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    TenneT Holding B.V. Integrated Annual Report 2019


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    Key figures 2019 Safe workplace Diverse workforce Safety (TRIR) Gender ratio 4.8 23% 77% Satisfied capital providers* Environmental impact ROIC % Greened of our carbon footprint 5.1 27.4% Grid availability Safeguard capital structure* Grid availability FFO/Net debt 99.9998% 14.8% Future proof grid* Our workforce Annual Investments (EUR million) Number of employees (internal and external) 3,064 4,913 Engaged stakeholders Healthy financial operations* Reputation survey EBIT (EUR million) fairly strong to very strong 768 * Based on underlying figures


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    Table of contents Integrated 2019 at a glance 2 Annual Letter from the Board 4 Report 2019 * About TenneT 6 Profile 6 Our strategy and value creation 9 Materiality analysis 14 * Our performance in 2019 16 Deliver a high security of supply 16 Contents Ensure critical infrastructure for society Create a sustainable workplace Create value to transition to a low carbon economy Secure a solid financial performance and investor rating 23 30 36 44 Solve societal challenges with stakeholders and through partnerships 50 Statements of the Executive Board 57 Our Executive Board 58 Supervisory Board Report 60 Supervisory Board Report 60 Remuneration policy 66 Board remuneration 68 Our Supervisory Board 72 * Governance and risk management 74 Corporate governance 74 Risk management and internal control 76 Risk management and internal control framework 79 Compliance and integrity 80 Risk appetite 82 Key risks 83 Financial statements 87 Consolidated financial statements 88 Notes to the consolidated financial statements 95 Company financial statements 147 Notes to the company financial statements 149 Other information 152 Profit appropriation 152 Independent auditor’s report 153 Assurance report of the independent auditor 160 About this report 163 Reconciliation of non-IFRS financial measures 168 SWOT Analysis 169 Key figures: five-year summary 170 Glossary 171 * These sections reflect the director’s report as mentioned by Part 9 of Book 2 of the Dutch Civil Code. Integrated Annual Report 2019 - TenneT Holding B.V. 1


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    TenneT at a glance 2019 Q2 Q3 After five years of construction, the Randstad We decided to 380 kV North Ring was increase our commissioned. This will biodiversity further strengthen Q1 measures at 462 of our grid in one of our stations in the the most densely Netherlands and populated regions in Germany. the Netherlands. We partnered up with Gasunie and Thyssengas in the Element Eins project, where we aim to find We completed the COBRAcable in Q4 In November 2019, TenneT entered into the largest sustainable Revolving Credit solutions to September 2019, which now allows Facility in the Benelux. This EUR 3 billion connect both green energy to flow between the facility provides TenneT with more options electricity and gas Netherlands and Denmark. to drive the energy transition. infrastructures through the production of hydrogen. We completed Borssele Alpha, TenneT’s first, and at the same time largest connection system for wind farms on the Dutch North Sea. We successfully issued another EUR 1.25 billion We have completed our project at the Elbe of Green Bonds. Crossing in Germany. With this project, we quadrupled our capacity (from 2.4 to 9.6 gigawatts (GW)) and it created TenneT’s most powerful line, using the highest masts in Europe. Together with 50Hertz, Amprion and We welcomed new members of the TenneT announced plans TransnetBW, we submitted the German Grid Supervisory Board (Edna Schöne, to invest an additional development plan (Netzentwicklungsplan) Essimari Kairisto and Stijn van Els) EUR 215 million in the high to the BNetzA after taking comments from and Tim Meyerjürgens as COO in We organised an annual event voltage grid in the north of a public consultation into consideration. our Executive board in the first half combining forces together with over the Netherlands to increase of 2019. 150 energy professionals to discuss connection capacity from how we can drive the energy transition. solar and wind farms. 2 Integrated Annual Report 2019 - TenneT Holding B.V. 3


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    Letter from the Board In order to implement the sustainable energy policies of the That’s why we focus on three main points when designing Netherlands and Germany, drive the energy transition and an energy system fit for a fossil-free future. Firstly, expansion carry out large-scale maintenance work on our high-voltage – by which we mean extending the reach of our grids to grids, our annual investments will need to expand from connect and carry the power of on- and offshore wind Letter approximately EUR 2 to 3 billion today to approximately to millions of users across the Netherlands and Germany EUR 4 to 5 billion within the next five years that implies that and beyond. Transport across large distances, combined we are preparing for doubling our execution capacity in the with international exchange of green electricity, is vital for the next years. As announced earlier and recognised by our success of the energy transition. Secondly, optimising the from the principal shareholder, the Dutch State, it is clear that additional equity capital is needed to maintain our solid standing in the financial markets and to ensure favourable utilisation of our existing grids will help us achieve a clean energy future faster. A promising development in this respect is the advanced thinking about an integration of Board access to a wide-ranging supply of financing sources. Our aim is to further build on TenneT’s strength as an electricity and gas power networks. In addition, automated system operations will help us achieve higher grid utilisation, which we are exploring together with universities, integrated, European company. The energy transition distribution system operators, suppliers and governments. recognises no borders – and we believe in a unified, rather With this new technology we expect to unleash latent grid than fragmented country-by-country approach. This is the capacity instead of upgrading or expanding our assets. Ben Voorhorst Manon van Beek Otto Jager Tim Meyerjürgens Chief Operational Officer Chief Executive Officer Chief Financial Officer Chief Operating Officer best way to ensure the highest availability of our grid when And finally system thinking and sector coupling, where it either gets flooded with green electricity, or when it is dark flexiblity is key. Flexibility of demand and supply of electricity and windless. It also ensures efficient investment across is essential to keep the system in balance while intermittent Dear all, a larger geographical area, avoiding costly miniature renewable energy sources will increasingly dominate the To put it in a nutshell: our task is it, to keep the lights on. And we are good at it. solutions. Finally, it will bundle knowledge and spur scene. Flexibility can be achieved, among other things, cooperation to achieve ambitious climate goals at a faster from interconnectors, storage (batteries, hydrogen With 99.9998% our grid availability is amongst the highest in the world. But times pace. As a consequence, we would like to further broaden conversion), comprehensive participation of consumers in are changing, and we face new challenges as we prepare for a clean energy future, and professionalise our existing shareholder base with the energy system and demand-side response. largely dependent on volatile renewable energy sources such as wind and sun. a European-oriented party, that will continue to enable us As we transition to a sustainable, reliable and affordable CO2-free energy system, to drive integrated network development, planning and This presents the framework of our work in the coming operations across borders and facilitates a uniform, years, something that we feel very passionate about. the tried and trusted methods and solutions we applied during the past 20 years, functional management of the entire company. We expect to We need everyone at TenneT as well as all the partners with will not sustain us in the decades ahead. reach a satisfactory solution on this before the end of 2020. whom we drive the energy transition, to pull this off together. We will also practise what we preach, with a comprehensive With much investment and innovation required to deliver plan to reduce our own carbon footprint and build our new energy solutions, the bill will rise in the foreseeable reputation as a green grid operator. We bring expertise and experience, but we don’t have all We share a degree of concern about the affordability of future, whether funded through tariffs or taxes. Although the answers. We need to transform the way we collaborate, the energy transition and the social acceptance that goes our share of consumers’ electricity bills is relatively low Clearly, the pressure on us and our partners to deliver, to make decisions and solve problems to navigate the with it. It’s primarily funded with public money – through (less than 10%), the costs of the necessary investments perform, is high. This does not mean that haggling with an challenging times ahead. Being open and honest about taxes and energy tariffs. It can sometimes be difficult to in high-voltage networks will increase and we want to be important theme such as security is acceptable. Working these challenges is important to find the best way forward explain why the energy transition requires such enormous as prudent as possible about how we invest our money. safely, where everyone can come home healthy in the in partnership with others. investments. Even though sun and wind come for free, evening, simply is a prerequisite in everything we do and we harnessing their power for society’s ever-growing Although major expansions of our onshore and offshore require the same dedication from our partners when it Last year exemplified the scale of change. It was a pivotal appetite for electricity is technically challenging and costly. grids are required, we don’t believe in endlessly more comes to safety. TenneT will continue to keep a special year for TenneT. We recognised that we are at a crucial Especially when near-perfect reliability and natural and physical infrastructure. That’s why, together with a number focus on this theme. point, facing the mounting challenges of a fast-paced environmental preservation are an essential part of the of partners, we are working on the application of new, smart energy transition while simultaneously launching an internal, equation. technologies, such as blockchain data, real time system We would like to thank everyone at TenneT for their hard multi-year effort to optimise our organisation, processes and operations, hydrogen conversion and sector coupling. work and dedication during 2019 and look forward to strategy execution. But it is not easy to move as fast as we Considering that we are dealing with a high voltage grid building on our achievements in the challenging but exciting want to. We can only do this in close step with our partners that was mainly built in the 1960s and was never intended time ahead. and stakeholders and within the constraints of what is for the volatility of supply we see today, our thinking must possible. Time is short and we face limited resources, extend beyond the legacy network. TenneT Holding Executive Board including the availability of talent and external service providers. 4 Integrated Annual Report 2019 - TenneT Holding B.V. 5


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    Profile About TenneT Our role Maintaining the balance between supply and demand As the debate on the climate emergency gathers pace As electricity is fed into the grid, we need to carefully in society, we are determined to play our part to accelerate balance the electricity supply with demand. The frequency the energy transition. We are fully aware that we cannot of all electrical devices we use is 50 Hz. If the voltage in our achieve our ambitions alone; we do not have all the high-voltage grid is not exactly 50 Hz, devices will not work answers. Real leadership is about bringing people together. properly. So, it’s crucial that the voltage remains constant. That’s why we’re working with governments, industry and other stakeholders towards a more sustainable, affordable And since electricity cannot be stored in large quantities, About and reliable energy future. This is pioneering work and we are fortunate to be in a position where we can contribute to changes we believe society urgently needs. We’re happy continuous adjustment of supply and demand is needed to ensure security of supply. To do this, we have control centres in the Netherlands and Germany, where transport, TenneT to share our ideas with others who share our commitment to a brighter future, because it benefits us all. We are all in the same position. At TenneT, we are proud to be lighting supply and demand is monitored and balanced 24 hours a day, seven days a week. the way together. Facilitating the European energy market Electricity recognises no geographical borders, and we Building, maintaining and operating the believe Europe is better served by an integrated electricity high-voltage electricity grid market. As such, we have extensively connected our Profile Transporting electricity electricity grid with the countries around us. In doing so, The (extra-) high-voltage grid is the backbone of the we facilitate a single market that guarantees a reliable TenneT is Europe’s first cross-border grid operator. We design, build, maintain and electricity supply system. It is used for the transport of electricity supply at a fair price. operate the high-voltage electricity grid in the Netherlands and large parts of Germany high-voltage electricity over long distances. We are a key player in the electricity supply chain. This consists of The majority of our activities are so-called regulated and facilitate the European energy market. We are committed to providing a secure electricity producers from conventional and fast-growing activities. A full overview of our group structure can be and reliable supply of electricity, today and in the future, 24 hours a day, 365 days a renewable energy sources and large industry and found on our corporate website. year and to playing our role in driving the energy transition. We transport electricity distribution system operators (DSOs). In addition, we import over a network of approximately 23,500 kilometres of high-voltage lines, from and export electricity across borders to keep the grid stable and balanced at all times. wherever and however it’s generated, to over 42 million people while keeping electricity supply and demand balanced at all times. Because wind farms and other (renewable) energy sources are often far away from where electricity is used, we need to carry it over large distances without incurring major energy losses on the way. To achieve this, we transport electricity at very high voltages: 110 up to 525 kilovolt (kV) Our task Designing the energy system in the Netherlands and in Germany. Also, electricity We transport electricity across borders, connecting Energy transition generated at sea, for instance, is transported via subsea countries and ensuring the power supply on which we all Balancing supply and demand of electricity is becoming cables and then connected to the high voltage grid. Maps of depend. These are regulated tasks that take place within increasingly complex as renewables flow into the power our onshore and offshore high voltage grid can be found on the framework of Dutch and German legislation and grid. Renewable energy sources, such as solar, biomass, our corporate website. regulations. The Dutch State (represented by the Ministry hydropower and wind, are often located in remote areas, of Finance) is the 100% shareholder of TenneT. The vast such as the North Sea. Bringing this energy onshore and majority of our activities are regulated by the Autoriteit transporting it across vast distances is a challenging task, Consument & Markt (ACM) in the Netherlands and the demanding new thinking and pioneering design. The energy Bundesnetzagentur (BNetzA) in Germany. transition – the switch from traditional fossil fuels to renewable energy sources – is one of the biggest challenges the energy sector has ever faced. It is an immense task for grid operators in particular. This is likely to remain the case for the foreseeable future. We have a strong track record for security of supply and our ambition is to keep it at the highest possible level: our grid was available 99.9998% of the time during 2019. 6 Integrated Annual Report 2019 - TenneT Holding B.V. 7


