and uncertainties with regard to the financial year.

Main events during the financial year

FOUNDING OF SUBSIDIARY 'AQCELERATOR'

In 2023, Aquafin decided to set up a second subsidiary. Aqcelerator is a venturing company that will participate as an investor in the initial phase in projects linked to the realisation of projects relating to treated waste water such as heat recovery and upgrading to process water, cooling water, etc. for industrial application. This new entity was set up on 8 February 2024.

STRUCTURAL COOPERATION WITH DRINKING WATER COMPANY PIDPA

In June, Aquafin and drinking water company Pidpa signed a cooperation agreement for municipal sewer management. At that time, we were already working together in four municipalities where Pidpa is the sewer operator. On 1 January 2024, the 41 other municipalities where Pidpa is already the sewer operator also came on board. In the future, only the structural form of cooperation will also be offered within the Pidpa’s operating area, as is also the case with the other two drinking water companies with which we have a structural partnership: water-link and De Watergroep.

APPROVAL OF A ONE-OFF ADDITIONAL COMPLETION BUDGET FOR THE CONSTRUCTION OF 2 NEW SLUDGE DRYERS

At the budget meeting with the Flemish Region and the Flemish Environment Agency (VMM) in June, approval was given for a one-off additional completion budget of €120 million for the construction of two new sludge dryers running on residual heat. The belt dryers are scheduled to be up and running in 2027, replacing the three existing and increasingly obsolete sludge dryers. Aquafin will use 15% less energy due to the use of new technology. Since both dryers will operate on residual heat from neighbouring companies, our annual CO2 emissions are set to decrease by 17,000 tonnes as of 2027.

For Flanders, the construction of the new sludge dryers is budget-neutral because the investment is financed partly by the saved purchase of gas and partly by the Energy Fund for the period 2027-2039. Managed by the Flemish Region and filled by the value of Aquafin's realised energy savings, the Energy Fund allows new energy-saving investments to be made.

MOODY’S CONFIRMS CREDIT RATING

Following its annual screening in 2023, rating agency Moody’s confirmed the longterm rating of Aquafin as Aa3 – stable outlook. The short-term rating remains at P-1. Aquafin’s credit rating tracks the maximum rating of the Flemish Region.

12TH EIB LOAN

In April, Aquafin and the European Investment Bank (EIB) signed a new financing agreement for a total of €200 million. It is the 12th EIB loan taken out by Aquafin since the partnership began in 1994. That means the EIB has now invested a total of €2 billion in the Flemish sewage and stormwater infrastructure. The new agreement shows that, even after the implementation of the new cooperation agreement with the Flemish Region, we can still count on the EIB as a major financier.

Auditing of the company

In 2023, BDO was appointed as statutory auditor by the General Meeting – based on nomination by the Board of Directors – for a period of three years, specifically for the 2023, 2024 and 2025 financial years.

The fees paid to the statutory auditor for the statutory audit of the financial statements of the company amount to 53,150 euros (excluding VAT, excluding the usual charges) and are index-linked annually. The task of attesting the financial covenants in the credit documentation is included in that amount.

In 2023, the services of the statutory auditor were requested in connection with the audit of EMIR reporting – required by the FSMA. These performances will be invoiced on a time and expense basis.

In addition, at the end of 2023 and within the framework of the Corporate Sustainability Reporting Directive (CSRD), a special task was assigned to the statutory auditor or persons with whom he collaborates.

Shareholder structure and cross-shareholdings

Participatiemaatschappij Vlaanderen (PMV) holds all the Aquafin shares. There are no cross-shareholdings.

Branch offices

There are no branch offices.

Events after the balance sheet date

There were no events with a material impact after the balance sheet date.

Conflicts of interest

There were no events where a conflict of interests under property law was established in respect of the directors in accordance with article 7:96 of the Companies Code.

Notes to the balance sheet

TANGIBLE ASSETS

The cumulative investment per category is shown below at book value:

IN THOUSANDS OF EUROS

As stipulated in the Management Agreement, Aquafin collects domestic waste water in Flanders in collectors and transports it to treatment plants where it is treated. Firstly, Aquafin develops the necessary supra-municipal infrastructure: collector sewers for waste water, pumping stations and waste water treatment plants. Secondly, Aquafin carries out the projects assigned by the Flemish Region under the Local Pact with the municipalities. These local pact projects follow the same procedures as the supra-municipal projects.

The increase in tangible assets is due to a net growth of investments in the water treatment infrastructure, carried out on the instructions of the Flemish Region. Water treatment infrastructure includes the aforementioned collector sewers for waste water, pumping stations and waste water treatment plants. This relates to all investment projects already delivered from the first delivery in 1992 to the end of the last financial year. Aquafin delivered 214.2 million euros’ worth of new projects in 2023. This year, 181.2 million euros’ worth of depreciation was also recorded and 5.7 million euros were invested in land.

Projects not yet delivered, including land comprises all costs incurred for supra-municipal projects in progress. It covers projects in the design phase, contracted projects or projects already awarded where the costs incurred mostly relate to accounting category 27 – assets under construction and advance payments – but also partly under accounting category 22 – land and buildings – for the land element. Assets under construction are not depreciated.

Projects not yet delivered in category 27 increased by 22.7% in 2023 to 457 million euros. There was an increase of 27.2% in calls for tenders for development projects. This increase is partly due to the increase in the completion budget and partly due to price increases. In 2023, 55.6 million euros’ worth of asset management was delivered and 56 million euros’ worth were added to assets under construction. In 2023, 8.2 million worth of energy fund projects were delivered and 7.7 million euros’ worth were added to assets under construction.

IN THOUSANDS OF EUROS

In 1994, under the Management Agreement, Aquafin acquired the right to use plants built in the period preceding Aquafin’s establishment and owned by the Flemish Environment Agency. In subsequent years, these plants were not only operated by Aquafin, but also extended and renovated. Since the management of the same assets by both Aquafin and the Flemish Environment Agency is inefficient, the Flemish Government decided to allow Aquafin to buy out the plants and associated land. These purchases took place from 2010 onwards and are recognised under tangible assets as Flemish Environment Agency assets purchased. In 2023, €15 million in depreciation was recorded on these assets. In addition, part of the site of Hamme WWTP was sold, further reducing the fixed assets by 20.5 thousand euros.

Hydronaut studies are studies that are carried out in order to ensure the correct design of the related supra-municipal investment project and are consequently capitalised. These studies are also carried out in relation to the management of existing infrastructure. In 2023, 3.4 million euros were invested on the one hand and 3.4 million euros were also depreciated on the other.

Investments in head office and operations relate to investments in hardware, software, lab equipment, furniture, materials and equipment required for the operation of the main office and umbrella operational activities which are not intended for one specific plant.

In 2023, 0.4 million euros were invested in the renovation of buildings managed and 1.3 million euros were depreciated on existing buildings. Of this, 0.8 million euros relates to the Campus.

In 2023, a further 4.2 million euros were invested in hardware and software, 2.1 million euros in materials and equipment and laboratory equipment and 0.2 million euros in furniture and in total, 4.1 million euros were depreciated on these items.

In the context of the role of Asset Manager of Flanders, Aquafin’s task package was expanded with the takeover of the overflow measurement matrix from VMM among other things. In 2023, overflow measurement devices worth 1.2 million euros were purchased and installed, of which 0.2 million euros were depreciated.

