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FY 2005 Consolidated results

Analyst meeting March 22nd, 2006


Agenda

Summary Financials 2005 Outlook 2006 Regulatory and legal aspects Highlights 2005


Summary • Financials 2005 - 2005 Results in line with expectations

• Outlook 2006 • Regulatory and legal aspects - New electricity law published on June 1st, 2005 - Court of Appeal law into force as of February 1st, 2006

• Highlights 2005 - Energy Off-take from Elia’s network in 2005 - Tariff evolution to the advantage of Elia’s customers - Significant increase of cross border capacity with France - Explicit auctioning of capacity on North/South borders - Acquisition 70 kV-net of Imea (industrial port area of Antwerp) - Constitution of the Belgian Electricity Exchange on July 7th, 2005


Agenda

Summary Financials 2005 Outlook 2006 Regulatory and legal aspects Highlights 2005


Overview of Key IFRS Figures

IFRS Income statement (€ million) Operating Income EBITDA (1) Operating result (EBIT) Financial result Taxes Consolidated net profit Net profit per share (€) Dividend per share (€) Balance sheet (€ million) Total assets Equity Net debt Equity per share (€)

2005 714,2 295,9 211,8 (93,8) (41,5) 76,5 1,60 1,27 31/12/05 3.855,8 1.282,7 2.080,1 26,80

2004 704,4 264,6 191,8 (98,7) (33,6) 59,5 1,42 1,27 31/12/04 3.789,5 1.061,5 2.164,8 25,29

Total number of shares (end of period)

47.898.052

41.979.640

(1) EBITDA = EBIT + depreciation + changes in provisions

Change In % 1,4% 11,8% 10,4% -5,0% 23,5% 28,6% 12,7% 0,0% 1,7% 20,8% -3,9% 6,0% 14,1%


2005 Profit and Loss Bottom-up Approach of Elia’s P&L in 2005 (EUR m) Determination of net profit Non tariff

63,2

Average RAB 2005 Reference equity (33%) Cost of equity Equity reference remuneration (A) Av. equity / Av. assets Deviation on ref. equity Equity deviation remuneration D-factor (B)

637,7

Costs 685,7

3.371 1.112 6,83% (1) 76,00 32,05% (2) -0,95% 3,21% (3) -1,02

Over-depreciation (C)

-8,18

Fair remuneration (A+B+C)

66,79

tariff

B/M Decision CREG over 2004 Reversal provision before regulation Net profit Belgian GAAP 34,7

Surplus

76,5

Net profit

Charges

(1) (2)

IFRS reconciliation

Revenues

OLO of 4,1683%; Beta of 1,0485 and a risk premium of 2,54% Av. Equity =1.201,1 and Av. Assets = 3.775,3

Net profit IFRS

0,62 0,49 67,90 8,6 76,50

(3) OLO of 4,1683%; deviation rate of 70bp and tax rate of 33.99%


Reconciliation Be GAAP - IFRS IFRS Impact on Equity and Net Profit for year ending 31 December 2005 67,9

8,0

4.1

76,5

(2,3)

Net Profit

(2,9)

1.7(1)

2005 Belgian GAAP

Employee Benefits

1.322,2

Regulatory assets

89,1

Deferred taxes Capitalisation Software

Others

(1)

29,6

2005 IFRS

26,3

1.282,7

Others

2005 IFRS

(18,7)

Equity

(165,8)

2005 Belgian GAAP

Employee benefits

Regulatory assets

Deferred taxes

Hedge Reserves

(1) Mainly relates to reversal goodwill Bel Engineering, inventory valuation, provisions & consolidation of Elia Re


Regulated Asset Base 2005 Evolution 2005 RAB

3.443 53

(1)

3.299

2004

Average RAB

3.324

(83)

(7)

181

Depreciation

Divestm. & Decomm.