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    Our strategy and value creation About TenneT TenneT in the supply chain Our strategy and value creation Our strategy Building, maintaining and operating the grid In 2019, we finalised the reorientation of our strategy. This has resulted in the following Raw material extraction and production of materials four strategic goals: Strategic goals Offshore Construction Renewables Interconnectors Export Drive the energy transition Energise our people and organisation Generation / In-feed as a green grid operator Consumption Import and a thought leader. with an inclusive and safe environment where people Transmission enjoy coming to work. and system DSOs Consumers/ operations prosumers DSOs Secure supply Safeguard our financial health Onshore today and tomorrow Renewables by implementing a regulatory framework Ma rk et io n by maintaining the grid to meet to support our strategy, delivering fa c i l i t at Large reliability targets and operating a return in line with what our capital industries it to its maximum capability. providers expect and raising the necessary external financing. Powerplants Decommissioning Our strategy helps us drive the changes we believe society That is why we are working together with our stakeholders really needs, and we’re happy to share those ideas with and through partnerships to shape the future energy Our supply chain explained These assets are crucial for us to be able to operate others who share our commitment to a brighter future, landscape. We believe that this requires a multi-dimensional You can view our supply chain in two different dimensions, our grid. When an asset is end-of-life, we need to because it benefits us all. At TenneT, we believe that we decision-making process in which we not only consider horizontally and vertically. Horizontally, to one side, you see decommission it. We are aware of the impact we have are lighting the way together. With this, we aim to meet security of supply, but also how our decisions affect from which source the electricity comes from, in the middle on our supply chain. In realising our projects, keeping the needs of society. This will require us all to show courage, sustainability and affordability. This is a constant balancing you see how we design, build, maintain and operate the our asset base up to par to secure supply and also further connect with each other and take ownership. act, in which we aim to make decisions that satisfy all three high-voltage electricity grid in the Netherlands and large upstream and downstream in the supply chain. We want dimensions in the best way possible. parts of Germany and facilitate the European energy market. to be a green and responsible grid operator and take steps How our strategic goals and our value creation model are On the right-hand side you see that we transport electricity to reduce our negative impacts and even create positive linked, is depicted in the table in the ‘Materiality Analysis’ For example, when we plan our projects, we balance security to large industries and via DSOs to customers. In addition, impacts, where possible. section of this chapter. Here you can find the four strategic of supply with making both sustainable and affordable we export electricity to the countries around us. pillars, to which chapter they are linked and with that how choices in realising our assets. This is not always easy. they are linked to which output/outcome of the value An example of this could be, when we are planning a route On the vertical axis you see that we use raw materials, such creation model. Note that the strategic pillar ‘Energise and we foresee that the capacity might be insufficient to as copper and aluminium, which are mined by third parties our people and organisation’ is covered in multiple topics, accommodate a future increase of renewable energy sources and used in our projects to build and maintain our assets. but all related to ‘Create a sustainable workplace’. being connected to the grid. An option would be to increase our capacity now, which may require a larger investment, Our balancing act however, this also has clear benefits. Examples of this Securing supply is our core task and our main responsibility. include less inconvenience for local communities as we can We aim to ensure a safe, reliable and secure supply of avoid expanding our capacity later and also avoid certain electricity to 42 million end-users, 24 hours a day, 365 days costs related to permitting. However, this way of forward- a year. We are committed to secure supply, not only today, looking working is not encouraged in the current regulatory but also tomorrow. framework and therefore it is not common practice. 8 Integrated Annual Report 2019 - TenneT Holding B.V. 9


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    Our strategy and value creation About TenneT The balancing act is also reflected in the choices we make How we create value Create value to transition to a low carbon economy. Solve societal challenges with stakeholders and to build, maintain and operate our grid. We need to consider The way we create value is represented in the image on Our aim is to drive the energy transition. With the knowledge through partnerships. We are very aware that we operate how these choices could affect the supply of electricity, the the following pages, using the concept of value creation and experience gained the past decades, we want to in a multi-stakeholder landscape. We need to build strong natural environment and the societal costs. An example of as described in the International Integrated Reporting contribute and help shape the future energy relationships with our stakeholders to fulfil our societal role. this is the use of SF6 gas. This is a gas which we use as an Framework of the International Integrated Reporting Council landscape. Realising our investment programme and On the one hand, this is visible in the connections we make insulator and extinguisher in some of our assets. However (IIRC). By means of the six inputs defined by this framework innovation portfolio will contribute to the climate targets in as we undertake our projects, such as engaging with local SF6 is a strong contributor to greenhouse gas emissions (financial, manufactured, intellectual, human, social & the Netherlands and Germany, which is essential on the communities, NGOs and local governments to gain and can have damaging environmental impact if leakages relationship and natural) we describe our input, output/ pathway to a low carbon economy. Looking at our business acceptance. On the other hand, we also aim to build new occur. Currently, we face limitations for switching to a more outcome and impact. This model is the basis of our report. from a natural capital point of view, we create positive relationships through partnerships. These collaborations are eco-friendly alternative to SF6. Alternative solutions are still Our inputs, through which we create impact for society, are impact by connecting renewable energy sources to the essential to find the answers and innovations we need to fairly new and relatively untested. They involve higher costs, influenced by our strategy, our core tasks, how we balance electricity grid. This does however goes hand in hand with shape the energy landscape of the future. Our current but more importantly, they cannot be used with the same our decisions and how we operate. All of these are impact and dependencies related to the use of energy relationships and social connections help us achieve this certainty, which imposes a risk for our ability to secure described in this chapter. More information on the specific sources, the natural environment and materials to build and we aim to expand this further. supply on a constant level. The question of switching inputs and our related output/outcomes are disclosed in operate and maintain our grid. to an alternative to SF6 is therefore a continuous balancing the chapters related to ‘Our Performance in 2019’. Our ambition is to show our societal impacts as part of our act for us. We are investing in innovations to make new Secure a solid financial performance and investor value creation, but we have not yet been able to do so for all technologies sufficiently reliable for our requirements, The way we aim to create long-term value for society is rating. Our main sources of funding are our regulatory of these areas. This is being further developed in the next while at the same time bringing costs down. defined alongside the six inputs from our value creation revenue and external financing, increasingly from green years. Together with others, we are following up on this and model. Here we aim to: financing. Maintaining our strong credit rating by retaining a for now, we have started by showing elements of our These examples illustrate that we do not just choose balanced equity to debt ratio is essential to safeguard our impacts with respect to our natural capital. More information and find one of these elements more important than the Deliver a high security of supply. We have built extensive financial health, as well as by delivering a return on capital can be found in the chapter ‘Create value to transition to a other, but we strive to find the right balance between all experience in operating the electricity grid and a clear vision that meets the expectations of our capital providers. Our low carbon economy’. three elements. on how to design the system to secure supply efficiently and societal role is always part of the choices we make and the effectively. In addition, we have years of experience in actions we take, so affordability is a key element in our TenneT plays a vital role in society. By securing supply of realising projects onshore and offshore that will help us decision-making. Handling this carefully and maintaining a electricity, we make a fundamental difference to the people ensure security of supply tomorrow. This is how we deliver healthy financial position allows us to build trust with our working and living in the areas we serve. As such, our work on our promise and fulfil our societal role in making sure that stakeholders. involves a wide range of stakeholders, including our we keep the lights on in a way that is sustainable for years shareholder, local communities, our employees, regulators, to come. investors, non-governmental organisations (NGOs), politicians, media, customers, suppliers and other European Ensure critical infrastructure for society. We build and TSOs. We identified our main stakeholders in 2013 based maintain the electricity grid, which has a vital role in the lives on interviews with TenneT’s senior management, as well of our stakeholders. With the materials and products we use as a validation among the stakeholders identified. Our to build and maintain our grid, such as our cables, stations relationship with them may be defined by law (shareholders, and interconnectors, we create the critical infrastructure that governments, political parties and regulatory bodies), enables us to transport the electricity which supports by internal or external cooperation (employees, suppliers, society every day. debt investors and rating agencies) or by the nature of the services we provide (customers, the media, NGOs, Create a sustainable workplace. Our people are our local communities and other European TSOs). most important asset and essential to realising our ambitions. Our policies and actions, such as our safety As we need to build strong collaborations with partners vision, how we train our people and how we create an to achieve the energy transition, we aim to re-examine inclusive environment where people are energised to work, our range of stakeholders as part of our Transformation help us create a stable, safe and sustainable workplace. and potentially expand it with partners in the energy sector and across sectors. If you would like to know who our stakeholders are and what we have done, please visit our corporate website. 10 Integrated Annual Report 2019 - TenneT Holding B.V. 11


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    Inputs How we create value Outputs/Outcomes Strategy Deliver a high security of supply With our knowledge and experience in operating the system and following up on our ambition Customers Extensive knowledge Drive the Energise our Secure supply Safeguard to further integrate European energy markets, we are able to provide a secure supply of energy. of and experience energy people and today and our financial In 2019, we have been able to achieve a 99.9998% availability of our grid. The instances we were with operating the transition organisation tomorrow health unable to secure supply, were the result of 14 interruptions. Our knowledge, experience and vision with system and integrating respect to an integrated European energy market is reflected in our grid and the 15 interconnectors that energy markets Balancing our decisions have been realised as of 2019. Debt investors Reliable Ensure critical infrastructure for society With our assets, we ensure that we are able to fulfill our core activities and tasks. We keep building Cables, lines, and maintaining our grid to realise the critical infrastructure, which helps us drive the energy stations, offices and transition and supports the economic development and human wellbeing of the people that interconnectors Affordable Sustainable live in our serving area. We expected to invest EUR 2.8 billion in 2019, of which we were Employees able to realise EUR 3.1 billion. Governments Create a sustainable workplace Our skilled Create stakeholder value Our goal is to create a working environment where our people feel safe and valued. We strive Stakeholders and motivated to bring out the best in our people to help them develop themselves and organise this in a way that people by providing security of energises them. This year we spent EUR 2,371 per employee on training. Unfortunately we did not Impacts electricity supply in the manage to have zero safety incidents and recorded a Total Recordable Incident Rate (TRIR) of 4.8. Local communities markets we serve and by pursuing, as a leading TSO, the development of an Create value to transition to a low carbon economy integrated and sustainable We want to drive the energy transition, because we believe we are able to make a significant contribution. Realising our investment programme and innovation portfolio will contribute to the climate targets in Energy, natural European electricity market. Media the Netherlands and Germany, which is essential on the pathway to a low carbon economy. In 2019 we environment and realised 1.6 GWh additional offshore capacity, increasing the amount of connected renewable energy materials to build, sources to the electricity grid in the Netherlands and Germany. At the same time, we ourselves have the maintain and firm ambition to be climate neutral as early as 2025, so that we too will contribute to part of the solution. operate our grid In 2019 our (gross) carbon footprint was 2,525,904 tonnes CO2, which has been greened for 27.4%. NGOs Secure a solid financial performance and investor rating How we operate TenneT is a regulated company, that has an important societal role. That is why we strive to make choices considering the impact on societal costs. To finance our grid investments, Regulatory return Enable the core activities we raise the necessary financing and meet the expectations of our capital providers. This is reflected (Green) Financing in various ways, such as our credit rating of A3 S&P and A- Moody’s, our ROIC of 5.1 and a S&P Other European TSOs ESG evaluation, with a score of 83 out of 100 and a classification ‘strong’. Build the Maintain the Operate the Enable Designing Solve societal challenges with stakeholders and through partnerships Shareholders electricity electricity electricity the energy the energy We believe in the power of cooperation. Working together will help us achieve the next steps with Strategic partnerships grid grid grid market system respect to the energy transition faster and better. Furthermore, in realising our future grid, we engage and our engagement with with our stakeholders to consider societal objectives. That is why we also measure our reputation on (project) stakeholders a bi-annual basis. The outcome of this is a reputation that can be classified as ‘fairly strong to very strong’. Suppliers Integrated Annual Report 2019 - TenneT Holding B.V. 13