As well as supra-municipal infrastructure, a small part of Aquafin’s assets is made up of municipal infrastructure. Under the contracts with the municipalities, Aquafin may assume responsibility for so-called transport services. Under these contracts, Aquafin provides the necessary investment and the company offers the municipality or intermunicipal cooperative society the opportunity to transport waste water via these sewers for the duration of the contract (15 years), after which the assets will be transferred to the municipality or intermunicipal cooperative society. The slight decrease in 2023 is due to 2.5 million euros of depreciation recorded on municipal infrastructure on the one hand and the capitalisation of a new project for the municipality of Kapellen worth 2.4 million euros on the other.

FINANCIAL FIXED ASSETS

The financial fixed assets mainly consist of Aquafin’s majority stake in Aquaplus. Aquafin has held all the shares in Aquaplus since 2022. The valuation in Aquafin’s books is adjusted annually based on Aquaplus’ equity.

The shares held by Aquafin in Synductis and Riopact are included in Other participating interests

In 2022, as part of Call Groene Stroom, Aquafin received a subsidy for the support of medium-sized installations based on solar energy and small and medium-sized wind turbines. In return, Aquafin had to deposit a guarantee in the amount of 7.5% of the support granted and at least 2,000 euros. In 2023, a guarantee of 11 thousand euros was repaid from the deposit and consignment office in connection with Call Groene Stroom.

STOCKS AND CONTRACTS IN PROGRESS

Apart from the tasks on behalf of the Flemish Region (which make up 87% of our activities) assigned via the Management Agreement, towns, cities and municipalities can outsource sewerage tasks to Aquafin, which has developed a specific offer for this purpose. They can either enter into a concession arrangement directly with Aquafin or use Aquafin’s services indirectly via one of the partnerships which Aquafin has formed. In addition to the ongoing partnerships with water-link and De Watergroep, Aquafin also entered into a structural partnership with drinking water company Pidpa in 2023. And an agreement was concluded with Farys specifically for Aalst.

Works in this context which have been started but not yet completed are included under contracts in progress. In 2023, 90 projects were delivered worth 57.0 million euros.

The increase in contracts in progress is due to the growth in the order book in conjunction with the significant increase in contract prices.

AMOUNTS RECEIVABLE WITHIN ONE YEAR

Amounts receivable within one year comprise trade debtors and other receivables

The balance for Trade debtors is determined by the timing of invoicing of our customers and the time of payment by our customers. As at the end of 2023, trade receivables decreased from 94.2 million euros to 34.1 million euros.

The decrease of 60.1 million euros (including VAT) for customers is mainly due to the extra rebilling at the end of 2022 of 54.7 million euros of operating costs relating to 2022 and the invoicing of the settlement of operating expenses relating to 2021 for 12.6 million euros. Both rebilling items were invoiced to the drinking water companies in December 2022 and consequently not yet settled as at 31 December 2022. At the end of 2023, these amounts receivable were no longer outstanding so that the balance decreased.

Other amounts receivable comprises recoverable VAT and recoverable taxes. These increased from 3.7 million euros to 16 million euros.

The main reason for this is recoverable VAT of 12.7 million euros in 2023. In 2022, the VAT payable was 5 million euros due to the extra sales invoicing of operating costs and investment expenditure to drinking water companies in December 2022 to the value of 67.3 million euros including VAT.

SHORT-TERM INVESTMENTS AND CASH

Due to the significant rise in interest rates in 2023, Aquafin switched from the method of 'avoiding negative interest' to the method of 'active cash management' where temporary cash surpluses are actively managed and invested safely to the maximum extent with sufficient liquidity.

As a result of this, the item Short-term investments and cash decreased by 4.7 million euros from 9.6 million euros to 4.9 million euros.

DEFERRED CHARGES AND ACCRUED INCOME

The item purchases of Flemish Environment Agency assets with equity covers the component of the receivable arising from assets acquired by Aquafin from the Flemish Environment Agency since 2010 (for more information on this, see under Tangible assets –purchases of Flemish Environment Agency assets). Aquafin finances these purchases partially with external funds and partially with equity. Purchases using equity are not invoiced to the water companies, but will be invoiced all at once should the Management Agreement - entered into on a rolling basis for 20 years - come to an end. The resulting receivable is increased annually by 1/20th of the acquisition price of the assets and recorded under accrued income.

Other costs to be transferred are costs incurred by Aquafin in 2023 but relating wholly or in part to 2024. These mainly relate to maintenance contracts, licence fees or prepaid rent or interest.

Under the contracts with the municipalities, Aquafin assumes responsibility for transport services (cf. Tangible assets – municipal activities) for which a payment system can be designed at the request of the municipalities. The municipal projects item reflects the positive difference between depreciation on municipal projects and the repayment part of the underlying loans invoiced to the municipalities. This balances out charges and income in the interim.

Accrued revenue includes the 2023 profit under a partnership for municipal sewerage activities between Aquafin and De Watergroep called Riopact. In this, both parties cede 50% of their result to each other. Aquafin ended the financial year with a profit of 1.7 million euros and De Watergroep achieved a result of 183 thousand euros. Profit distribution is processed as a credit note for 1.7 million euros to be prepared and payment of 938 thousand euros to be received.

Interest charges to be transferred are primarily due to the issue of commercial paper in which the interest compensation is paid at the time of issue.

Aquafin uses interest rate hedging contracts to hedge the interest rate risk on certain loans, in line with the policy approved by the Board of Directors. In order to enable the results of the hedging to be measured, a benchmark is set for each hedging strategy. Where the interest charges for the benchmark are lower than the total of the interest charges for the underlying loan and the fixing of the associated hedging instruments, this difference is recorded as a financial charge. Since the interest rate is fixed six months before the payment date, so that the deviation from the benchmark is also known and recorded, pro-rata entry takes place at the time of arrangement under accrued interest - management of interest rate risk

Thanks to optimisations of a large number of our hedges in past years, the interest management results are positive and do not lead to financial charges that have to be recorded on a pro rata basis under accrued interest - management of interest rate risk. The financial charges, which represent the difference between the benchmark and the interest charges for the loan and are recorded in the result as an interest correction for the management of the interest rate risk, are also recorded on a pro rata basis under deferred charges and accrued income. The interest rates on loans consist of a Euribor interest rate plus a margin. In 2023, there was a sharp rise in the Euribor interest rates and the benchmark interest rate was lower than the loan rate. That meant that as of the end of 2023, there is no accrued interest on the asset side in respect of interest rate risk management.

EQUITY

Aquafin’s capital currently stands at 298 million euros. The capital consists of 1,001,613 shares, which are unlisted, and is fully paid-up.

Following the revaluation of Dijkstraat and Ingberthoeveweg, a revaluation surplus of 1.8 million euros was recorded in 2021.

The reserves consist of the legal reserve and the available reserves.

The legal reserve is topped-up annually until it reaches a level equal to 10% of the capital. In accordance with Article 7:211 of the Companies Code, 5% of the after-tax profit is added to the reserve annually.

If the General Meeting accepts the proposed appropriation of profits for the 2023 financial year, the legal reserve will be increased by 244 thousand euros to 16,344 thousand euros and the remaining profit of 426 thousand euros added to profit carried forward.

INVESTMENT GRANTS

In 1992, Aquafin received a notice from the Belgian Accounting Standards Board granting permission to interpret the investment grants item differently from the usual interpretation. This item reflects the difference between the repayment and depreciation periods for delivered supra-municipal projects. Since the rate of repayment for these projects does not always correspond exactly to the rate of depreciation, a mismatch arises between charges and related income. In other words, it relates to prepaid depreciation.

The land acquired by Aquafin is not depreciated and is repaid immediately.