Capex

Change in WCR

2005

3.371

(1) Small difference with â‚Ź 3.311m Y/E RAB 2004 of analyst presentation of April 25th, 2005 due to CREG B/M decision of June 2005 over 2004


Working Capital Requirements 2005 Changes in Working Capital Requirements (EUR m)

(1)

68,6 53,7

2005

(27,6) 36,3

1,7

(25,3)

Inventory & trade debtors <1 year

Deferred charges and accrued income

Trade creditors & others

(1) Based on Belgian GAAP accounts

Accrued charges & deferred income

Surplus 2005

Total Change in WCR


Breakdown Costs Evolution of Costs between 2005 and 2004 (EUR m) 637,7

644,9

138,9

-4,3%

145,1

Ancillary services (reserve energy)

144,0

-2,6%

147,8

Raw materials, Services & Other goods

117,2

-4,6%

18,2

122,9

Personnel Expenses

24,0

Others

84,1

+15,5%

72,8

Depreciation

93,8

-5,0%

98,7

Financial charges

41,5

33,6

Taxes

2005

2004


Non - Tariff Revenues Breakdown of Non â&#x20AC;&#x201C; Tariff Revenues in 2005 and 2004 (EUR m) 71,0 63,2

12,0 9,4

Others

11,2

Telecom & third party services

21,8

Fixed assets own construction capitalised

21,9

International revenues

-25,4% -16,1%

12,4

-43,1%

29,4

34,2%

2005

16,1

2004


Tariff Revenues Breakdown of Tariff Revenues in 2005 and 2004 (EUR m) 685,7

756,8 2,1%

27,9

-21,6%

191,6

28,5

Connection tariffs Tariffs for ancillary services

150,3 55,9%

39,6

467,3

-8,7%

25,4

511,9

Tariffs out of previous surpluses

Tariffs for grid use

123,4 34,7

2005

2004

Significant decrease of recorded difference between approved budget and reality

14,1

69,5

Shortfall on costs

20,6

53,9

Surplus revenues (tariff & non-tariff)


Deviation from Budget 2005 Sources of surplus over budget at the end of 2005 (EUR m) 0,4 13,7

34,7

(1)

13,3

7,3

Reasons

Surplus regulated revenues „ Access and balancing fees

Surplus international & other income „ „ „

Auctioning fees North Congestion fee South 3rd party services

Shortfall in charges „ „ „

Purchase ancillary services Lower interest rates Less debt than forecasted

Adjustments to the regulated profit „

Total Surplus

RAB adjustment

(1) Elia’s recorded difference for 2005 is EUR 34,7m of which 27,3 will be allocated by the CREG during the 1st half of 2006


Overview treatment of surpluses Overview of allocation and use of total surpluses In millions of EUR

Surpluses

2004

2005

2006

2007

Surplus 2003 Bonus 2003 Used Total 2003

134,6 3,2

25,4

36,4 3,2 -39,6 0,0

36,4

36,4

36,4

36,4

9,8 3,5

9,8

23,8

23,8

23,8

13,3

9,8

23,8

23,8

23,8

Surplus 2004 Bonus 2004 Used Total 2004 Surplus 2005 Bonus 2005 Used Totaal 2005 Total Surplus Total to reverse

-25,4 137,8 119 3,5

28,0 (1)

2008

2009

2010

Total 134,6 3,2 -65,0 72,8 119,0 3,5 -28,0 94,5

122,5

-28,0 0,0

34,7

34,7

34,7

34,7

-7,4 (1) 27,3

-7,4 27,3

295,0 27,3 (2)

49,7

46,2

23,8

23,8

23,8

194,6

About EUR 200m available for future tariff reductions

(1) Financing of federal levies Q4 2005 (decision CREG)

(2) To be allocated by CREG in decision B/M over 2005


Financial Debt Position Elia benefits from a strong credit rating Standard & Poor’s rating: Long Term: AOutlook: Stable

2.129,5

2.223,8

250,0

344,6

996,0

995,7

883,5

883,5

31/12/2005

31/12/2004

2.500 2.000 1.500 1.000 500 0 Shareholders'loans LT Banks LT

Eurobonds Shareholders'loans ST

€ millions

2005

2004

Net debt 2.080 2.165 Leverage (D/D+E) 62,4% 68,0% EBITDA / Gross interest 3,2 3,0 Net debt / EBITDA 7,0 8,2 Average cost of debt 4,4% 4,0% % Fixed of gross debt 72,4% 87,7%

Amount Unused Credit lines (€m) European I.B. 125 Commerc ial PP 250 Confirmed Credit facility 50 Unconfirmed Credit facility 875 Total 1.300

Interest rate Euribor + 5 bp Euribor + 32,5 bp To be negotiated


Dividend Policy Elia’s dividend policy ensures a steady dividend 2,05

2,1

(1)

1,6

1,27

1,17

In EUR

89,6%

1,27

90,00% 85,00%

1,1 80,00%

80,9%

0,6

79,3%

77,6%

75,00%

0,1 -0,4

2002

2003

Dividend

2004

2005

70,00%

Pay-out ratio

• Steady dividend despite 14,1% increase in number of shares • Pay-out ratio over 2005 Belgian Gaap result is 89,6% (79,6% under IFRS) (1) Contains exceptional dividend of EUR 0,88


Agenda

Summary Financials 2005 Outlook 2006 Regulatory and legal aspects Highlights 2005


Outlook 2006: RAB Evolution 2006 RAB as approved by CREG

3.443 (85)

(6)

140 (1)

3.239 (253)

2005

Average RAB

Depreciation

Divestm. & Decomm.