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    Materiality analysis About TenneT Materiality analysis Materiality At TenneT, engaging with our stakeholders is a crucial part of our business. Economic Our purpose is strongly rooted in society and success depends on working 3 6 1 2 High Environmental closely with a broad range of players including municipal governments, NGOs 10 12 9 11 Social and local communities. Relevance for stakeholders Engaging with our stakeholders provides valuable insight In addition, we also report on the contribution we are 5 7 Medium to help us determine the right policies and appropriate making with respect to the UN Sustainable Development 4 13 8 actions. In 2019, we re-evaluated our list of relevant Goals (SDGs). In this, we reached out to our stakeholders topics. We reviewed this against relevant external reporting and requested feedback on the SDGs we currently focus standards, such as GRI and SASB, as well as relevant on. The outcome of this is that we believe our current focus internal information. We also performed a peer analysis by is still valid. With our core business activities, we clearly Low reviewing the list of topics relevant to other European TSOs contribute to SDG 7 and SDG 9 and in the execution of and DSOs. This resulted in a list of relevant topics, of what these activities, we realise we have an impact on other Low Medium High we believe are the most important and relevant topics for SDGs. This relates to SDG 5 and SDG 8 are relevant to our TenneT. Compared to previous years, we updated this people policies and actions and SDGs 12, 13, 14 and 15 Significance of TenneT’s Economic, Environmental en Social impact list and reduced the number of topics. Several topics are relevant to the choices we make that affect our planet. # Subject on our previous list were combined and new topics We have linked the SDGs to the relevant sections in our were added, such as access to our grid. More information report in the table below. 1 Financial health 6 Safety 11 Driving the energy transition on this is included in our Additional CSR data document 2 Security of supply 7 Talent attraction 12 (Cyber) security on our website. Our own environmental impact 8 Responsible supply chain practices 13 Accessibility of our grid 3 4 Health and development of our people 9 Stakeholder engagement During 2019, we also redefined our materiality analysis policy, to determine our most material aspects. We now 5 Diversity and inclusiveness 10 Strategic partnerships perform our materiality analysis on a bi-annual basis, based SDG Subject Reference Related metrics (where available) on a survey of stakeholders in which we ask them to provide their views on the importance of specific aspects - Percentage of female employees (headcount) 5 7 included on the topic list. Create a sustainable workplace - Percentage of females hired at management level - Percentage of female EB and SB members Furthermore, TenneT’s economic, social and environmental 1 Secure a solid financial performance - Return on invested capital and investor rating impact was determined through internal analysis. This 11 13 Deliver a high security of supply - Number of offshore connections determines whether our impact per topic is either high, medium or low. This, together with the outcome of the - Amount spent on training 4 6 Create a sustainable workplace - Total Recordable Incident Rate stakeholder questionnaire, is the basis of the materiality 8 Ensure critical infrastructure for society analysis in 2019. This re-evaluation resulted in four key material topics: financial health, security of supply, - Grid availability stakeholder engagement and driving the energy transition. 2 11 13 Deliver a high security of supply - Annual investments In the table below, we have indicated where more 9 10 Solve societal challenges with stakeholders and through partnerships information can be found per material topic. The materiality 12 Ensure critical infrastructure for society process is thoroughly embedded in the TenneT organisation. The final step in the validation process is the approval from Create value to transition to a low - Reduction of virgin copper use 3 carbon economy - Reduction of non-recyclable waste the CSR board. Both the CEO and CFO are members of this board. 3 Create value to transition to a low - Gross / net carbon footprint - SF6 leakage carbon economy Our policies, decision-making and our reporting are not 11 Deliver a high security of supply limited by the most material topics in this analysis. We also Create value to transition to a low - Environmental incidents 3 consider other topics, which we disclose in this report or on carbon economy our corporate website. Create value to transition to a low - Environmental incidents 3 carbon economy 14 Integrated Annual Report 2019 - TenneT Holding B.V. 15


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    Deliver a high security of supply Our performance in 2019 We describe our performance in 2019 in the following six chapters, each describing one of the six outputs / outcomes as mentioned in our value creation model. Grid availability Target 2019 2018 2017 Onshore1) Grid availability 99.9996% 99.9998% 99.9988% 99.9986% Interruptions N/A 14 17 11 Our Energy not transported (MWh) Offshore Grid availability N/A 92.90% 156 93.20% 1,244 94.50% 1,072 97.80% performance 1 In 2018, the definition for this indicator has been updated. The table shows the 2019 and 2018 result based on the updated definition. Based on the former definition, the 2019 figures remain the same, however for 2018 this results in a grid availability of 99.9988%, 16 interruptions and 1,184 MWh of energy not transported. in 2019 Investing to maintain security of supply Maintaining security of supply also means investing in Flexibility for the future To meet the challenges of the energy transition and fulfil new assets, performing necessary maintenance and our mission to provide security of supply for society, we further linking our grid to the European electricity network. must realise all capabilities of our grid so that it is fit for the As a result, TenneT invested EUR 3.1 billion in critical future. To do this, we must harness innovations, in both the Deliver a high security of supply infrastructure last year – including new high-voltage power lines, new cross-border connections and offshore platforms market and technology, to develop more flexibility that can support the system. in the North Sea to bring wind-generated electricity onto the In today’s connected world, people expect that power will always be available, mainland, see Ensure critical infrastructure for society. Doing this is not only a matter of building more assets. when we flick a switch or reach for a power outlet. We rely on electricity to power Upgrading and futureproofing our network in this way allows We also need to be smarter, including using digital solutions us to keep our grid availability performance amongst the to prepare our grid for more volatile renewable energy many aspects of our lives –at work, home and on the move. Our modern, connected highest in the world. sources. As such, we are investing in many innovations to and growing high-tech economy relies on a high-performing electricity infrastructure. unlock new flexibility, such as advanced data analytics, If we fail to meet the energy needs of society, we risk slowing economic growth One of the most important reasons for investment is to help crowd balancing and blockchain technology. and social prosperity. the grid cope with the intermittent peaks and troughs of in-feed from wind and solar energy. We need to make We work on this ourselves and more importantly, with our ongoing investments in the grid to help us overcome this partners. There are several examples from 2019, including volatility and maintain a secure supply. An example of this is our project with Sonnen E-services, a company that our ‘Beter Benutten’ (Utilise Better) programme. Started in specialises in energy storage systems. This partnership aims As the grid operator for the Netherlands and large parts As a cross-border, interconnected energy company 2019, this will increase the capacity of the national 380 kV to manage the exchange of electricity between different of Germany, our biggest responsibility is to ensure a safe, working closely with government and partners across the electricity transmission network in the Netherlands. It does sources, including wind, solar, combined heat and power reliable and secure supply of electricity to 42 million energy spectrum, TenneT is at the centre of the change. not involve installing new lines but increasing the capacity of (CHP), electric cars and electric pumps, in order to get more end-users, 24 hours a day, 365 days a year. We have We experience first-hand society’s growing demand for the existing connections. The first stage of work began with flexibility in the system. Another example is Innosys 2030, a worked hard to meet this expectation during every step electricity. We contribute by connecting more renewable the Lelystad-Ens connection. Four other connections, will collaborative project that explores innovations to boost grid of our 20-year journey. This is also becoming more complex electricity into the grid, and by making the grid smarter then be upgraded between 2019 and 2024. Investments flexibility and automation. Furthermore, TenneT is partnering and dynamic as more renewable energy sources (RES) are through continual innovation. Step by step, and together like this will enable the network to transport more electricity in Element Eins, an important project exploring how the introduced into the energy mix. By nature, power generated with many partners, we are helping to realise a new in the future, and help it to cope with the strongly fluctuating electricity and gas power systems can come together to by the sun or wind is volatile, which makes it more dynamic energy future. in-flows of sustainable energy. help overcome peaks and troughs in wind and solar energy. for TenneT to balance supply and demand of electricity in For more detail and other examples of partnerships, see the grid. To manage this, we need to be innovative, agile Despite our efforts to secure supply of energy at all time, we Another example is our project at the Hamburg/Nord – Dollern Solve societal challenges with stakeholders and more forward-thinking than ever before. noted a few outages, such as the interruption that occurred (Elbe Crossing) in Germany. Here we have invested in our and through partnerships at the Maasvlakte in October 2019. However, we are proud grid and have quadrupled our capacity (from 2.4 to 9.6 Furthermore, TenneT plays a critical role in helping society of the work of our colleagues, who have worked hard to gigawatts (GW)). This has created TenneT’s most powerful Securing supply not only today, make the transition to a low carbon economy. The challenge secure supply for the people that live in the areas we line, using the highest masts in Europe. but also tomorrow is how to achieve this energy transition on the scale and at serve. This has resulted in a grid availability of 99.9998% In securing supply, we do not merely focus on the the speed society requires, while also considering the in 2019. present, we also plan ahead to secure supply in the future. affordability of this societal change. It is a challenging quest We see an ongoing debate in society with respect to climate for our entire industry, sparking a new age of ground- change and ambitions of (local) governments to step up breaking invention and collaboration the world over. their ambitions. 16 Integrated Annual Report 2019 - TenneT Holding B.V. 17