We note that all items have increased apart from construction engineering. Up to 2008, construction engineering was invoiced over 15 years and depreciated at 33 years. As of 2009, the construction engineering category is invoiced over 30 years and the repayment term for the outstanding amounts adjusted, halving the annual invoice amount. This means that in time, more and more projects will be invoiced in full and only depreciated so that the amount of investment grants reduces again.

The difference between the repayment and depreciation periods is broken down as follows:

PROVISIONS FOR LIABILITIES AND CHARGES

The provision for supra-municipal project costs (3,092 thousand euros) relates firstly to risks for works in progress and projects that cannot be delivered due to delayed/postponed execution of municipal projects because they would generate an insufficient return as yet (2,609 thousand euros). Secondly, provisions are made in relation to the deduction of project costs recorded after delivery, known as subsequent costs (483 thousand euros). The reduction of the provision can primarily be attributed to the delivery of two projects, in 2023, worth 1,383 thousand euros.

Possibly rejected operating costs are operating costs where there is a possibility of them not being reimbursed according to the management agreement. On the one hand, the provision is reduced by 532 thousand euros because the costs provided for in 2022 were approved at the budget meeting in April 2023. This provision mainly related to the payment for transport and processing costs due to the shutting down of the dryer from Leuven and the switching from gas to fuel oil in Houthalen within the gas shutdown plan initiated by Flanders. On the other hand, an additional new provision of 11 thousand euros was made following VMM’s comments on Aquafin's financial reports. IN

Provision is made for legal disputes based on a reasonable estimate of the claim where it is probable that Aquafin may lose the case. As at 31 December 2023, the provision for legal disputes amounted to 518 thousand euros for 67 disputes. In 2023, we recorded 21 new cases and 20 files could be closed.

As advised by the accounting standards, every year, provision is made for the processing costs of the sludge in the buffers. These are the provisions for sludge buffers

Provision for bridging pensions has decreased by 8 thousand euros. This is partly because fewer employees qualify for this scheme due to stricter government regulations, and partly because the gap between SWT (bridging pension) and actual pension narrows each year for those who remain eligible for this.

A provision of 8 thousand euros was provided for the KLIP Turnhout insurance claim or the exemption value from the professional liability insurance policy.

The provision other comprises various provisions, including a provision of 290 thousand euros made for digital transport documents, 1.2 million euros in connection with the Bruges shutdown plan for sludge treatment, a provision of 330 thousand euros for severance payments and 163 thousand euros linked to a fraud dossier.

AMOUNTS PAYABLE AFTER MORE THAN ONE YEAR, INCLUDING THE CURRENT PORTION

An additional sum of 195.0 million euros was allocated in 2023 to finance our supra-municipal investment expenditure, whose repayment by the drinking water companies is spread. The resulting allocation ratio, in which the remaining claims against the drinking water companies are set against financial debt under the allocation agreement, stands at 1.17 (this must always be greater than one) at the end of the 2023 financial year.

For our day-to-day business operations, Aquafin relies firstly on medium-term finance so as to limit interest rate movements, and secondly on short-term loans and commercial paper so as to be able to respond to fluctuations in work in progress for investment projects. The amount of these general-purpose bank borrowings increased due to new disbursements in the amount of 55 million euros and repayments by 25.5 million euros as provided for in the repayment schedule.

At the request of the municipalities, a payment system can be designed with regard to our municipal activities. New long-term financing in the amount of 2,355 thousand euros was taken up in this respect in 2023. Due to a higher amount of repayments on existing financing, there is a small net reduction.

IN THOUSANDS OF EUROS

IN THOUSANDS OF EUROS

FINANCIAL DEBTS PAYABLE WITHIN ONE YEAR

The short-term financing was used primarily to fund work in progress before delivery. Within the commercial paper programme worth 500 million euros, of which 385 million euros are available for short-term finance, 54 million euros of this debt security were outstanding as at 31 December 2023. The outstanding balance depends on various factors and is only a snapshot. However, the reduction can largely be attributed to the accelerated refinancing of medium-term financing which matures in 2024 in the amount of 55 million euros.

For the purpose of the management of the interest rate risk, fixing always takes place six months before the payment date. During this period, the balance of debts and receivables resulting from these fixings is recorded as a short-term financial debt. The decrease is due to a further increase in the short-term interest rate in 2023. In swap contracts, Aquafin is the receiving party of this floating rate and the payer of the long-term interest rate. Across all swap contracts, Aquafin has receivables of 4,585 thousand euros in respect of the counterparties to the hedging contracts.

As at 31 December 2023, under the existing credit lines worth 465 million euros – including the syndicated credit – a straight loan for 3.7 million euros was in place to finance municipal work in progress.

TRADE DEBTS

Invoices to be received includes estimates for goods and services already provided, the invoice for which has not been received or processed yet. The difference of 3 million euros between the two financial years can mainly be attributed to provisions for invoices to be received relating to hardware (0.6 million euros), investments in Asset Management (0.7 million euros), structural maintenance (0.5 million euros) and fees for IT and laboratory and external research costs (0.9 million euros).

The item supplier debts increased by 20.7 million euros compared with the previous year and this mainly relates to energy supplier VEB. At the end of 2023, the October and November invoices had been received and processed (outstanding balance at the end of 2023 19.8 million euros). At the end of 2022, the invoices for the month of November were not received until the beginning of January 2023 as a result of which the outstanding amount was therefore half as much (outstanding balance at the end of 2022 5.5 million euros). In addition, November 2023 was an extremely wet month with very high consumption which made the consumption month of November 2023 a particularly heavy month in terms of invoicing.

The item credit notes to be prepared - water companies reflects the difference between the budget estimates for operating costs – estimates on which the advance invoices to the water companies are based – and Aquafin’s final invoice, based on services actually performed and settlement of the remuneration model for operating costs.

In 2023, the final settlement of accounts for the 2022 remuneration model resulted in a credit note of 36.2 million euros where a provision for the credit note to be prepared of 22.0 million euros was made for 2023. The remaining balance (1.2 million euros) comprises a reserve set up by Aquafin to carry out the restructurings of the interest rate management programme.

The other item includes firstly a reclassification between assets and liabilities of customers with a credit balance and suppliers with a balance owing to Aquafin (1.7 million euros). Secondly, this includes a provision for credit notes to be prepared for the Flemish Region and De Watergroep among others regarding the settlement of profits within Riopact (1.9 million euros combined). In this, both parties cede 50% of their result to each other.

Aquafin ended the financial year with a profit of 1.7 million euros and De Watergroep achieved a result of 183 thousand euros. Profit distribution is processed as a credit note for 1.7 million euros to be prepared and payment of 938 thousand euros to be received (see also Accrued revenue).

ADVANCES RECEIVED ON CONTRACTS IN PROGRESS

The services provided and invoiced by Aquafin for municipal customers which are not yet completed are included under the heading of advances received on contracts in progress and evolve along the same lines as contracts in progress. As at the end of 2023, this balance sheet item increased by 43.7 million euros to 232.3 million euros.

DEBTS RELATING TO TAXES, REMUNERATION AND SOCIAL SECURITY

Outstanding liabilities with respect to taxes relate to payable corporate tax, VAT payable, regional, provincial and municipal taxes and levies.

The item Taxes, remuneration and social security decreased from 24.6 million euros to 22.0 million euros.

In 2023, when making the provision for holiday pay, the indexation for 2024 was taken into account. That is because holiday pay was accrued in 2023 and will be paid in 2024. An additional provision of 2.9 million euros was also made in 2023 for holiday not taken in 2023 but carried over to 2024, mainly due to the holiday savings plan introduced. In addition, the increase in the provision for group insurance is in line with the growth of the workforce.