Capex

Change in WCR

3.371

(1) Mainly relates to replacement and development capex (does not include acquisitions)

2006

3.341


Outlook 2006: CAPEX Breakdown CAPEX

CAPEX 2005-2009 (IPO) € 800 m

CAPEX 2006 € 140m

8%

10% 22%

25%

14%

24%

44%

53%

Replacements

Driven by interconnections with neighbours

Driven by internal consumption

Driven by import levels & generation localisation


Outlook 2006: Fair remuneration Determination of net profit 2006 by the regulator (Belgian GAAP)

Average RAB 2006 Reference equity (33%) Cost of equity Equity reference remuneration (A) Av. equity / Av. assets Deviation on ref. equity Equity deviation remuneration D-factor (B)

CREG 3.341 1.103 6,76% (1) 74,5 34,29% 1,29% 3,19% (2) 1,4

Over-depreciation (C)

-8,2

Fair remuneration (A+B+C)

67,7

B/M Decision CREG over 2005

-

Net profit as set by regulator

67,7

(1) (2) (3)

• For the tariff 2006, the regulator deducted from the RAB the short term financial debt • Elia filed a proceeding (3) against the decision for the State Council • Elia has adapted its financial structure • This change in financial structure could have a positive impact of about EUR 3m on the 2006 results compared to the approved net profit 2006 by the regulator

OLO of 4,1293%; Beta of 1,0358 and a risk premium of 2,54 OLO of 4,1293%; deviation rate of 70bp and tax rate of 33.99% The proceeding also includes the disagreement with the computation of the D-factor and the decommissioning


Agenda

Summary Financials 2005 Outlook 2006 Regulatory and legal aspects Highlights 2005


Update on legal aspects

Law

• • • • •

Amended Electricity Law

Appeal Law

4-year tariff mechanism Concept of return on RAB Concept of incentivisation Embedded financial debt Corporate governance principles

• New law enables third parties to

01/06/05

Royal Decrees

• Parameters of tariff mechanism • Parameters of RAB evolution • Parameters of incentivisation ?

• Implementation of tariff mechanism

CREG Guidelines ?

challenge CREG decisions before the court of appeal instead of the Council of State 20 & 27/07/2005

• Parameters to start-up procedures

20/01/2006


Multi-year tariffs • Procedure as foreseen in new electricity law: Minister of Energy to send letter to Regulator Proposal by Regulator after concertation with Elia (40 days) Final decision by council of ministers

• Status : • Concerned Articles in Law will be implemented by decree • Objective of Minister remains January 1st 2007 • Elia is prepared to submit 4-year tariff proposal


Agenda

Summary Financials 2005 Outlook 2006 Regulatory and legal aspects Highlights 2005


1. Energy Off-take from Elia’s network Net Energy Off-take GWh 2004

7.500 7.250 7.000 6.750 6.500

Total net Off-take from Elia grid slightly decreased to 78,9 TWh in 2005 from 80,6 TWh in 2004

2005

This is mainly due to :

MW

December

November

Oktober

September

Augustus

Juli

Juni

Mei

April

Maart

Januari

Februari

6.250 6.000 5.750 5.500 5.250 5.000

• mild weather in 2005 • increase of : - local generation - renewables, mainly wind

Minimal en maximal off-take of Elia-net in 2005

13000 12000

Maximum Net Off-take

11000 10000

2005 Dec 15th 12,8 GW 17.45-18 2004 Jan 27th 12,4 GW 17.45-18

15 dec 05 31 juli 05

9000 8000

Minimum Net Off-take

7000

2005 2004

6000 5000 0

2

4

6

8

10

12

14

16

18

20

22 uur

July 31th Aug 8th

5,9 GW 6,3 GW

6.30-6.45 2.30-2.45


2. Evolution of tariffs since 2001 Since 2001, decrease of transmission tariffs for all types of clients Tariffs for use of the grid and tariffs for ancillary services: comparison 2001 - 2006 16 14 12