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    Deliver a high security of supply Our performance in 2019 We are helping governments in our service area to realise The high-voltage DC link will enable the exchange of 1,400 We have agreed to report on structural congestion and It will most likely be a mix of digitalisation, big data, market these ambitions. An example of this is with our offshore MW of renewable energy – wind power from Germany and defined starting values for capacities on our network and price models, sector coupling, new types of cables, projects, where we bring the steadily growing amount of hydropower from Norway. NordLink will contribute to the elements. Our ministries have provided an action plan for lines and other assets to transmit energy. As new wind generated electricity to land. energy transition in Germany and Europe. Enabling the each country in order to reach 70% market capacity on all technologies are introduced, whether in physical assets or exchange of renewable energy between the two countries critical network elements. In the Netherlands we have also software solutions, there could be an increased risk of In its 20-year journey, TenneT has become a leading will not just help to lower energy prices, but also facilitate submitted two derogations in order to prepare our outages caused by malfunctioning. TenneT demands high offshore TSO, playing a strong role in building an offshore the integration of the European power markets. This organisation to be able to meet the yearly increased targets. quality standards from its suppliers and service providers. grid in the North Sea that will help to connect new wind connection is planned to be fully in operation in 2021. As an additional measure, TenneT builds test procedures, power capacity to the onshore electricity network. Major The increased infeed of renewables presents challenges to test periods and guarantee periods into its project planning projects include BorWin3 in the German North Sea and Cyber security operate our grid in its current form. Essential investments and supplier contracts. Borssele Alpha in the Dutch North Sea, which were TenneT takes the possibility of a severe outage resulting are required to ensure our grid is future-proof and can commissioned in 2019 (see: Ensure critical infrastructure for from a terror or cyber-attack very seriously. We regard the facilitate the energy transition. We continue to develop new Cyber risks are an ongoing risk in our sector. To ensure we society). These are critical steps in realising the offshore risk of a politically-motivated attack, either government- and innovative ways to improve our way of working to can handle cyber-related risks and any repercussions, we grid, bringing clean wind-powered electricity to millions of backed or non-state cyberterrorism, to be higher than secure supply of electricity today and tomorrow. An continuously work on understanding our cyber risks (and users across Germany and the Netherlands. We will conventional computer crime. Hence, a successful attack example of this is the progress we made in 2019 to balance how best to handle them) as a joint effort between internal continue to put the ‘dot’ on the horizon to push cannot be ruled out entirely, despite us having physical and our grid with the help of mainly decentralised small flex units and external allies. We have ISO 27001 certification for the transition forward. For instance, with respect to our digital prevention measures in place that are continuously and renewable energy sources. This has been part of the information security in place in Germany and ongoing in the partnership related to the North Sea Wind Power Hub. assessed, optimised and tested. To this end, we develop, Frequency Containment Reserve (FCR) pilot. FCR is an Netherlands. We also carry out penetration tests and crisis align and carry out contingency plans together with national ancillary service used to support (‘contain’) the frequency in management exercises every year. Connecting across borders authorities. Moreover, we continuously perform penetration the interconnected European electricity supply system Ensuring security of supply also means connecting tests. More details related to our cyber security risks can be within a few seconds to 15 minutes. In 2019, we succeeded Outlook European energy markets so we can share electricity with found in our Governance and Risk management chapter. to increase the percentage of FCR delivered via small flex Our energy landscape is changing and we see more our neighbours. TenneT has long been a pioneer in building units and renewable sources. In the month of October, 76% renewable energy sources becoming a larger part of the cross-border connections and supporting the evolution of What could prevent us from realising our goals? of FCR has been allocated on “small flex units” and for 33 production mix. We are making steps towards a low carbon an integrated European electricity trading market. In today’s cross-border energy market, security of supply days FCR has been delivered using only power from small economy by increasingly connecting more renewable is enhanced by the interconnectivity of the European flex units. The success of this pilot helps us in our next energy sources (RES) to our grid. In our systems we can An important example is the COBRAcable between the transmission grid. However, misalignment in the energy steps to balance our grid when we strive to switch from also already identify the impact RES have on the distribution Netherlands and Denmark, which became available for policies of individual European countries – such as stalling conventional to renewable energy sources. grids. This provides both opportunities and challenges in the the electricity market in September 2019. The 325 km- plans to invest in nuclear power, stopping the development design and operation of the future system. As mentioned, long subsea high-voltage direct current cable has a capacity of coal or lignite plants, or increasing the development of Furthermore, observed weaknesses in market design connecting more RES to our grid requires us to think of new of 700 megawatts (MW) and will enable the Netherlands to renewables – is having a significant impact on the entire have led to a systematic shortage of electricity production. solutions to operate our grid in a way that allows us to import more sustainable electricity, mainly wind energy from European grid. Dealing with European grid issues has In addition to significant frequency deviations in the grid secure supply. Solutions should manifest themselves on at Denmark. It can also be used to export electricity to become more of a daily challenge, especially as the and the challenges created by new technologies may, least three axes. Denmark when prices are low in the Netherlands. The further integration of renewables and reduced availability result in an increased risk of outages. Technology itself can, • Continue to invest in the grid to be able to transport and project was supported with a European Energy Programme of conventional energy production has increased the however, also play a crucial role in mitigating risks around connect more solar and wind in areas that traditionally for Recovery (EEPR) grant from the European Commission likelihood of critical situations. This is particularly likely security of supply. In particular, TenneT sees an opportunity had limited production of RES. In the North East of the to stimulate innovation. during the autumn and winter. To address this requires to use digitalisation to improve the utilisation of the grid, Netherlands this will lead to an increased connection international alignment of political targets. TenneT works without increasing operational risks. To this end, we are capacity up to 2 GW by 2025. The COBRAcable is an initiative of TenneT and the towards this by engaging in and providing transparency exploring the potential of big data to improve our capacity to • Continue to invest in partnerships with DSOs and other Danish electricity and gas grid operator Energinet. in political discussions. predict the weather and assess levels of consumer demand. stakeholders in the energy landscape to unlock flexibility With construction starting in 2016, the cable runs between Sophisticated data analytics can also help us determine the at a decentral level. Eemshaven (the Netherlands) via the German Bright and An example of how political decisions can impact us is condition of our assets and reduce demand on the grid at • Support market and product developments to ensure Endrup (Denmark). Two onshore converter stations, one in the Clean Energy Package (CEP), which is an initiative of peak times by connecting decentralised batteries. that we benefit from international characteristics of a the Netherlands and one in Denmark, convert alternating the European Commission. The CEP will come into force in variety of production sources as well as local initiatives. current (AC) into direct current (DC) and vice versa. This is 2020 and includes measures with respect to the electricity Technological innovation plays an important role in achieving This will enable a broad variety of participants be beneficial when transporting electricity over longer distances market. The effect of some articles of the CEP may the ambitions of the energy transition. Although there are active in the markets we serve. Developments should as it reduces the losses in the system. endanger our security of supply as congestion is likely to many innovations in the energy sector, there are currently happen at multiple voltage levels, all with the goal to increase and could be in conflict with the decarbonisation no decisive breakthroughs that will simultaneously create value for society while securing supply not only Another example is NordLink. This will be the first direct targets of the member states. In close cooperation with guarantee security of supply, affordability for society and today but also tomorrow. power connection between Germany and Norway. both ministries and regulators we have defined actions competitiveness of industry prices. It is not yet clear which to be compliant to the CEP. technological developments will be the most promising. 18 Integrated Annual Report 2019 - TenneT Holding B.V. 19


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    Interview with Nienke Homan & Matthijs Coops Working with partners to drive the energy transition Set on the coast of the Dutch North Sea, Eemshaven is a crucial hub for connecting sustainable energy into the Netherlands’ electricity grid. “TenneT and the Province of “Eemshaven is an energy port. Groningen are working closely It is a central hub for wind and together on projects that are sun as well as for conventional helping to drive the energy power and connects the Danish transition, particularly in Eemshaven and Norwegian cables – Cobra (Port of Groningen & Chemiepark). and NorNed – to the Dutch grid. Any transition calls for out-of-the-box thinking, In terms of stakeholders and residents, the province innovation, trust and collaboration. We’re impressed of Groningen is a sensitive area for energy projects at TenneT’s very thorough approach: they carefully following earthquakes caused by gas extraction. weigh different interests and analyse future scenarios. We are very aware of these sensitivities and want We look forward to partnering with TenneT again as to inform and engage with stakeholders so we can we play our parts in achieving the ambitious goals be part of the solution, not the problem. In the spring of the energy transition.” of 2020, we will open an information centre for stakeholders in Eemshaven.” Nienke Homan Regional Minister Energy Transition Matthijs Coops Advisor TenneT


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    Ensure critical infrastructure for society Our performance in 2019 Our Ensure critical infrastructure for society grid Investing in the energy infrastructure is very important – not only for TenneT, but for all players in this complex and fast-changing market. We have an important role in helping to meet society’s demands with respect to the energy transition, while maintaining reliability and affordability for end-users. To ensure that our 42 million end-users in the Netherlands and For the next decade, our investments in the Netherlands Germany continue to enjoy a secure supply of electricity, TenneT and Germany aim to deliver the required backbone to plans to increase its investment level from approximately EUR 2 support the energy transition, with solutions that to 3 billion today to approximately EUR 4 to 5 billion within accommodate and balance renewables in the electricity the next five years. This is necessary to future-proof our grid supply, connect across borders, allow renewable electricity and will cover essential projects, such as our North Sea to be stored and transported further, and link the offshore infrastructure projects and our interconnection agenda. and onshore grids. At the same time, we strive to keep the cost for society as low as possible, minimise our impact on The fight against climate change demands a long-term the natural environment and local communities and optimise commitment. To this end, our plans should look as far the working environment of our people. ahead as 2030 or even 2050. We have to think big, plan for the unexpected and work closely together with our stakeholders to safeguard security of supply in a carbon-free energy future. (EUR million) Actual Budget Difference Investments 3,064 2,781 283 Sustainable supply chain practices Our policy is to visit suppliers, ask them detailed questions Technical Our contractors and suppliers are important partners for us in on these issues and discuss with them how to make improvements where necessary. In 2019, we performed realising our investment portfolio. When we contract them, we data: require them to adhere to our supplier code of conduct, 32 supplier visits. It is our policy that suppliers who fail to particularly regarding sustainable practices. These are not only meet our standards will not be accepted. We strive to help these suppliers to improve their practices, to be able to meet 15 related to environmental impact, but also to moral, ethical and safe working standards, based on the principles of UN Global our standards at a later stage. This has been the case in 9 Compact which TenneT committed to in 2015. As a state- instances. In the other instances, suppliers met our standards owned company, we aim to set the right example. As such, we or were given the opportunity to be fully in line with our are committed to the OECD (Organisation for Economic Co- standards after follow up of corrective actions. interconnectors operation and Development) guidelines, as are the Dutch and the German governments. For more information on this, please This year, we completed a human rights scan in our supply refer to the ‘Additional CSR Data’ document on our website. chain. This helped us identify the human rights issues most 23,555 For the first time, we were asked in 2019 to commit ourselves pertinent to our business. These are so-called ‘salient issues’. to the supplier code of conduct of one of our customers, To us, this relates to the topics ‘fair business practices, human Vynova, which we have done so. rights and ethics’ (which include elements such as corruption, community impact and land use & property rights). They also KMs of circuit As we rely on our suppliers to provide essential components relate to ‘labour rights’ (related to topics with respect to child and materials for our work – e.g. pylons and power lines – we labour, forced labour, human trafficking, labour conditions, over want to ensure that none of them are involved, directly or freedom of association, wage & remuneration, discrimination and workers’ health and safety). This analysis showed that 13 26,000 462 indirectly, in conduct that does not meet our policies, e.g. from the perspective of product quality, environmental aspects or these salient issues are mainly related to our supply chain as related to human rights. we buy our parts on the worldwide market. We are currently following up on the outcome of this human rights scan to take the next steps in this respect. offshore connections pylons substations 22 Integrated Annual Report 2019 - TenneT Holding B.V. 23


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    Ensure critical infrastructure for society Our performance in 2019 The key performance indicator to show our progress in projects, Borssele Alpha and BorWin3, and the completion When a final investment decision has been made, With a length of 65 km, it is TenneT’s largest land-based realising the necessary critical infrastructure, is the annual of the COBRAcable, the Hamburg Nord/Dollern (Elbe permits are requested and final design details are project in the Netherlands and is essential for the security realised amount of our investment portfolio. This relates to Crossing) project and the Randstad 380 kV Noordring in our formalised. A project is tendered to award a contract for of supply of electricity in the Randstad, a metropolitan area projects that have been completed, progress on ongoing project portfolio. We are proud that we were able to meet the realisation of the project. The project will be carried out comprising the four largest Dutch cities and their investments and our maintenance portfolio. Several large our investment goal with good progress made in 2019. This by the supplier that is awarded this project. Assets are surrounding areas. Not only is this region of great economic projects were commissioned in 2019. Key highlights were is despite facing challenges, such as with our NordLink tested before being accepted and if everything is realised and strategic importance, its energy demands are growing. the commissioning of two large North Sea infrastructure project (see below). according to plan, assets are commissioned, and the Having overcome the challenges of constructing a powerline project or asset is formally accepted. When the project in one of Europe’s most urbanised environments, TenneT is Progress on investments portfolio1 is administratively closed, it is formally completed. proud of the completion of this project. The connection also helps to future-proof our grid, as it will transport green Realised large projects energy from the wind farms in the North Sea. Pre-project Planning & Licensing Construction & commissioning In September, Borssele Alpha, TenneT’s first and largest Investment approval process connection system for wind farms on the Dutch North Sea Progress update became ready for operation. Completed according to plan, Next to these completed projects, we also made important G1 Technical Final permits Study on Construction & Borssele Alpha is ready to transport wind energy from major progress on several large projects. For example in 2019 Initiation G0 specifications & G2 & detailed G3 G4 Closing G5 Completed alternatives commissioning PBA spatial planning design offshore wind farms in the North Sea. The Borssele area is important steps were taken in the planning and licensing critical for the Netherlands to meet its renewable energy phase for the ‘SuedLink’ and ‘SuedOstLink’ projects. Phase targets. Borssele Alpha is the first of two connections of For SuedLink, the preferred corridor for the direct current SuedLink 1,400 MW in aggregate, with the second expected to be connection was published, followed by extensive ready in 2020. This brings our total completed offshore stakeholder dialogues and the beginning of the plan SuedOstLink connections to 13. approval procedure. This corridor is the result of detailed Westküstenleitung2 studies and is planned to run from Schleswig-Holstein Hollandse Kust Zuid With respect to the German renewable energy targets, through Western Lower Saxony, Northern Hesse and DolWin5 TenneT out-performed expectations in 2019, by achieving the Southern Thuringia to Bavaria and Baden-Württemberg. DolWin6 Federal Government’s 2020 target (6.5 GW) for offshore grid In order to efficiently advance the approval procedure NordLink connections. By doing so, TenneT is helping to accelerate the and the subsequent construction of SuedLink, TenneT BorWin3 Energiewende. The offshore transmission capacity in the and TransnetBW have contracted an international project German part of the North Sea alone amounted to more than developer, Jacobs. Moreover, the EU-wide tenders for Hamburg/Nord – Dollern (Elbe Crossing) 7 GW by the end of 2019. By the end of 2025, three other DC underground cables and the DC3 convertor - key Randstad 380 kV Noordring connection systems will be added - DolWin5, DolWin6 and components of the projects – were launched, which is COBRAcable BorWin5. This will bring the available transmission capacity in a big step towards achieving this connection. Borssele Alpha the North Sea up to almost 10 GW. For SuedOstLink, similar progress has been made and the project has entered the next phase to work on the 2018 2019 We also celebrated the delivery of key projects in our technical specifications and spatial planning. interconnector agenda. In September, the COBRAcable 1 Please note that this overview contains a selection of our project portfolio. For more information with respect to our projects, please refer to between the Netherlands and Denmark became available The ‘Westküstenleitung’ project provides a connection to our corporate website. for the electricity market. For more information on the Germany’s most Northerly state, Schleswig-Holstein from 2 This project relates to multiple sections. Each section is in different phases, however all phases at least reached this phase and the majority COBRAcable, see ‘Delivering a high security of supply’. Brunsbüttel to the Danish border. Consequently, this of the sections are either in construction or even completed. important 380 kV power line will help transport electricity the next phase is initiated, and technical design studies Between the German federal states Schleswig-Holstein from renewable energy sources generated in the North of Our investment process are performed for several alternatives. All alternatives are and Lower Saxony, the Hamburg/Nord – Dollern (Elbe Germany to end-users further South. During 2019 good Our investment process can be divided into three phases: presented and a decision will be made. In the planning Crossing) connection was completed in 2019. This project progress was made on the construction of the lines and Pre-project, Planning & Licensing and Construction & & licensing phase other elements are considered, such was related to the realisation of a 45 kilometres long power substations. Section 1 between Brunsbüttel – Süderdonn Commissioning. as the spatial planning of the project. In our decision steps, line and is considered to be an important project with respect has been in continuous operation and section 2, Süderdonn we do not just consider technical solutions, but also the to the energy transition, as this connection serves as a bridge – Heide (including the Heide substation), was commissioned. The Initiation phase starts with identifying capacity wider impact. This includes environmental and community between the two largest wind power states in Germany. Section 3, Heide – Husum, is in construction and making constraints. This is reported periodically to our regulators. considerations, such as weighing alternatives and good progress. The planning and licensing activities for Studies are then performed and alternatives defined, considering the impact on safety and the impact of October 2019 saw the completion of the Randstad 380 kV the remaining sections of the route are ongoing. resulting in a ‘general investment decision’. At this stage, the project during the construction and lifetime. We also Noordring project. This strategically important connection is it is decided to either accept the capacity constraint or use internal carbon pricing in our decision making to a new 380 kV high-voltage connection between Beverwijk to solve it with infrastructure. If the decision is the latter, help us determine the alternative to proceed with. and Bleiswijk. 24 Integrated Annual Report 2019 - TenneT Holding B.V. 25