Regional, provincial and municipal taxes and levies decreased by 1.7 million euros. This is mainly because at the start of 2023, a provision of 2.1 million euros was reversed as the 5-year period of limitation had ended.

The VAT payable in 2022 amounted to 5.1 million euros due to the extraordinary extra invoicing in December of operating costs and investment expenditure to drinking water companies to the value of 67.3 million euros including VAT. In 2023, there was a recoverable VAT balance (see the item amounts receivable within one year) as a result of which this item VAT payable went down to zero at the end of 2023.

OTHER AMOUNTS PAYABLE

The dividend payable is recognised here.

If the General Meeting approves the proposed appropriation of profits, a gross dividend of 4,207 thousand euros will be paid to PMV on 16 April 2024. This amount is the same as the dividend paid for the financial year 2022.

ACCRUED CHARGES AND DEFERRED INCOME

Other accrued charges include 34.2 million euros of revenue to be carried forward. Since 2021, this item also includes budgets for Flanders already received but not yet allocated for the roll-out of the digitalisation programme Digital 4Us and for performing the role of Asset Manager for Flanders. In 2023, these were cumulated to give 22.2 million euros and 3.1 million euros respectively. In 2023, additional budgets were received for financing the construction of a sludge mono-processor, investing in making residual water available for use in agriculture and horticulture and investing in a platform for digital transport documents, the use of which became mandatory as of 1 January 2023 in connection with the transportation of waste substances. The balances still applicable to these are 4.5 million euros, 2.4 million euros and 0.5 million euros respectively. This income will be recorded as turnover in proportion to the related costs. The other elements are shown in the table opposite.

IN THOUSANDS OF EUROS

Other contains a provision for municipal projects not yet completed. Based on the list of projects showing a negative balance as of the end of 2023, a provision was made driven by the principle of prudence.

Bank charges include the commitment fee payable and negative interest CP receivable which together amount to 41 thousand euros.

Accrued interest on loans includes interest on both short and long-term finance which is allocated to the relevant financial year on a pro rata basis at the time of arrangement. These increased significantly due to a rise in interest rates.

Transactions relating to the hedging of interest rate risks for the future period are also recorded under accrued charges and deferred income. Aquafin uses hedging instruments in particular to hedge the interest rate risk on certain loans. In order to enable the results of the hedging to be measured, a benchmark is set for each hedging strategy. If the interest charges for the benchmark are higher than the total of the interest charges for the underlying loan and the fixing of the associated hedging instruments, this difference is recorded in a revenue account. Since the interest rate is fixed six months before the payment date, so that the deviation from the benchmark is known and recorded, pro-rata entry takes place at the time of arrangement via accrued interest - management of interest rate risk. Because the short-term interest rate is no longer negative, Aquafin is again the receiving party of the floating legs of the swaps, benefiting performances compared with the benchmark.

Notes to the income statement

The cooperation agreement with the Flemish Region which contains provisions regarding Aquafin’s supra-municipal activities stipulates that Aquafin’s remuneration for supra-municipal activities is based on the rebilling of all reasonable costs, plus remuneration for the shareholder(s) based on the contribution to the company’s equity. This means that charges and income for these activities broadly mirror one another.

The reasonableness of the operating costs – excluding financing costs and excluding fluctuations in energy prices – is determined based on the so-called performance budget formula where Aquafin’s operating resources budget is dependent on a number of parameters including assets and the pollution load treated and specific indices.

The difference between the result according to the performance budget formula on the one hand and the actual charges recorded for this financial year on the other has a negative impact of 0.4 million euros on the accounting result as at 31 December 2023.

Operating income

TURNOVER

Aquafin realises the majority of its turnover from supra-municipal activities under the cooperation agreement with the Flemish Region.

Within this remuneration, a distinction can be made between payments relating to construction activities (investment costs) and payments relating to operational functioning (operating costs), which, in view of the constantly growing activities, evolve along the same lines.

Payments for operating costs concern invoicing for the budget set by the performance budget formula. The change in operating costs is due to the rise in the output parameters and indices for the remuneration model. This budget has increased due to an increase in activities: including the future delivery volume, the increase in assets and the pollution load treated. The evolution of energy prices is another important factor here.

The staggered invoicing of investment costs concerns repayment for the sewage treatment infrastructure delivered. The repayment terms for this infrastructure take the expected life of the underlying assets into account.

The settlement of interest charges relates to the rebilling of the interest charges which are due to Aquafin’s prefinancing role.

Turnover also includes the rebilling of charges made for the cleanup of cross-regional waste water by the Brussels Region via Hydria

The remuneration for equity – equity remuneration – is designed, with due regard for the risks taken, to ensure a minimum acceptable return after tax for the shareholder(s). In 2022, the Flemish Region reduced the rate of return expected on equity capital from 3.5% to 1.95%. The difference of 1.8 million euros relates to the adjustment of estimated tax for the 2022 financial year.

Services rendered by Aquafin to towns, cities and municipalities not covered by the cooperation agreement resulted in a turnover of almost 82 million euros for 2023. Fewer municipal investment projects were delivered in 2023 than in 2022: the higher number of deliveries in 2022 is mainly due to the catch-up that took place during that year.

Due to a timing difference between the depreciation and rebilling of supra-municipal investments – as explained under the investment grants item – a correction is made to the result via netting of invoicing of investment costs after depreciation in order to bring the depreciation into line with the related turnover.

CHANGES IN CONTRACTS IN PROGRESS

This item reflects the change in the item stocks and contracts in progress on the asset side of the balance sheet, current period versus previous period.

Under the completed contract valuation method, a project is not recognised on the income statement until the project is fully completed. This heading reflects the growth of purchases linked to commercial projects not yet delivered. The increase is due to the relatively constant refilling of the order book and the sharp increase in contracting costs.

OTHER OPERATING INCOME

Other operating income rose by 3.3 million euros year on year.

As part of the process of cost recovery, 1.5 million euros was invoiced for discharges via emergency connections, 0.3 million euros of which was to Alpro and 1 million euros to Limelco. That is an increase of 1.2 million euros compared to 2022.

From 2023, bicycle leasing costs which are repaid by the employee are also included under other operating income. In 2022, these were recorded under remuneration and social security charges. As a result, other operating income in 2023 increased by 472 thousand euros compared to 2022.

In 2023, similarly to previous years, an exemption was obtained from income tax deducted at source concerning research and development activities for the 2022 financial year. 2.5 million euros were recovered, which is 230 thousand euros more than the amount recovered in the 2022 financial year.

Other operating income also includes primarily recovery of costs that cannot be treated as part of normal sales. The main increases relate to subsidies for solar panels (402 thousand euros), green energy certificates (411 thousand euros) and recovery of external waste water (231 thousand euros).

Operating charges

RAW MATERIALS, CONSUMABLES AND GOODS FOR RESALE

The main items under this heading are shown below.

Electricity prices for 2023 were locked in for ~60% of the volume during the course of 2022 at the forward rates applicable at the time in order to limit the risk of a further increase (+15.7 million euros, +20% costs). In 2023, the impact of the falling market prices is therefore not yet visible in the costs. The average price paid for natural gas decreased because only a limited share of the volume in 2022 was locked in at the higher market prices (-1.7 million euros, -22% costs).