â&#x201A;Ź/MWh

10 8 6 4 2 0 2001

2002 2003 2004 (Q4) (Q2 to Q4)

2005

On the 380/220/150 kV netw ork

2006 (*)

2001

2002 2003 2004 (Q4) (Q2 to Q4)

2005

2006 (*)

At transformer output to the 70/36/30 kV netw ork

2001

2002 2003 2004 (Q4) (Q2 to Q4)

2005

On the 70/36/30 kV netw ork

2006 (*)

2001

2002 2003 2004 (Q4) (Q2 to Q4)

System management

Ancillary services

2006 (*)

At transformer output to medium voltage

(*) Hypothesis: the concerned client is supposed not to have a local production

Annual power

2005

Loss compensation


European comparison 2004 tariffs European comparison transmission cost per type of client

Benchmark 2004 with neighbouring countries 180

160

140

120

100

>41 GWh (63/70kV) >41 GWh (150kV)

80

60

40

20

0

Vlaanderen Flanders

F

D

NL

UK

Source : Flemish government : Comparative study industrial transmission costs 2004


Breakdown 2005 Energy cost Transmission cost is a small part of clientâ&#x20AC;&#x2122;s total energy cost

Residential client

Midsize industrial client

Large industrial client

3.500 kWh, 12 kVA 1.300 kWh night

2-10 GWh, 500-2.500 kW 4.000h / year

50-70 GWh, 10.000kW 5.000-7.000h / year

8%

9%

10% 36%

24%(1)

(2)

(2)

13% 15%

22% 62%

69%

32%

Energy

Source : CREG

Transmission

Distribution

(1) 18 out of the 24% relates to VAT

Federal levies & taxes (direct & indirect)

(2) Not subject to VAT


3. Elia in a European context Since Nov 05, one of Europeâ&#x20AC;&#x2122;s most interconnected network Belgium Max. import cap. (MW) Max. (MW) Net offtake North South Elia-grid 05 2006 est.

% of opening North

South

Winter

1.344

3.300

12.447

10,80% 26,51%

Summer

1.257

2.300

11.044

11,38% 20,83%

Total 06

Total 05

37,31% 32,21%

29,30% 24,10%

Netherlands 5,074 GWh

Total energy exchanges 2004-5 4,430 GWh

2005 Direction Exchanged F B 6,750 GWh B F 2,221 GWh NL B 4,430 GWh B NL 5,074 GWh Lux B 2,366 GWh B Lux 1,373 GWh

2004 Exchanged 7,591 GWh 1,180 GWh 4,630 GWh 4,053 GWh 2,381 GWh 1,577 GWH

Change -11,08% 88,22% -4,32% 25,19% -0,63% -12,94%

Total

21,412 GWh

3,75%

22,214 GWh

2,221 GWh France 6,750 GWh

2,366 GWh Luxembourg 1,373 GWh


Capacity increase with France: major progress Significant increase of the capacity between France and Belgium 1. Avelin (France) – Avelgem (Belgium) 380 kV •

Adding of second line adds Min 700 MW ; Max 1000 MW

€ 1 million EU grant

2. Release of capacity from historical contract •

as decided by French, Dutch and Belgian Regulators

3. Chooz (France) – Monceau (Belgium) 220 kV •

Since Jan 2006 2H 2006

Preparations works started

4. Moulaine (France) – Aubange (Belgium) 380 kV •

Since Nov 2005

Works in France included in MOU which was signed with Belgium

To be defined

Æ

Max capacity (winter) : 4.300 MW when all projects commissioned

Æ

This major increase of access to neighbouring competitive wholesale markets should compensate future increase of transmission tariff due to • investment charges not driven by an increase in demand • potential decrease in auctioning revenues (used to lower tariffs)


4. Explicit auctioning at F and NL borders From year 2006, France-Belgium interconnection capacities are also auctioned, on a yearly, monthly and daily basis •

RTE and ELIA jointly determine the capacities which are auctioned taking into account security rules

First results • Low prices on the south border compared to the north border confirm favorable impact of increased commercial capacity • Demand increased at Dutch border, especially for the direction B-NL with auctioning prices of about € 4-5/MWh on average

Next steps • Jointly operated auction office foreseen mid 2006 • Auctioning of daily capacity will be transferred to Belpex at the start of market coupling


5. Acquisition 70 kV network IMEA

Port of Antwerp

Du tc

hb ord er

Flanders •

Acquisition in line with Elia’s objective to acquire networks not yet in ownership

Provide electricity supply to major large industrial clients located near Port of Antwerp

Assets mainly relates to 55.4km underground cables, 9 70kV stations and 26 transformers


6. Belgian Power Exchange (Belpex) • Constitution on July 7th, 2005 • Shareholdership: 3 TSOs (F,NL,B) and 2 Px (F,NL); Elia = 60% • Two main activities : 1.