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    Ensure critical infrastructure for society Our performance in 2019 Despite the progress made on the construction of the What could prevent us from realising our goals? We communicate with a large number of stakeholders, On the other hand, there might also be opportunities in this ‘NordLink’ interconnection, the in-service date has been Society is demanding a swift transition towards renewable assess different technological options, routing options, area, such as digitalisation, which could reduce costs and delayed from end of 2020 to the beginning of 2021. energy. Our investment portfolio causes a high workload interdependencies of work packages between different help us achieve a secure energy transition. This may come The start of trial operation with market involvement is throughout the entire supply chain and we face scarcities in projects and challenges in the political environment. Delays with some strict requirements, not only regarding data planned for the end of 2020. This will be the first direct our supplier markets due to strongly increasing market in licensing (especially mandatory permits issued by security, but also especially for information management power connection between Germany and Norway. For more demand for power transmission components and especially authorities) as well as challenges arising from the use of and human resources in terms of designing, developing, information on NordLink, please read the chapter ‘Deliver a for overhead lines and cables. This high workload is innovative technology (e.g. newly designed 525 kV cabling) maintaining and operating systems. As such, TenneT high security of supply’. amplified by the lack of skilled staff available to us and our can also throw a project off schedule. TenneT works to continuously develops its IT capabilities, enhancing its suppliers in the labour market. Together with the high mitigate these risks by identifying possible constraints and organisation, training employees and reviewing the A significant project for supporting the energy transition in degree of organisational complexity our projects have, the cost of viable solutions in the early stages of the performance of IT service providers. the Netherlands is the ‘Hollandse Kust (Zuid)’ grid these factors present a viable risk to realising our investment decision-making process, communicating transparently with connection. This consists of two 700 MW connections, portfolio and achieving a successful return on investment regional stakeholders, working closely with authorities, Outlook 1,400 MW in total. During 2019 the construction of the without delay and against affordable costs. enforcing high quality standards and closely monitoring its We have reviewed and updated the outlook with respect topside and jacket for the platforms started. The platforms suppliers and deliverables. We are aware that we will not to our investment portfolio. We now expect that we have will be connected to the high-voltage 220 kV substation at To mitigate this challenge, we use framework agreements, always overcome local opposition. to increase our delivery capabilities and that means that the Maasvlakte by means of four AC cables. The civil works bulk orders, standardisation, increased storage capacities, we need to raise our investment level from approximately to accommodate the installation of the cables (horizontal improved demand forecasting and we actively support the There are certain environmental developments in Europe, EUR 2 to 3 billion today to approximately EUR 4 to 5 billion directional drillings) through the sea defence wall and across development of new technologies (e.g. 525 kV DC-cables) also related to our service area, that may pose a risk and within the next five years. Naturally, we do our utmost to the harbour ship channel, were completed in 2019. and look for alternative supplier and service providers. We delay projects. These include various European government optimise our existing assets and are fully aware that the way also employ external project management service providers policies on perfluoroalkylated substances (PFAs) and nitrous in which we manage our investment portfolio is crucial in In Germany we made progress with the 900 MW grid to staff construction projects in the onshore grid. To oxide. This is embedded in our daily operation. this. We remain focused on not just investing in new assets, connections ‘DolWin5’ and ‘DolWin6’, serving the DolWin counterbalance a lack of internal resources, we pro-actively but on finding smarter, digital solutions that allow us to use wind farm cluster in the Southwestern German North Sea perform analyses to ensure adequate succession planning. our existing assets in a better and more efficient way. and thereby helping to support the energy transition. In 2019 both projects worked on the required plan approval Ageing infrastructural assets are a challenge in realising the and licenses for the route. In summer 2019, the first steel investment portfolio of an asset-driven company like TenneT. cut for the platform of DolWin6 was made and at the end We continuously work to optimise our organisational of 2019 the construction work for the land station started. processes, including lean decision-making, an emphasis on employee training, and using probabilistic schedule Unfortunately, we did encounter some challenges analyses. We make additional resources available for with DolWin3. Due to an incident beginning of the year, maintenance work and are increasing the efficiency and a large number of valve modules were damaged. flexibility of our maintenance programme by monitoring and The duration of the repair works lasted several months simplifying internal processes. We consider bottlenecks in and required further outages. outage planning in addition to an increasing duration of unplanned outages still to be a risk. Maintenance TenneT is facing a major replacement task for its aging In a highly dynamic market, there is a certain risk associated 110 and 150 kV substations. The traditional component with the emergence of new players who may either replacement method cannot meet the necessary overreach themselves, fail or go out of business. To avoid replacement rate and obstructs the application of new a consequential lack of support or (spare) parts, TenneT technology. In order to be able to replace many substations assesses the financial stability of suppliers and prescribes in a short time span, we developed a new bay replacement a long-term availability of parts and services as one of its concept. This will enhance the 110-150 kV segment of the contractual pre-conditions. Dutch grid and reduce the costs and time on-site required for replacements, extensions, operation and maintenance. As a company that builds critical infrastructure in the natural The new concept is based on prefabricated standardised environment, our engagement with stakeholders treads a modules and new digital protection and control technology. fine line between societal and local interests. What is good In 2020 we start with the realisation of six Proof of Concept for and desired by society is not always welcomed by the substations and the prepare the large-scale rollout of 140 communities affected by our projects. substations for the next decade. 26 Integrated Annual Report 2019 - TenneT Holding B.V. 27


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    Interview with Bastiaan Burger & Jannes Kinds First and biggest connection to the Dutch North Sea on time and within safety targets The completion in 2019 of Borssele Alpha, TenneT’s first and largest connection system for the Borssele wind farms on the Dutch North Sea, is a major step in achieving the Netherlands’ climate targets. “The Borssele grid connection “Borssele Alpha and Beta will be is a first major step in linking the largest AC substations in the the wind parks in the North Sea world and are the first large-scale to the onshore grid, reducing grid connections to be constructed the Netherlands’ dependency under the Dutch National Energy on fossil fuels. agreement for offshore wind farms. The collaboration with our construction partner We completed the hook-up, commissioning and HSM Offshore, which is building the offshore certification of Borssele Alpha in August 2019, making substation, benefits from trust, transparency, the grid connection ready to receive power from the mutual understanding and a continuous focus two Borssele wind parks. At HSM we are very proud on results. Key to success is early stakeholder to be handling all the engineering, procurement, involvement and TenneT’s holistic approach construction, transport, installation, connection and the to the process in collaboration with the Ministry testing. It was also a privilege to work closely with the of Economic Affairs and Climate. TenneT team on this and pioneer this together. We look forward to continuing to work closely on Borssele Beta, Bastiaan Burger in the same cooperative way and spirit.” Project Lead Borssele Platform Alpha and Beta TenneT Jannes Kinds Project Manager Borssele Alpha & Beta HSM Offshore BV


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    Create a sustainable workplace Our performance in 2019 Create a sustainable workplace What does this mean for our employees? To attract the talent we need, it is important to be seen Our people are at the heart of our organisation. They are as an employer of choice. During 2019, TenneT received At TenneT, we are proud of the successes of the first 20 years in the European essential to the successful delivery of our sharpened recognition for being a great place to work. We were electricity market. During this time, we have grown rapidly, becoming a European strategy and transformation, as well as our new processes, certified as a Top Employer in the Netherlands in 2019 by leadership and culture. Our people will help us achieve the globally recognised Top Employers Institute. In Germany, cross-border grid operator with a dedicated workforce exceeding 4,900, internal and internal structural change and benefit from our new ways of we also received a Top Company qualification from Kununu, external, employees. We are pioneers, working at the forefront of the energy transition, working, being open, curious and courageous. We aim to a classification given to approximately 5% of the companies which is an important challenge for society as a whole. champion innovation, which means creating a culture in evaluated by this German employer rating platform. which mistakes are accepted more often, as long as we This means that TenneT is recognised as an employer learn from them. that demonstrably works towards creating the best work To continue to meet this challenge, TenneT needs to Given the skills shortage in our industry and our demand for surroundings for its employees. Top Employers are those transform. We are proud of what we have achieved so far, new hires, we simply cannot afford to overlook any talent. What does it mean for our leaders? who have worked hard to shape their HR-policy and but to reach our goals, we must adapt and evolve. We need To fulfil our roll, we have updated our strategy and need to We are in the process of repositioning TenneT. We want improve continuously. They give opportunities to their an organisation that allows our people to perform at their evolve our culture and processes in step with the changes leaders who empower, inspire and create growth employees by setting up strategic and well-thought out best with new ways of working, so that we’re in the best and challenges the energy sector faces. opportunities, so everyone can perform at their best and programmes that creating workplaces where employees possible shape to drive the energy transition, now and in the work as one in a culture that helps us all tackle the changes can grow and thrive. future. We also need to attract and retain the best people. coming our way, both externally (e.g. energy transition) as well as internally. We want to build on our existing strengths As the energy transition requires us and our partners to SDG Impact area KPI identified Target 2019 2018 2017 and develop all of our people. To that end, we want a step up our efforts to recruit and train technical staff, we culture where we take Ownership, build Connection with have been working on new ways to attract talent. That is Percentage of female employees (headcount) 22% in 2023 23% 22% 21% Percentage of females hired at management level 22% in 2023 15% 28% N/A each other and our stakeholders and act with Courage why we have committed ourselves to an agreement to train Diversity Percentage of female Executive and Supervisory when necessary. We have defined our principles as follows: MBO students (Intermediate Vocational Education) for work Board members 30% in 2023 36% 22% 20% • Ownership: we are responsible for our words, actions on the energy transition. This is a new way for us to attract and decisions and create a safe working environment technical staff and help us build and maintain the future grid. Safety TRIR 1) <3.74 in 2020 4.83 3.74 3.742) together. The MBO-Covenant Klimaattechniek is a collaboration 1 Prior year’s figures have been updated as we harmonised our methodology to determine the contractor hours for this indicator. For more • Connection: we get personally involved, work actively between the educational sector, government and grid information, refer to our CSR reporting website. with others, respect different opinions and accept operators and includes agreements to create more training 2 The 2017 Total Recordable Incident Rate (TRIR) has not been assured, as this metric was introduced last year as a KPI. differences and diversity. positions and job guarantees for technical MBO students. • Courage: we say what we think honestly, openly and We believe this will help alleviate the shortage of technical clearly. We dare to make decisions, take initiatives and staff. We are also working with NGOs, such as the Refugee Transforming for growth The principal characteristics are functional, steering across are prepared to learn from our mistakes. Talent Hub and Rising You. With the Refugee Talent Hub, We are organising for growth, adopting structures and borders and boosting empowerment at lower organisational we entered a partnership to uncover new talent and in processes that will help to drive the energy transition, levels, allowing us to develop excellence in all functions. The work to achieve these goals is the basis of Transforming 2019, we welcomed six new colleagues who will gain enabling our employees to take faster and more decisive This is designed to create a unified company-wide view, TenneT in the upcoming years. We need everyone at TenneT relevant work experience at TenneT. With Rising You, we action. We want to accelerate decision-making with more supported by end-to-end processes. to join us in this journey and contribute in this critical process. are developing employment opportunities to refugees, with personal responsibility, clearer roles, and work seamlessly We realise we are asking a lot from our people to help us training to work high above ground. For more on this, please across borders and departments. We are working to Moving towards a functional and harmonised organisation achieve this. However, we strongly believe our employees will read our chapter ‘Creating solutions with our stakeholders energise our people and our organisation, offering them will help to make TenneT fit for the future and deliver on benefit from our transformation – it will empower them and and through partnerships’ chapter. an inclusive and safe environment where they enjoy coming our ambitions and promises. We are currently redefining make TenneT an even more exciting place to work. to work. Our aim is to create a leadership model that our purpose and values and we want to inspire and In addition, we want to retain talent by offering a empowers, inspires and creates growth opportunities, support our people to bring them to life in their work. Attracting and retaining talent competitive rewards package. We work on this closely so everyone can perform at their best and work as one. This also means creating development opportunities To succeed in our role to drive and realise the energy with our employee representatives and reached collective for ambassadors within our company. An example is transition, we need to attract new talent and expand our labour agreements, covering a significant proportion To facilitate this, we are developing new ways of working the Coalition of the Daring, a group of over 100 colleagues workforce. In 2019 the number of internal employees grew of our employees. TenneT negotiated its own CAO and adopting a new organisational model, based on a who have volunteered to be leaders for change and a from 3,409 to 3,768. However, recruiting talent is getting (collective labour agreement) in the Netherlands for the ‘functional organisation’. We believe this approach best sounding board for management. Several events were harder, particularly in the technical sector where there is first time. This will enable TenneT to offer a tailored set prepares us to address our current and future challenges. organised this year and workgroups formed to actively strong competition for the personnel we are looking for. of primary labour conditions which we believe is more provide feedback to our senior leadership. suitable to TenneT’s business and labour market position. 30 Integrated Annual Report 2019 - TenneT Holding B.V. 31