Costs of removal of sludge, sand and screenings rose by 2.5 million euros. The transport costs for the removal of liquid, dewatered and dried sludge increased by 9% compared with 2022 (or +0.8 million euros), mainly due to the increase in transport rates. The actual sales costs also increased by 8% (+1.2 million euros). There, we note an increase in the tonnage sold of 0.9% and an average rate increase of 7%.

Chemicals increased by 3.8 million euros, mainly due to the significantly higher cost of phosphorus removal products used in the waterline (iron and aluminium), together with the new cost for quaternary treatment in Aartselaar (removal of micropollutants).

In the case of Mechanical, electrical and architectural maintenance, inflationary pressure on the price of spare parts and the impact of ageing assets resulted in higher maintenance costs. In addition, we also notice that the upward pressure on the maintenance budget has increased due to ageing assets.

With the main variations in respect of the item Other, we see the strongest increase in respect of sludge treatment by third parties (+0.7 million euros) due to the larger volumes of sludge to be treated. In addition, the costs of routine maintenance also increased (+0.3 million euros) along with improvement operations (+0.2 million euros) and inspection costs (+0.2 million euros).

SERVICES AND OTHER GOODS

The increase of 4.7 million euros (or 3.5%) has been recorded within supra-municipal activities. Vehicle leasing costs increased by 1 million euros, mainly due to the conversion of a number of light trucks but also due to the increase in the workforce. In addition, we see an increase for IT support (1 million euros), innovation (0.4 million euros) and the costs relating to measurements (0.5 million euros). The remaining increase was spread over many cost types such as analyses, training and communications.

Costs relating to municipal activities increased slightly by 0.3 million euros compared with 2022. These costs have a limited impact on the result. This is because they are neutralised via contracts in progress on the balance sheet and are not recognised on the income statement until the project or service is fully completed.

REMUNERATION, SOCIAL SECURITY COSTS AND PENSIONS

The increase in personnel costs follows the increase in the workforce from 1,110 FTEs to 1,146 FTEs. This increase is in line with the growth of the infrastructure operated and developed by Aquafin, at both municipal and supra-municipal level.

The increase in Salaries and direct social benefits is the result of the high wage indexation in 2023 and the adjustment of wages within the framework of growth. In addition, a provision of 2.9 million euros was made in 2023 for holiday not taken in 2023 and carried over to 2024, mainly due to the holiday savings plan introduced.

DEPRECIATION AND OTHER AMOUNTS WRITTEN OFF ON FORMATION EXPENSES, INTANGIBLE AND TANGIBLE FIXED ASSETS

Depreciation can be subdivided into the four headings above.

Given the steady expansion of Aquafin’s assets – the value of Aquafin’s assets continues to increase year on year – the depreciation on Plant, machinery & equipment also increased.

Of the increase of 1.4 million euros in respect of buildings, 0.6 million euros relates to the Campus and 0.8 million euros relates to one-off compensation payments for land.

In September 2022, Aquafin moved onto the renovated Campus. The costs invested were capitalised and depreciation started. That meant that in 2022, there was only four months of depreciation compared with a whole year in 2023.

The increase in one-off compensation payments for land is due to the adjustment made to the way that rebilling is carried out. As of the end of 2022, the delivery from the 4th quarter was recorded in the 1st quarter of the following year. In December 2023, another 323 thousand euros was delivered. According to the old way of rebilling, that would be added to the 1st quarter of 2024 but with the new way of rebilling, it was added to 2023. This means that 2023 has 5 quarters compared with 4 quarters in previous years.

IN THOUSANDS OF EUROS

AMOUNTS WRITTEN DOWN ON STOCKS, CONTRACTS IN PROGRESS AND TRADE DEBTORS – PROVISIONS FOR LIABILITIES AND CHARGES

The table above shows the connection with changes to the related balance sheet accounts. A new provision was made for two commercial customers in 2023. Bankruptcy proceedings were opened for the two companies, making the possibility of collecting the outstanding debt uncertain.

Provisions for liabilities and charges have already been discussed in relation to the balance sheet position concerned.

OTHER OPERATING CHARGES

This heading mainly covers direct taxation and taxes levied on Aquafin’s installations. This mainly comprises property tax and regional, provincial, municipal and environmental taxes which together amount to 3.5 million euros. At the start of 2023, a provision of 2.1 million euros was reversed as the 5-year period of limitation had ended. This reversal is budget-neutral as Aquafin rebilled this cost on a one-to-one basis.

In addition, this item contains the cover for the residual balances relating to invoices to be prepared for operating costs for the financial year 2022 (244 thousand euros) and costs not accepted by VMM (83 thousand euros).

The item final closure of performance budget 2020-2021 relates to amounts where Aquafin agrees with VMM’s advice regarding operating costs from 2020 and 2021 which mainly relates to the calculation of exogenous elements.

In 2019, a provision of 555k euros was made for the relocation of a pipeline to D’Herbouvillekaai as part of the Nieuw Zuid Antwerpen project. Because these costs could not be passed on to the Flemish Region, a provision was made. At the start of 2023, Aquafin was notified by the project developer that the pumping station will not be relocated. As a result of this, the provision was reversed.

FINANCIAL CHARGES AND INCOME

This heading covers interest charges on short- and long-term financing, charges and income relating to active interest rate management and the interest received on Aquafin’s current and savings accounts.

Both the short- and the long-term interest rates have risen since the beginning of 2023, hence the increase in interest charges. Longterm debt also increased by more than 100 million euros to enable pre-financing of the additional deliveries in the long term.

Through active management of the interest rate risk, Aquafin is able to keep its financing costs under control. The net result of that interest rate management has risen from 99 thousand euros to 500 thousand euros.

In addition, Aquafin now also receives a refund for its temporary cash surpluses due to the higher interest rate and active treasury management.

NON-RECURRING FINANCIAL INCOME AND CHARGES

This comprises the adjustment of the loss recorded for the participating interest in Aquaplus. The valuation in Aquafin’s books is adjusted annually based on Aquaplus’ equity. In 2022, the method of recognising profits or losses on projects changed from percentage or completion to completed contract. As a result of this, Aquaplus ended that year with a negative result of 39 thousand euros.

The reason for this is that the historical margin of the projects not yet delivered was reversed and is only recognised as a profit or loss at the time of delivery. In 2023, Aquaplus achieved a positive result of 83 thousand euros. As a result, a surplus value of 83 thousand euros on the participating interest was recognised in Aquafin.

INCOME TAXES

Corporation tax on the result amounts to 1.0 million euros. Specifically 2.4 million euros for tax owed for the 2023 financial year and an adjustment of 1.4 million euros for the 2022 financial year.

Proposal to the General Meeting

Taking into account the profit after taxes, the profit available for appropriation amounts to 4,877,315.46 euros:

• transfer to the legal reserve:

243,865.77 euros

• transfer to the other reserve: 0 euros

• dividends:

• profit carried forward:

4,206,774.60 euros

426,675.09 euros

If the General Meeting approves the proposed appropriation of profits, a gross dividend of 4.2 euros per share will be paid to PMV on 16 April 2024.

Extra information

Hedge accounting

In view of the level and the term of Aquafin’s long-term debt, the Board of Directors agreed to manage the interest rate risk actively in 2006. The framework stipulates that the interest rate risk associated with borrowings may be hedged as follows:

a) Long-term debt (initial maturity of more than 10 years)

• a maximum of 10% of the long-term debt may have an unlimited floating rate;

• a maximum of 35% of the long-term debt may be floating, but with interest costs being limited (via caps).