VPP’s : intermediary role for daily deliveries (since 1/1/2006)

2.

Day-ahead power exchange with market coupling F-B-NL -

-

Spot market for electricity on the next day ¾

Maximum use of capacity between F-B-NL

¾

Increase liquidity and transparency on Belgian market

¾

Enlarged convergence of prices between F-B-NL

¾

Lower risks for the participants as energy and capacity are allocated simultaneous

Start foreseen : Q3 2006 ¾

License & Market rules approved by Minister of Energy Jan 12th

¾

Waiting for “green light” from F-NL-B Regulators


Questions & Answers Investors Relations – Contact details „ Bert Maes Tel: + 32 (0)2/546.72.39 Mail: bert.maes@elia.be Website: http://www.elia.be


FY 2005 Consolidated results

Analyst meeting 22 maart 2006


Agenda

Annexes


Update on Elia group & Shareholdership

Suez/ Electrabel

Publi-T

27.45%

Publipart

30.00%

Freefloat

2.55%

40,00%

(2)

Elia: A Single Economic Unit Elia System Operator

Licensed System Operator

99.99%

Network Owner

Elia Asset(1)

HGRT 12/2001

• •

“Holding des Gestionnaires de Réseaux” Shareholder of French-based electricity power exchange Powernext

(1) 1 share Publi-T, 1 share Electrabel

100%

60%

22.17%

Belpex 07/07/2005

Belgian power exchange

100%

Elia Re 05/02/2002

Captive reinsurance company

BEL Engineering 26/12/2003

Engineering consultancy firm mainly involved in the design and project management of electricity network-related infrastructure

(2) Includes 0,54% Employee shareholdership


Very Successful IPO

Price (€)

• • • •

2005 (june 20th-dec 31st)

Demand 10x oversubscribed > 100,000 private investors +7.8% first trading day Employee offering: 5x oversubs.

• • • •

Performance: Average volume: Free float velocity: Market cap:

+18,9% 125,585 109.44% € 1.5bn

33,00

0,9

32,00

0,8

31,00

0,7 0,6

30,00

0,5

29,00

0,4

28,00

0,3

27,00

0,2

26,00

0,1

25,00

0

Juni 2005

Juli 2005

Aug 2005

Sep 2005

Okt 2005

Nov 2005

Dec 2005

Volume (In m)

IPO


2006 Auctioning results South border

€ / MWh

2006 Auctioning F-B 0,78 0,68 0,58 0,48 0,38 0,28 0,18 0,08 -0,02

Year Month Day Results yearly and monthly auctioning South border

Jan 06

Feb-06

Mar-06

€ / MWh

2006 Auctioning B-F 0,78 0,68 0,58 0,48 0,38 0,28 0,18 0,08 -0,02

Period Direction Cap. auct. Participants Price / MWh Year 2006 F B 1298 MW 17 0.76 € B F 799 MW 9 0.11 € Month Jan F B 1450 MW 15 0.22 € B F 520 MW 6 0.35 € Month Feb F B 1450 MW 16 0.22 € B F 400 MW 7 0.41 € Month Mar F B 849 MW 13 0.31 € B F 300 MW 7 0.33 €

Year Month Day

Jan 06

Feb-06

Mar-06


2006 Auctioning results North border 2006 Auctioning NL-B 5,6

€ / MWh

4,6 3,6

Year

2,6

Month

1,6

Day Results yearly and monthly auctioning North border

0,6 -0,4

Jan 06

Feb-06

Mar-06

2006 Auctioning B-NL

Month Jan Month Feb

5,6

Month Mar

4,6 € / MWh

Period Year 2006

3,6

Year

2,6

Month

1,6

Day

0,6 -0,4

Jan 06

Feb-06

Mar-06

Direction B NL NL B B NL NL B B NL NL B B NL NL B

Cap. auct. 328 MW 328 MW 313 MW 313 MW 313 MW 313 MW 313 MW 313 MW

Price / MWh 4.70 € 0.11 € 3.49 € 0.57 € 5.51 € 0.90 € 1.44 € 0.35 €


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