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    Create a sustainable workplace Our performance in 2019 Diversity and inclusion We also continued our Always Energy programme, designed TenneT also strives to work with other stakeholders. Working with high voltages and in capital-intensive projects We value diversity in a wider sense, not only in terms to support the physical and mental health of our employees. For example, TenneT works with the Dutch Distribution can mean an increased risk of injuries and even fatalities. of gender, religion and culture, but also socio-economic System Operators (DSOs), resulting in, for example, the This also applies to, perhaps even to a greater extent, the backgrounds, skills, knowledge, personality, experience Safety for our people development of a joint gate instruction, where safety rules work our suppliers are performing. They might consider and and a balanced reflection of geographical backgrounds. In 2019 we launched our TenneT Safety Vision 2022, based at site level are explained. Furthermore, TenneT seeks and apply safety values that are different to the ones at TenneT. We believe that a diverse working environment helps us on two central themes: Safety Leadership and Safety encourages safety cooperation at the European level and We continue to explain what safety means at TenneT and perform better as a company and deliver better value for Execution. The Safety Vision 2022 builds on TenneT’s is a driving force in cooperation with other European TSOs build awareness of this among subcontractors. our stakeholders and society. We strive to be a workplace previous safety vision, with new targets to achieve Zero to exchange knowledge and to tackle joint projects. Next to where everybody feels safe and included. Safe not only in Harm. Although our Safety Vision means we want to focus this, TenneT is also working closely with DGUV (Deutsche Outlook its physical sense, but also socially. less on statistics and put people first, we will of course still Gesetzliche Unfallversicherung) / BG (Berufsgenossenschaft) We all need to pull together to drive the energy transition. ensure we record our safety progress and set new targets. to share learnings on safety initiatives. In the years ahead, TenneT will continue to work hard to We have introduced various initiatives to improve gender For example, we have adjusted our safety indicator, the Lost bring out the best in our people and our company. People equality, including a female leadership training programme Time Incident Frequency (LTIF), to include Total Recordable What could prevent us from realising our goals? are our most valuable assets and we will continue to seek and diversity workshops in Germany and the Netherlands. Injury Rate (TRIR). The TRIR includes a larger scope of Without the right culture, structure and common opportunities to attract talented new colleagues. Any failure We are actively seeking more female talent in our incidents, as certain less severe incident categories are also understanding throughout all layers of our organisation, to attract and retain the right, properly qualified staff, could recruitment efforts, attending recruitment events such as included, such as medical treatment cases. We recorded a TenneT might not be able to execute the strategy as undermine our efforts to fulfil our investment portfolio. That HerCareer in Munich. We realise it may take considerable TRIR of 4.83 this year and a LTIF of 3.61. We consider every intended. Furthermore, the impact of “Transforming TenneT” is why we are working closely with our stakeholders and time to make significant progress, but we believe we are incident to be one too many and are therefore not content on employee perception of job security could also impact other strategic partners to ensure we have the talent we heading in the right direction. Additional information can be with this outcome. the motivation of our workforce. As such, ongoing dialogue need for the future. In the course of 2020, we expect to found in our Supervisory Board report. and open communication with our employees are essential complete the new organisational structure of our company Developing Safety Leadership and keeping it up to date in this perspective. Transforming TenneT is a clear objective as a result of Transforming TenneT. We acknowledge that is Diversity at TenneT is an ongoing effort. In 2019 we organised training sessions for us, and next to this we remain focussed on the a challenging process and continue to work together with to stimulate safe behaviour. An example of this are our development and mobility of our people. our employees to make our organisation future-proof and workshops on Safety Leadership where we trained equipped to drive the energy transition. 43 Nationalities our employees. One key risk both in the shorter and longer term is the scarcity of qualified staff. To address this risk, we focus 1% Safety for our suppliers on tailored sourcing approaches and are aiming on building 7% Safety is not just about TenneT’s own employees, but also an image of TenneT as an attractive employer, as well as 14% about the employees of our contractors who perform actively work on internal succession planning. We are 22% work for us. As such, we involve our suppliers as much interacting more with potential employees, actively 3,768 as possible in our safety improvement programmes. An example is the rollout of the Safety Culture Ladder (SCL) participating in career events and reaching out to students during their studies. We are investing in our future talent Employees 30% 23% 77% to our contractors. More than 100 TenneT contractors have pipeline, including initiatives to attract potential employees 26% now been certified for the SCL, and that number is rising such as our International Trainee Programme and our steadily. TenneT also opted to be certified by the SCL High Voltage Trainee programme. and last year achieved SCL level 3 (out of 5). This level means that all relevant instruments within the organisation 1,145 are correctly implemented and employees are familiar with the systems and how to use them. In 2019, we successfully External employees passed the intermediate audit, which verified that we still comply with the results of the initial certification achieved Health and development in 2018. We believe in energising our people. This means empowering them to perform to their full potential, ensuring they are fully equipped to do their work in the best way possible. We give our people, opportunities to participate in external trainings and we also train them internally, sharing our knowledge on a frequent basis. 32 Integrated Annual Report 2019 - TenneT Holding B.V. 33


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    Interview with Connie-Ann Nkouka-Bracht & Jakob Huber Coalition of the Daring for change from within A hundred colleagues volunteer to lead TenneT’s transformation from within. “Being part of the Coalition of the “As part of the Coalition of the Daring Daring by playing an active role I learned that change starts with in focusing on the fundamentals yourself and with small steps. of leadership makes me feel I see colleagues that make small steps and so things very energised. are happening that were not possible years ago.” I feel empowered taking others with me on this Jakob Huber important journey of change. My key insight is that the Team Learning and Development TenneT improvements most often lie in the small behavioral changes we all can realise if self-reflection is an appreciated given.” Connie-Ann Nkouka-Bracht Team Manager Stations in LPO


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    Create value to transition to a low carbon economy Our performance in 2019 Create value to transition to a low To reduce our environmental impact, we are taking steps to reduce SF6 emissions (see below) as well as implementing Carbon footprint breakdown carbon economy measures at our stations to use less energy. The energy savings programme to execute these measures was approved in 2019 and will be executed in 2020. tonnes CO2e (gross) tonnes CO2e (net) We want to drive the energy transition, because we believe we are able to make a significant contribution. Realising our investment programme and innovation portfolio Next to this, greening is an additional step to reduce our impact. We will “green” our electricity use with green will contribute to the climate targets in the Netherlands and Germany, which is guarantees of origin to the maximum extent permissible essential on the pathway to a low carbon economy. At the same time, we ourselves by law. This relates to the full energy use of our substations also have an important role to play in this transition and have set the firm ambition for in Germany and the Netherlands and our grid losses in ourselves to lead as a green grid operator. To this end we identified three main impact the Netherlands. We report a gross carbon footprint (without greening) and a net carbon footprint (with areas: Climate, Circularity and Nature. greening). In addition, we have successfully completed the installation of solar panels on our Redwitz substation. Looking at our business from a natural capital point of view, We realise that we need to combine our impact on nature Furthermore, we also promoted more sustainable ways our main positive impact is related to connecting renewable with the ability to make a positive difference. Our impact on of travelling during 2019, with a commitment via the “Anders energy sources to the electricity grid. This does however go nature is one of the important factors in the balancing act Reizen” initiative to halve the CO2 emissions of all TenneT’s hand in hand with impact and dependencies related to the we face in our business: we strive to deliver a reliable and business traffic for 2030. Indirect Indirect Direct use of energy sources, the natural environment and secure supply of electricity, at an affordable cost for materials to build operate and maintain our grid. These are consumers while ensuring that we act as sustainably These are not merely internal ambitions. TenneT is entering put to use in our projects and operations to secure supply as possible. into partnerships with respect to these initiatives as part of Upstream Upstream Own operations and to connect more and more renewable energy sources. our quest to become climate-neutral by 2025. Our main carbon impact reported is related to our grid Data Carbon footprint SDG Impact area KPI identified Target 2019 2018 2017 losses. There are many factors that influence the amount of To be climate neutral for our these losses, but they are inherent to the transportation of substations, offices and mobility in 2020. electricity. We continue to look for opportunities that can Travel and Grid losses SF6 leakage To be fully climate neutral (SF6 reduce these losses. transport 94.58% 0.91% Climate CO2 footprint of our substations, emissions, grid losses, energy use 0.53% offices and mobility (net emission offices, stations and mobility of our in tonnes of CO2) employees) in 2025. 1,833,950 1,975,205 1,889,936 A TSO-specific part of our carbon footprint is the leakage of Electricity Lease SF6 leakage (%)1) < 0.28% in 2020 0.24% 0.30% 0.28% use stations vehicles SF6 gas. This gas is used as a highly-effective insulator and SF6 leakage (kg)1) < 1,106kg in 2020 979 1,069 934 3.71% 0.11% extinguisher in switching installations. It allows these In 2025 25% less impact of virgin Reduction of virgin copper use copper use 2) N/A N/A N/A switching installations to be more compact, which is often Electricity Gas Circularity necessary in built-up environments. It is also necessary for Reduction of non-recyclable In 2025 25% less impact of use offices consumption waste non-recyclable waste 2) N/A N/A N/A interrupting currents in the networks. However, SF6 is a 0.12% 0.03% (Net) impact on nature 3) Zero (net) impact on Nature in 2020 N/A N/A N/A greenhouse gas that is over 23,000 times more polluting Nature than CO2. There is currently no technology concept for Environmental incidents N/A 50 55 44 gases, that has proven itself over the long-term, other than SF6 at our (high) voltage levels. This makes it necessary for In 2019, we agreed to focus on our SF6 leakage beyond 1 Based on the current definition. We have updated our definition to include projects from the date they have been reported operational to TenneT to use SF6 in our operations. 2020, and have agreed to keep our leakage rate below a the regulator. When applying the former definition, this will result in a leakage rate of 0.25% and 976 kg leaked. 2 target of 0.28% for the years until 2025. Knowing that our Not applicable as 2020 will be our base year. 3 However, we recognise the growing concerns about the use asset base will increase considerably due to large-scale This KPI is currently in progress. of SF6 in our industry and noted reports in the media during network expansions, these objectives are ambitious. 2019 focused on the climate impact of SF6. We have been To reduce our SF6 impact, we have been increasing our Climate In accordance with SDG 13 on Climate Action, we take working on reducing our climate impact related to SF6 for efforts to prevent leakages in our maintenance programmes TenneT aims to drive the energy transition and increase the responsibility for our own climate impact. We have defined many years and realise that we need to accelerate this and also stimulating innovation to explore alternative share of renewable energy in the energy mix. This reduces the action plans related to our climate ambition, which includes important work. solutions. Examples of these include a project at the climate impact of electricity consumption in the Netherlands projects and initiatives to reduce our own environmental Ovenstädt station, where we installed a power switch with and Germany. At the same time, we also have a climate impact. Our climate impact is related to our own operations clean air. Also, at our Meeden station, we are applying an impact ourselves. (offices, substations and mobility), the emissions related to our alternative gas in a gas-filled station. grid losses and those resulting from the leakage of SF6 gas. 36 Integrated Annual Report 2019 - TenneT Holding B.V. 37