• a minimum of 65% of the long-term debt must have a fixed rate.

b) Medium-term debt (initial maturity of 1-10 years)

• A maximum of 50% may be hedged

c) Short-term debt

• not hedged

d) Budgeted long-term debt

• 50% may be hedged (maximum 5 years forward)

Each hedging transaction is fully documented on conclusion and linked to a (budgeted) underlying loan.

The table below shows the distribution of the outstanding debt for long- and medium-term loans based on the type of rate, hedged or otherwise.

IN THOUSANDS OF EUROS

The proportion of financing with a fixed interest rate has increased. That is due to a number of hedging contracts that were concluded in previous years, through which the interest rates for financing in 2023 were already locked in on the one hand. On the other hand, almost all other new financing from 2023 was recorded with a fixed interest rate. Only 25 million euros was recorded with a floating interest rate that was not hedged. However, the percentage of financing with a floating or limited floating interest rate decreased on account of the repayment capital for this financing recorded before 2023 and the conversion of an ongoing loan with a limited floating interest rate into a loan with a fixed interest rate.

The market value of the instruments used to hedge the interest rate risk amounted to -7.4 million euros as at 31 December 2023, a reduction of 50.7 million euros compared with a year ago. This is mainly due to a drop in the long-term interest rate as of the end of 2023 compared with 31 December 2022.

Cash flows relating to interest rate hedging instruments form part of the interest cost in accordance with the provisions of the cooperation agreement.

Pension liabilities

There are two types of pension plans within the company.

Employees joining before 1 January 2007 have a defined benefit plan. Employees joining after 1 January 2007 have a defined contribution plan.

These ‘life and death in service plans’ are managed by AG Insurance NV. They are underwritten in the form of a group insurance scheme managed for each individual member.

Every employee with a temporary or permanent contract is signed up for the ‘survival’ and ‘death’ cover immediately upon joining the company.

For the current population of employees, the upper age limit of the plan is 65 years (the first day of the month following the 65th birthday). If a member remains in the employer’s service after the specified end date, this is postponed for successive periods of one year.

All of the contributions are at the expense of the employer.

No problem of underfunding arises for the group insurance. For both plans, the balance of the financing fund is considerably larger than the shortfall on the contract for active members and ‘sleepers’ (former employees who have left the amount of their supplementary pension in the plan).

Cash flows

The table opposite shows the cash flows for 2023 compared with 2022.

The cash flow table shows significant changes in operating activities.

There is a decrease in net outgoing operating and investment cash flow of 31.3 million euros. This is largely due to the increase in revenue from customers. Despite the higher rebilling to the customer, outstanding receivables decreased.

In 2023, the amount rebilled for operating costs and investment costs was higher compared with 2022. In 2023, a higher interest rate budget was received among other things and additional budgets were received for financing the construction of a sludge mono-processor, investing in making residual water available for use in agriculture and horticulture and investing in a platform for digital transport documents, the use of which became mandatory as of 1 January 2023 in connection with the transportation of waste substances.

The decrease in revenue from customers is mainly due to the extra rebilling at the end of 2022 of 54.7 million euros of operating costs relating to 2022 and the invoicing of the settlement of operating expenses relating to 2021 for 12.6 million euros. Both rebilling items were invoiced to the drinking water companies in December 2022 and paid in 2023.

Payments to suppliers and Investments increased due to price rises. The sum of interest paid and interest received increased in 2023 by 4.2 million euros due to both higher short-term and long-term interest rates.

New disbursements & repayment of debt: this item relates to financial debts which increased by 40.8 million euros. Taking account of both new disbursements and repayments, long- and medium-term debt increased more in 2023 than in 2022 (106 million euros compared with 28 million euros). An opposite movement occurred on the short-term debt. As of 31 December 2023, this was lower than in 2022, generating a negative cash flow (-65 million euros), partly offsetting the above-mentioned increase.

Green Finance Framework report on 31/12/2023

In April 2020, Aquafin published a new Green Finance Framework. In this way, we offer investors structured information about the ecological impact of our projects. The Green Finance Framework is available to view at www.aquafin.be. The annual reporting can also be found on the website, but is also contained in this section of the annual report.

IN THOUSANDS OF EUROS

Clarification of the metrics

Metric Definition

1 Total flow rate of waste water entering all WWTPs and SWTPs in operation on 31/12. IWWTPs and commercially operated WWTPs have not been included. The figures are based on an extrapolation of sampling days.

2 Total sludge production sold without digestion + total amount of sludge supplied to own digestion plants.

3 Total amount of sludge sent for digestion

4 * Up to and including 2021, official figures of VMM; from 2022, Aquafin’s own calculation subject to reservation due to lack of updates by VMM

5.1 Total electricity consumption of WWTPs (mechanical and biological treatment) and Total electricity consumption (metric 5.1) translated into treated m³ of waste water

5.2 Own production of renewable energy from various sources

6.1 Annual average removal percentage of nitrogen across all WWTPs assessed (in operation on 30/6)

6.2 Annual average removal percentage of phosphorus across all WWTPs assessed (in operation on 30/6)

6.3 Percentage of the number of WWTPs assessed (in service on 30/6) that comply with all standards

Corporate governance statement

CORPORATE GOVERNANCE AT AQUAFIN

Aquafin’s Corporate Governance Charter defines the rules and principles based on which corporate governance is organised within the company. In line with the Belgian Corporate Governance Code originally published in 2004, the Board of Directors approved the first charter on 26 January 2006. Following the publication of the Belgian Corporate Governance Code in 2009 and general developments in the area of corporate governance, the charter has since been reviewed several times and adapted in line with the changes occurring, where necessary.

The Charter has since been brought into line with the Belgian Corporate Governance Code 2020. The latest version of the charter is available at

www.aquafin.be/nl-be/investeerders/corporate-governance

The latest composition of the Board of Directors can also be found on the website, as well as in the Belgian Official Journal.

NOTES ON DEVIATIONS FROM THE CODE

Aquafin applies the provisions of the Belgian Corporate Governance Code. The provisions of the code are deviated from in certain cases, according to the specific requirements and characteristics of the company. Further details of the provisions of the Code with which the company does not comply are given below.

• 5.6 The term of the mandate should not exceed four years Aquafin complies with the provisions of the articles of association, which stipulate that a mandate may be for a maximum of six years and is renewable.

• 7.6 Non-executive board members should receive part of their remuneration in the form of shares.

In view of Aquafin’s special situation in which all shares are held via Participatiemaatschappij Vlaanderen by the Flemish Region, this rule is not followed.

• 7.9 The Board of Directors should set a minimum threshold of shares to be held by members of the executive management

In view of the exception in point 7.6, this rule does not apply.

• 8.7 The Board of Directors should debate whether it would be appropriate for the company to enter into a relationship agreement with the significant or controlling shareholders. In view of the exception in point 7.6, this rule does not apply.

• 8.8 and 8.9 Institutional investors. In view of the exception in point 7.6, this rule does not apply.

KEY FEATURES OF THE COMPANY’S INTERNAL CONTROLS AND RISK MANAGEMENT SYSTEMS IN RELATION TO FINANCIAL REPORTING

The Board of Directors is responsible for approving and evaluating the existing systems of internal control and risk management.

Internal control environment

The Audit Committee plays a key role in the operation of the internal control system and in particular the financial reporting process. The tasks of the Audit Committee include:

• overseeing the integrity of the financial information;

• evaluating the systems for internal control and risk management set up to ensure that the main risks (including the risks relating to conformity with existing legislation and regulations) are suitably identified, managed, and reported;

• monitoring the activities of internal audit and the effectiveness and performance of the audit function;

• monitoring the statutory audit of the annual accounts, including follow-up of recommendations made by the statutory auditor;

• monitoring the accounting team responsible for recording income and expenses in the accounts and preparing the reports;

• monitoring the controlling team responsible for reviewing and declaring fluctuations (both timewise and with respect to the budget);

• monitoring the Finance management team, together with the accounting team, responsible for the final review of the financial information and the preparation and presentation of the financial statements.

Risk management

The management team is also aware of the importance of the good operation of the internal control system and risk management. Risk-related matters are a permanent item on the agenda and discussed at the weekly meetings.

A range of control measures are implemented in all departments as part of risk management. These control measures comprise policies, procedures, specified signing authorities, segregation of duties, built-in early warning indicators, management reporting, actual/budget comparison and so on.

New or amended legislation is noted and communicated. At the same time, the necessary steps are taken to comply with it. Processes and procedures are updated if necessary.

Aquafin operates according to the principles of standard ISO 55001. Inherent in this standard is management based on risks and opportunities. In this context, the risk matrix is an objective tool.

Critical performance indicators are defined, which are used as a measurement tool but also as a reporting system.

COMPOSITION AND FUNCTIONING OF THE MANAGEMENT BODIES AND COMMITTEES

Board of Directors

The company has adopted a single-tier structure, in which the company is governed by the Board of Directors. The Board of Directors is the company’s highest decision-making body and is authorised to perform all actions required or necessary to achieve the company’s objects, with the exception of those actions that are reserved for the General Meeting, by law or by the articles of association.

• Composition

The General Meeting of 18 April 2023 confirmed the appointment of Caroline Craenhals as director, appointed by co-option by the Board of Directors on 25 November 2022.

Aquafin’s Board of Directors comprises ten members appointed by the General Meeting. All members are non-executive directors. Nine directors are independent based on the criteria of Article 7:87(1) of the new Companies and Associations Code and provision 3.5 of the Belgian Corporate Governance Code 2020. Consequently, the Board of Directors complies with provision 3.4 of the Corporate Governance Code 2020 which states that at least three members of the Board of Directors should be independent (please note that this does not refer to independence in the definition from the Administrative Decree but only in application of the Companies Code).

The Board of Directors is assisted by secretary Annelies Keirsmaekers, head of legal affairs

• Functioning

In 2023, the Board of Directors met six times. One director was absent from three of these meetings. This represents average attendance of 95%.

As well as exercising the powers defined in the charter, the Board of Directors once again paid close attention to the subjects of safety and well-being during the last financial year.

During each meeting, the directors were informed of occupational accidents which had occurred in the period under review, among both employees and contractors since 2023.

Remedial actions were linked to these in each case.

Work continued towards setting up a long-term safety programme with the ultimate goal of zero occupational accidents.

BOARD OF DIRECTORS - ATTENDANCE

The various long-term, annual and permanent objectives were also reviewed in order to realise Aquafin’s vision within the context of the corporate values and the policy around corporate social responsibility. From 2026, Aquafin will report on its nonfinancial results for the 2025 financial year in accordance with the European Corporate Sustainability Reporting Directive. A stakeholder consultation had already produced a materiality index and the same method was also used to determine Environment, Social and Governance (ESG) ambitions so that concrete objectives and indicators can be determined in line with the CSRD and EU Taxonomy.

The impact of the Flemish Coalition Agreement with the new coordinating role for Aquafin with respect to the sewer operators and municipalities was discussed further. The new cooperation agreement was finalised, approved and came into effect in January 2023.

A cooperation model between Pidpa and Aquafin drawn up under the supervision of KPMG led to a framework agreement between the two parties.

The European Whistleblowers Directive of 23 October 2019 imposed an obligation on member states to set up a framework for whistleblower schemes, for both public and private entities. This directive has since been transposed into Belgian legislation which provides for the setting up of reporting channels. Thus, breaches in certain areas can be reported on the one hand and covers effective protection for whistleblowers on the other hand. Consequently, a whistleblower scheme was also formulated within Aquafin, which the Board of Directors took note of.

The Board of Directors is also closely following the evolution of digital transformation because Aquafin regards digitalisation as a lever in the realisation of our strategic objectives. To this end, an ambitious transformation program was set up under the umbrella name "Digital4us" that will allow us to catch up technologically in response to a number of key challenges.

The implementation of Aquafin’s long-term strategy for sludge treatment was also covered with plans for a full review of sales by 2026.

Some time ago, the Board of Directors approved a strategy focussing on recovery of raw materials and energy, which is also in keeping with the company’s energy policy: reducing the CO2 footprint through annual energy saving, phasing out and eventually ceasing the use of fossil fuels and producing (more) green energy.

The Board of Directors was also closely involved in the major strategic commercial projects relating to the reuse of effluent in industrial applications and the development of sewer thermal energy. In doing this, the Board of Directors set the course for further elaboration and realisation of these projects.

The founding of a subsidiary called "Aqcelerator" was approved. Aqcelerator is a venturing company that will participate as an investor in the initial phase in projects linked to the realisation of commercial applications relating to effluent, such as heat recovery and upgrading to process water, cooling water, etc. for industrial application.

The Board of Directors was also kept up-to-date regarding investments for maintaining existing infrastructure. The growth, but above all the obsolescence of our assets, leads to an increasing budgetary requirement for repairs and replacements year by year.

• Conflicts of interest

During the meeting of the Board of Directors on 24 March 2023, a potential conflict of interest was reported relating to Jan Goossens, CEO. The wife of the CEO was appointed Head of Business Development at Fiberklaar on 1 February.

As part of the "fibre in sewer" project in which Aquafin is looking for convergences with the construction of a fibre optic network for the telecom sector – forming part of the tender for a monitoring system for its sewage network via fibre optics – talks were also held with Fiberklaar.

This project is currently in the research phase and a conflict of interest does not seem to be an immediate issue. Due to the provisions on conflicts of interest in the Corporate Governance Charter and the integrity policy, participation in the deliberations or decision-making was advised against.

Director Dirk Lybaert, secretary-general at Proximus, will not be participating in the deliberations or decision-making in connection with this project either.

Audit Committee

• Composition

The General Meeting of 18 April 2023 confirmed the appointment of Caroline Craenhals as director, appointed by co-option by the Board of Directors on 25 November 2022. The committee has a balanced composition as a whole and possesses the necessary independence, competencies, knowledge and experience to perform its tasks effectively.

Chairman Jochen Bultinck

Caroline Craenhals

Katrien Desomer

Koen Helsen

Nathalie Heremans

• Functioning

The main function of the Audit Committee is to assist the Board of Directors in the exercise of its mission of control, in the broadest sense. The tasks relate in particular to supervision of financial reporting, internal controls and risk management, the internal audit process and the external audit process. The Audit Committee is the main link between the Board of Directors, the internal auditor and the statutory auditor.

The Chairman of the Audit Committee reports systematically on the activities of the Audit Committee at the next meeting of the Board of Directors. The annual report on the activities of the Audit Committee was presented to the Board of Directors.

During the 2023 financial year, the Audit Committee also focused on the following matters in particular:

• the financial reporting was discussed in depth at all meetings.

At the March and September meetings respectively, the 2022 financial statements and the 2023 interim results were discussed, in the presence of the independent auditor.

• preparation of the 2024 budget for presentation to the Board of Directors

• evolution and results of interest rate risk management and compliance with hedging policy.