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    Create value to transition to a low carbon economy Our performance in 2019 We use these pilots to investigate the effects on network Circularity Nature Another example of our steps with respect to our nature reliability, costs and sustainability. Ultimately, as the network We define circularity as minimising our use of scarce As our assets are located throughout the Netherlands and ambition is related to our project “Nature inclusive operator, we will have to weigh up all these aspects and materials, re-using materials where possible, and reducing Germany, often in areas of natural beauty, we are aware our design”. Together with NGOs, such as the North Sea find a solution that meets our needs without damaging waste in our operations. As we realise that operating in a business has an impact on biodiversity, ecosystems and Foundation, we have come up with possible measures the environment. fully circular way is not yet possible, we therefore focus the landscape. Our commitment to nature is to minimise to improve biodiversity for life near and at our assets. on contributing to a circular economy with feedback our impact and protect and improve nature in the areas We are currently including this element as part of our tender To make our progress against our climate ambitions loops. As a large player in the energy transition we use where we operate. procedures and this concept will be used in the Holland even more visible, we signed a EUR 3 billion sustainable copper, steel, aluminium and many more materials to Coast (North) offshore project – due to come on stream Revolving Credit Facility (RCF) to further drive the energy expand our grid. In working with these materials, we aim to Our Nature ambition is for our projects to have zero net in 2023. We have also introduced a Bird Action Plan to help transition. With this RCF we connect our financing efforts reduce our impact by taking steps with respect to circularity. impact on nature in 2020. To achieve this, we aim to create us minimise harm to bird populations from our infrastructure. to our performance on our own CO2 emissions. In practice For our raw material use we are focussing our copper as it positive impacts, such as promoting biodiversity at our Here we have defined follow up actions, which helps us take this means that, depending on the realisation of the KPIs, is expected to become scarce in the near future and we substations and considering our impact on nature early proactive mitigation measures. a discount will be applied to the interest margin on the RCF. have a high dependency on it in our operations. in the process of realising a project. This relates to the This is related to the green percentage of energy use of planning & licensing phase of our projects (for more What could prevent us from realising our goals? our stations (100% in 2019 vs 12% in 2018) and of our Regarding our KPI to reduce non-recyclable waste, information refer to the chapter Ensure critical infrastructure The scarcity of natural resources (such as copper and offices (84% in 2019 vs 70% in 2018), SF6 (refer to the we have set targets (refer to table) to monitor our for society). We will also track the number of substations aluminium) may jeopardise our ability to complete projects, carbon footprint table above) and our mobility where the progress. To reach this goal, we have set a target for our with positive biodiversity measures. With respect to potential also against affordable costs. As such, we have defined a KPI related to the net carbon impact of mobility against virgin copper use and non-recyclable waste, to reduce both negative impacts on nature, we also track environmental policy and actions for our circular ambitions. We are the total number of employees (3.1 in 2019 vs 4.1 in 2018). by 25% in 2025 compared to 2020. To obtain insight into incidents that can unfortunately occur in the course of our stepping up our efforts to use the resources we need in our current virgin copper use, we use a raw material daily operations. These are the number of environmental our daily operations with maximum efficiency and raising In 2019, we have been working together with other passport in our tender procedures and identify our sources incidents in a reporting year. In 2019, we recorded 50 the bar on our circular ambitions. That is why we are companies within the Groene Netten coalition to continue of waste. This will set the basis for our reference year environmental incidents, which is a slight decrease with striving to reduce our use of virgin copper in our asset our journey to measure impacts. We have started this year 2020. Based on the first raw materials passports obtained respect to the 55 incidents we recorded in 2018. Although management activities. Our initial focus is on our copper in our own annual report by including a part of both our in 2019, we have concluded that we already purchase this figure is moving in the right direction, we regret the usage. We will then use this information to determine negative and our positive environmental impact. For now we components with partly non-virgin copper and that copper environmental incidents that have occurred. An example of what actions we need to take to reach our goals. focus on our own operational carbon footprint on the one is very recyclable. We are working closely together with this is the incident that occurred near Doetinchem, where hand and the avoidance of carbon emissions due to more similar companies in the Netherlands, Germany and other one of our substations caught fire. Our circular ambitions are a part of our overall CSR renewables on the grid on the other hand. In measuring our European TSOs to align our requests to the market. ambition. Together with our stakeholders, such as our impacts, we use a carbon price of 100 euros per ton CO2. To achieve our ambitions, we have agreed on our nature contractors, we strive to realise these ambitions. We work We are currently working on taking the next steps and roadmap, which sets the targets for the coming year and together with contractors and sometimes we need to The first step in providing insights with respect our negative obtaining more insights regarding our circular ambition. our definition of zero impact on nature. We have defined challenge them to help us to realise our goals. However, impacts, is measuring the impact of our own carbon In November 2019, we organised a Copper Dialogue birds and insects as the nature closest to our business. this is not always easy as there is quite some pressure emissions. This results in a negative impact of together with other coalition partners in the “Groene Netten” As one of the most important decisions in our roadmap from different stakeholders to build and maintain our EUR 183.4 million based on our net carbon footprint. coalition. Professionals in procurement and asset during 2019 we announced a plan to promote biodiversity assets in a way that is affordable and putting demands For TenneT, our main positive environmental impact is management attended this round table meeting and shared at all of our 462 high-voltage substations in the Netherlands on the market that they cannot fulfil is contra productive. the potential avoidance of carbon emissions. This relates knowledge on copper to help each other accelerate their and Germany, especially as regards protecting and To us, the challenge is to balance this out and try to raise to connecting more renewable energy sources to the grid, respective circular ambitions. We also launched an internal increasing bird and insect populations. the bar at the same time for us but also for our contractors which reduces the share of conventional energy sources initiative to involve our colleagues in our quest for circularity, to find a solution that meets our ambition and those of in (and thereby lowers the CO2 impact of) the grid mix. called “Power to the Planet”. Ideas from this campaign Our stations, which are unmanned, serve as an excellent our stakeholders. This impact is a combined effort of both the companies include more efficient waste management and entering into location for biodiversity and can be connecting hubs for that are responsible for the generation of renewable energy partnerships to refurbish end-of-life materials. nature in the surrounding area.The plan follows excellent In our tender procedures, we require our contractors to be and us, as a TSO, to connect this to our grid and results from a pilot project at three such substations in the transparent about their carbon footprint to create insights, transporting the renewable energy. This results in a positive Furthermore, we held a market consultation in spring Netherlands, revealing that nature-friendly maintenance of for us but also for our contractors. And it gives the impact of EUR 962.0 million for our offshore connections 2019 asking for circularity proposals for power transformers these sites conserved up to 72% of their insect populations. necessary information for more steering in the future. in Germany in 2019. We acknowledge that these are just that are no longer in use, including possibilities to repair, The new programme will ensure this biodiversity-friendly An example of this is the aforementioned tender procedure elements of the impact we have as TenneT. We strive to re-use or refurbish components and materials. Some approach will become standard practice. By 2020 we aim for the Holland Coast (North) project, where we have continue on our journey with respect to the measurement 40 participants attended the workshop, submitting for all new projects to include a positive nature measure in included CSR aspects, like nature and CO2. This way, we of impacts and aim to include more on this in the next years. 12 proposals. These insights will help us develop solutions the investment process, ensuring they are built into the are stepping up to realise our ambitions and at the same that will contribute to our circularity KPIs. planning and design. time working together with our partners to get there. 38 Integrated Annual Report 2019 - TenneT Holding B.V. 39


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    Our performance in 2019 Another difficulty, which at the same time creates Outlook opportunities to us, is the impact we have on the natural Current megatrends predict, that many natural resources environment. We build our assets in the habitat of living will become scarcer. That is why we want to ensure creatures. We are working on implementing measures to long-term value creation by including our circular ambitions. create solutions to positively influence the biodiversity near The effect the climate has on society, policies and regulation our assets. An example of this is working on nature inclusive and also on our own direct operations are factors we design, where solutions that create positive effects for life on continue to weigh in how we manage our natural capital land and at sea are included in the design phase of our and the broader topic of climate. Examples of this include projects. We work closely together with our Asset our efforts with respect to the recommendations of the Management and Grid Services colleagues to include nature Taskforce for Climate related Financial Disclosures, inclusive design in our projects. We carefully weigh potential where we incorporated these recommendations in risks and decide on which are acceptable and which are not our risks assessments. and proceed with including more innovations to create positive impacts near our assets with respect to biodiversity. We will continue to make progress on our road towards The most important lesson learned so far is that the earlier science-based targets. In 2019, TenneT signed a pledge measures are taken into account, the more likely it is they organised by the United Nations Global Compact as a call will eventually be implemented. We aim to balance the to the business community, in connection with the 25th positive effects as a responsible grid operator against annual climate change conference, COP25, to set emission the costs for society and the reliability of our grid. At first reduction targets. The pledge is in line with the report on instance, an extra measure which does not directly 1.5 degrees by the Intergovernmental Panel on Climate contribute to security of supply could be seen as risk Change (IPCC) and aims to reach net-zero emissions by no in realising a project. later than 2050. With this pledge, we also commit ourselves to set science-based targets and this will be one of our We have also noticed that our stakeholders are increasingly action items for 2020 next to other initiatives to further paying attention to our climate-related risks and reduce our carbon footprint. opportunities. Physical climate-related risks with respect to our assets include drought and higher temperatures significantly increasing the risk of wildfire, resulting in damage to substations and over-headlines, which in turn causes outages. With respect to climate adaptation, we are working together with authorities. For instance, we are cooperating with authorities to protect our assets against rising sea levels. In general, signs are currently pointing to a global economic slowdown, fuelled by nationalism, state-centred politics, erratic trade policies and regulatory changes, large-scale geopolitical conflicts, potential frequent financial market turmoil and rapid advances in technology. A severe economic crisis could impact the current focus on climate change and energy transition. It could also call into question the affordability of projects and also impact how much society is willing to accept the cost of energy transition. 40 Integrated Annual Report 2019 - TenneT Holding B.V. 41


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    Interview with Albert Vliegenthart, Louise Vet & Margriet Rouhof Setting a standard for biodiversity in the energy transition TenneT proudly promotes biodiversity around all of its 462 high-voltage stations in the Netherlands and Germany. Relatively simple steps can make all the difference to maintaining insect populations. “This is very “Restoring our “Last year, we conducted encouraging. TenneT biodiversity is a biodiversity pilot is demonstrating absolutely crucial - around three Dutch how simple, not just for the natural substations. relatively minor adjustments at world, but also for We took the following steps to hundreds of stations can achieve our own wellbeing. strengthen biodiversity: sowing impressive results. Maintaining This can only be achieved through indigenous seeds to strengthen the insect population at these levels partnership, working closely local biodiversity and mowing in is impressive and a crucial step together with a wide range of a non-linear way (so-called sine in helping tackle the challenges stakeholders from NGOs and mowing). The pilot demonstrated of preserving biodiversity.” farmers to corporates and financial how non-linear mowing helps institutions. That’s why I applaud maintain the insect population by Albert Vliegenthart this initiative of TenneT and will do up to 72%. If we mowed in normal Ecologist what l can to share this good work straight lines, these insects De Vlinderstichting with others.” wouldn’t survive.” Louise Vet Margriet Rouhof Professor in Evolutionary Ecology CSR Manager TenneT at University Wageningen