• the approval of the internal audit plan and monitoring of the KPIs relating to the functioning of internal audit and follow-up by the management of the recommendations made by internal audit

• discussion of the management letter 31/12/2022 and 30/06/2023 the internal audit reports

• explanation of the procedure for the 'whistleblower scheme within Aquafin'

• proposal for the invitation to tender for a new framework contract for co-sourcing of internal audit assignments

• procurement file CSRD Reporting

• Number of meetings and attendance record

The Audit Committee met four times in 2023. One director was absent from one meeting. This represents average attendance of 95%.

Appointments and Remuneration Committee

The main task of the Appointments and Remuneration Committee (ARC) is to assist the Board of Directors to define the outline of the Company’s remuneration policy. It also contributes to the objective and professional functioning of the process for appointing and re-appointing directors and the annual evaluation of the performance of the management team.

• Composition

Chairman

Marleen Evenepoel

Renaat De Sutter

Dirk Lybaert

Jozef Wittouck

• Functioning

The Appointments and Remuneration Committee met twice during the past financial year. These meetings were attended by all directors. This represents average attendance of 100%.

The independent auditor, the CEO, the Finance & Procurement director and the internal audit manager attended all or part of the meetings.

In addition to the evaluation of the functioning of the management team and the determination of the remuneration of the team members (see later on), a number of other topics were also discussed during the meetings that took place in the last financial year, with the focus on well-being.

For instance, the results of the well-being scan were analysed, which is typically carried out every year in order to find out how our organisation has evolved in terms of well-being. This is a quantitative measurement that gauges the perception of the four topics from the well-being vision: talent development & growth, workable work, health & safety and connection. This year, additional themes surveyed were the impact of coronavirus, disconnection and coping with change.

The new well-being vision and accompanying roadmap were also discussed. On the one hand, concrete actions were defined in order to further anchor the four pillars (talent development & growth, workable work, health & safety and connection) in respect of individual employees, teams and managers. On the other hand, changing legislation also led to actions. A new RD relating to reintegration and the labour deal that includes the right to disconnect resulted in new CLAs and agreements.

KEY ELEMENTS OF THE EVALUATION PROCESS OF THE BOARD OF DIRECTORS, THE COMMITTEES AND THE INDIVIDUAL DIRECTORS

The members of the Board of Directors evaluate the size, composition and functioning of this body on a regular basis, at least every three years. The current composition is evaluated in terms of the desired composition. The relationship and interaction with the management team are also reviewed.

The following elements are discussed during the evaluation process for the Audit Committee: internal regulations, composition and appointments, meetings, training of members and resources available for this, the integrity reporting procedure and relations with the Board of Directors. The Audit Committee evaluates its effectiveness and efficiency at least once every three years. As part of this evaluation, an individual questionnaire shall be issued to the members of the Audit Committee. The results of these questionnaires shall be discussed during a meeting of the Audit Committee and submitted to the Board of Directors.

The Appointments and Remuneration Committee evaluates its own effectiveness and efficiency at least once every three years. For the purpose of this self-evaluation, an individual questionnaire is sent to each member of the committee. The results are discussed at a meeting of the committee and submitted to the Board of Directors.

The Appointments and Remuneration Committee also contributes to the objective and professional functioning of the process for appointing and re-appointing directors and the annual evaluation of the performance of the management team.

Managementteam

• Composition

Following the adaptation of the articles of association to bring them into line with the new Companies and Associations Code, the Board of Directors has established an executive body, the management team. The management team consists of the CEO, who leads the management team, and all other directors of the Company at a given time.

The composition of the management team on 31/12/2023:

CEO

Project Management

Operations

HR & Organisational

Development

Asset Management

Finance & Procurement

Business Development

Jan Goossens

Danny Baeten

Hans Bruynooghe

Sabine Schellens

Bart Van Eygen

Glenn Van Olmen

Marjolein Weemaes & Innovation

• Functioning

The management team exercises the powers relating to dayto-day management, and all transferable powers except for those powers reserved for the Board of Directors according to the statutory provisions, the company’s articles of association and the internal regulations of the Board of Directors. The management team meets on a weekly basis.

DIVERSITY POLICY

Aquafin aims for diversity in the Board of Directors and the management team. We interpret this more broadly than age, gender and cultural background, and also view diversity in terms of education, insights, experience and professional competencies.

Aquafin believes that diversity of perspectives within the management bodies contributes to the constructive puttingforward of views for discussion. It provides a broad range of perspectives, new ideas and critical considerations which are necessary to support the decision-making process effectively. Aquafin also enters into dialogue with the outside world and external expert groups regarding a wide range of topics in order to gather broad insights.

The Board of Directors ensures that each appointment or reappointment enables a suitable balance of competencies, knowledge, experience and diversity to be maintained in the board and the committees. As far as gender diversity is concerned, the Board of Directors aims to ensure balanced participation in the Board of Directors. The Board of Directors currently consists of ten members, four of them women.

REMUNERATION REPORT

• Non-executive directors

Aquafin applies the following remuneration model for directors:

On the one hand, there is an annual flat fee for attending meetings of the Board of Directors. This flat fee stands at 6,500 euros for directors and 13,000 euros for the chairman. Payment of the fee is conditional on attending at least two thirds of the total number of meetings, barring force majeure. In addition, a fee is paid per meeting of the Audit Committee and the Appointments and Remuneration Committee amounting to 380 euros for the chairmen and 320 euros for the members of these committees.

((C)

= Chairman)

• Management team

The total gross remuneration paid for 2023 to the members of the management team amounts to:

• basic salary: 1,486,059.89 euros

• variable part: 271,700 euros

• pension entitlements: 288,785.52 euros

• other remuneration components: 186,138.10 euros

The variable remuneration for the 2023 financial year will be added to the group insurance in 2024.

• General

Based on the advice of the Appointments and Remuneration Committee, the Board of Directors determines the remuneration policy for the executive management team. The aim of this policy is to attract, retain and motivate knowledgeable people. The amount of the remuneration shall take into account the individual tasks and responsibilities of the members of the management team.

The performance of the management team is evaluated once a year in the presence of the CEO. The appraisal of the CEO takes place in his absence. The Appointments and Remuneration Committee follows the whole procedure closely.

Additionally, a broad assessment was organised for each director this year by means of collaboration with Accord Group. This consisted among other things of a 360° survey (digital questionnaire) and an interview with each director conducted by Accord. Finally, Accord also spoke to each director’s immediate superior (so to the CEO for the board members and with the chairman of the Board of Directors for the CEO himself). This assessment also formed the basis for each director’s general appraisal. Individual development plans were also defined where relevant.

In terms of determining the variable remuneration, management functioning was analysed as usual. In the first instance, there are a number of collective objectives (scorecard) for the management team relating to operational functioning (e.g. treatment results); the financial results; safety; innovation and business development. In addition, there are also individual objectives for each director.

Going forward, at the request of the ARC, the variable remuneration system was significantly adjusted. From now on, the total bonus amount to be paid to the MT will be determined by the results achieved on the scorecard on the one hand and 5 collective objectives on the other hand. Consequently, the distribution of the total bonus amount obtained in this way between the board members will no longer take place based on individual objectives but rather on a general discretionary evaluation. The aim of this is to achieve greater differentiation between the board members in terms of variable remuneration.

AQUAFIN NV

Colophon

Publisher : Jan Goossens, Dijkstraat 8 - 2630 Aartselaar

Graphic design: altera

Photography : Silke Van Rooy, Frederik Beyens, Shutterstock and Aquafin NV

The 2023 annual report is also available in Dutch.

Aquafin NV, Dijkstraat 8, B-2630 Aartselaar tel. 03 450 45 11 l e-mail: info@aquafin.be www.aquafin.be