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    Secure a solid financial performance and investor rating Our performance in 2019 Deliver a return on capital that meets of its investments. Overall, capital reimbursement decreased Secure a solid financial performance the expectations of our capital providers in 2019 compared to 2018 due the start of a new regulatory and investor rating ROIC period in Germany, characterised by a lower rate of return on equity and a change in the application of reimbursement rules for the investment measures. This decrease is partly We need smart solutions to meet climate targets and drive the energy transition. % offset by an increase in the regulatory asset base. We need to optimise existing infrastructure as well as expand and strengthen our 6.2 Investments high-voltage grid. To raise the necessary financing, TenneT strives to maintain its Target 5.1 4.1 strong credit rating by retaining a balanced equity to debt ratio, as well as by EUR million delivering a return on capital that meets the expectations of our capital providers. 3,064 8 0 2,253 Rising investments, financing costs and related grid fees It is a pre-condition for the Minister that the Dutch public 2019 2018 7 all impact the tariffs we pass on to end users. We seek to interest and national security be safeguarded, whatever limit this impact through stringent cost management and decision is reached. This will be weighed against the 1,925 1,370 operational excellence. In addition, we also need our advantages of cross-border activities and a possible Our key performance indicator used to measure the value regulators to provide us with more cost-efficient incentives reduced financial risk relating to TenneT’s German activities. TenneT delivers to its capital providers is the rate of return to develop innovative solutions for a smarter grid. This on invested equity (ROIC). Our minimum target of 4.1% is 1,131 876 would be preferable to the current incentive, which is to Net debt position based on an average of long-term returns derived from 2019 2018 simply develop more assets. While we have a clear role in TenneT’s net debt position rose from EUR 8,712 million in Dutch and German regulatory frameworks in combination TSO Netherlands enabling the energy transition, it comes at a financial cost. 2018 to EUR 9,500 million in 2019 due to EUR 1,750 million with our target financial leverage profile. Realised ROIC TSO Germany Either through taxes, subsidies or tariffs, the public cost of of new financing in 2019, capped with EUR 756 million of decreased from 6.2% in 2018 to 5.1% in 2019, mainly Non-regulated companies the energy transition will rise. redemptions of interest bearing loans. due to the increase in equity. Raise the necessary financing In January, TenneT received the proceeds of EBIT Our capital expenditure totalled EUR 3,064 million in 2019. Equity EUR 500 million from its first green private placement in This represents an increase of 36% compared to 2018 In line with the EUR 1.19 billion capital commitment by the United States. In May, TenneT issued EUR 1.25 billion EUR million (EUR 2,253 million). the Dutch government in 2016, TenneT received a third in green bonds under its Green Bond Programme. unconditional tranche of equity of EUR 280 million at The issue was split into two tranches – a EUR 500 million 853 Compensation for our onshore and offshore 768 the end of 2019. The Ministry of Finance also granted tranche, with an 11-year maturity (coupon of 0.875%) 27 operating costs 15 the conditional fourth and last tranche of EUR 410 million, and a EUR 750 million tranche, with a 20-year maturity Due to lump sum compensation, as well as increasing which was also received in 2019. (coupon of EUR 1.5%). assets, compensation for our onshore operating costs 753 826 increased, while onshore operating costs were kept stable. TenneT’s investment portfolio will increase further due In November, TenneT refinanced its EUR 2.2 billion Compensation for our offshore operating costs in Germany to increasingly ambitious climate targets in both the Revolving Credit Facility (RCF) and increased the principal decreased due to a new offshore regulatory framework in Netherlands and Germany. We believe this will require to EUR 3 billion. The maturity date of the RCF, which can 2019 2018 which actual operational expenses are reimbursed, rather additional equity of EUR 2 to 3 billion in the next four years be used for general corporate purposes, was extended than a significantly higher fixed percentage. to ensure TenneT’s current credit rating, which is deemed to November 2024 with two one-year extension options. EBIT excluding special items crucial to raise the necessary financing at attractive and The interest rate TenneT pays for this RCF partially depends Special items Special items – from a regulatory point of view efficient interest rates – on our progress in reducing our own CO2 emissions. EBIT was negatively impacted in 2019 due to a balance to execute TenneT’s strategy. of several positive and negative developments in regulatory Senior unsecured credit ratings for TenneT Holding B.V. The decrease of underlying EBIT is mainly driven by a decisions, reference is made to regulatory considerations On 13 September 2019, the Minister of Finance and remained unchanged in 2019 and were reaffirmed by reduced regulatory rate of return on equity in Germany, and risks included. the Minister of Economic Affairs sent a letter to Dutch Standard & Poor’s (A- / stable outlook) and Moody’s starting with the new 5-year regulatory period and other parliament, referring to several alternatives for raising Investor Service (A3 / stable outlook). Standard & Poor’s regulatory changes, partly offset by a higher regulatory asset Regulatory considerations the necessary equity. These include: a further capital also conducted an Environmental, Social and Governance base due to investments. Our revenues are strongly influenced by decisions contribution by the Dutch State, a (partial) sale of TenneT (ESG) evaluation of TenneT; an assessment of its ability taken by our regulators. Currently, the German regulator to a private party, or some form of cooperation with the to operate successfully, now and in the future. Standard & Reimbursement of capital expenditure (capex) is questioning whether 2018 offshore compensation German State. Poor’s awarded TenneT the classification ‘strong’, with TenneT earns a return on capital invested in regulatory should have been based on a lump sum or whether a score of 83 out of 100. assets (such as power lines, transformer stations, and the pass-through compensation should have already converter stations) and is compensated for the depreciation been applied. 44 Integrated Annual Report 2019 - TenneT Holding B.V. 45


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    Our performance in 2019 At the same time TenneT holds the view it should receive Outlook Quote by compensation for asset retirement costs provided for to In mid-2020, the Dutch cabinet expects to inform parliament Timm Krägenow & Tetiana Chuvilina-Bueschgens be able to decommission offshore assets at the end of on the desirability and feasibility of the various options their useful lives. regarding TenneT’s future equity financing. We are confident In November 2019, the CBb ruled favourably for TenneT regarding both the WACC and the ex-post settlement of that there will be a solution that fits our strategy: balancing our aims of driving the energy transition, ensuring security of supply and safeguarding the financial health of TenneT and Driving offshore OPEX costs related to the Netherlands. The tariff the wellbeing of our people. Various options will have to be decision 2020 takes into account the new x-factor decision and EUR 100 million from congestion income. Approximately EUR 50 million of allowed revenue 2020 is evaluated to achieve the best fit with our strategic ambitions To contribute to the climate goals, additional investment in our assets and smart solutions for optimising the use the energy transition postponed to the tariff decision of 2021. of our grid will be necessary. This will lead to higher financing costs, increased grid fees and ultimately higher For the current regulatory period, the efficiency factor, theta, energy bills for end users. We are fully aware that this has been set at 0.979 in 2021. The ACM has organised a impacts the affordability of energy, and we will do all we new international TSO benchmark in 2018/2019. The model can to execute our projects and operations as efficiently “International cooperation is key and methodology of the benchmark have been significantly and effectively as possible. for an affordable, sustainable revised compared to the previous benchmark. TenneT has and reliable energy system. communicated to the ACM that there are substantial errors Increasing interdependencies of energy transmission in the benchmark model. The revision of the benchmark infrastructures in Europe, as a cost-minimal source model and outcome may have a significant adverse impact for flexibility, require strong political cooperation as on TenneT’s efficiency score for the next regulatory period. well as alignment within Europe and also globally. However, the revision of the benchmark model has not yet However, a one-size fits all approach is not the right been finalised and the final revision thereof – in which NL way. We need regional flexibility to establish the transformation efficiently and effectively. Example: operator specific conditions have been incorporated – is the North Sea requires different energy policy than expected in 2020. the Ruhr area. Offshore is different than onshore, now not recognised in regulations. What could prevent us from realising our goals? The foreseen European New Green Deal CO2- Timm Krägenow In order to fund our investment portfolio and raise the reduction targets for electricity are very ambitious. Head Brussels Office required debt financing, TenneT needs to secure a sufficient Only if we set the frameworks right they will be achievable without endangering affordability and credit rating by attracting sufficient additional equity. At the reliability of the energy system. We as TenneT will same time, society and politicians are critically assessing build new grids, but we are also working intensively investments by the Dutch state. As such, we work closely on innovations to increase the transport capability together with the Dutch Ministry of Finance and of existing grids and to make decentralised flexibility continuously work on alternative solutions for financing. available to the market. Our revenues are based on the regulatory framework in For TenneT it is clear we have to look beyond the Netherlands and Germany. The growing sentiment electricity and beyond national borders. We have to co-optimise the infrastructure for green electrons against the increasing cost of energy is putting more and for green molecules. And it is clear that this pressure on the reimbursement system. Adverse changes infrastructure should not be a patchwork of national in the regulatory system might impact our performance. systems, but a European system. The future offshore wind system will not be national but will make best use of the available wind and available space in the North Sea. As first cross-border TSO, TenneT is eager to play a key role in driving this forward Tetiana Chuvilina-Bueschgens and we are already working on it intensively.” Deputy Head of Group Representative Office Berlin 46 Integrated Annual Report 2019 - TenneT Holding B.V. 47


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    Interview with Gerard Kits & Floris Jongens Financing the energy transition with broad, solid and sustainable funding To help drive the energy transition, TenneT plans to increase its investment level from approximately EUR 2 to 3 billion today to approximately EUR 4 to 5 billion within the next five years in offshore and onshore grid connections across the Netherlands and Germany. “Sustainability is key to “Sustainability is a core value for TenneT’s business operations. us, so we are proud to support Linking the pricing of the sustainable Revolving leaders, like TenneT, who are helping Credit Facility to our CSR ambitions in order to to drive the energy transition. be fully climate neutral in 2025 underlines our We do this by providing them with tailored financial commitment to sustainability. I am very proud that services and access to knowledge and networks. TenneT is leading the way in green and sustainable The Netherlands is faced with a dual challenge: financing through green bonds and now with this the country needs to find a sustainable way to satisfy credit facility as well.” its energy needs while at the same time meeting Gerard Kits climate change targets.” Manager Treasury TenneT Floris Jongens Director Loan Syndication Rabobank


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    Solve societal challenges with stakeholders and through partnerships Our performance in 2019 Solve societal challenges with stakeholders As such, our engagement with stakeholders helps As part of this, TenneT started working on a pilot project and through partnerships to strengthen our reputation as a strategist, supporter and partner in the energy transition. with Gasunie and Thyssengas called Element Eins. This involves the construction of a power-to-gas installation with a capacity of 100 MW in Lower Saxony, Germany, Working with our stakeholders and through partnerships, TenneT has an important Likewise, in Germany, we are seen by our stakeholders as which is expected to come into operation gradually from role to play in driving the energy transition. To succeed in this revolutionary change an important player in the Energiewende. As we are the only 2022. By bringing electricity and gas together in this way, TSO with a North-South link, we cover one of the biggest we can create an integrated energy system, capable for society, we need to work even more closely with our partners to share challenges of the Energiewende. of serving our needs in a green energy future. The Federal perspectives, develop new energy solutions and build support. This is one of Government of Germany has selected the project as one the key ways we create value for society. We realise that building acceptance and considering of 20 “real laboratories of the energy transition” to receive the needs and wishes of all stakeholders is difficult. its funding, reflecting its strategic importance for society. When determining the route of a new project, there are Our partners range from fellow European TSOs and DSOs, Pro-actively engage project stakeholders many considerations. These can be environmental, where Future vision for North Sea Wind Power Hub knowledge and business partners to NGOs and local The infrastructure and technology needed to deliver the natural landscape needs to be protected and social, TenneT also works extensively with partners to help shape communities. Together, we are able to take the necessary electricity to end users, unavoidably impacts local where local communities object to the construction of a more integrated European energy market for the long-term. steps by using our combined knowledge and experience communities. As such, our work involves a delicate balance: power lines in their vicinity. Examples of this are the routes Our collaboration on the North Sea Wind Power Hub project to realise this transition in a way that is beneficial for all. what is good for and desired by the broader society is not of SuedLink and SuedOstLink. In 2019 these two onshore is an example, where TenneT is partnering with Gasunie, always welcome at a local level. We manage this grid projects required TenneT to engage with intense Energinet and the Port of Rotterdam. Together, we are A fact-based dialogue with government, industry by striving to act as a partner who puts our newly defined stakeholder activities across all levels. Balancing community evaluating and developing technical concepts for an and academia values of Ownership, Connection and Courage into viewpoints at this project phase, including investigations internationally coordinated roll out of ‘hub-and-spoke’ At government level, we actively engage in the public practice. Whenever we start a new project, our goal is to for long cable routes, is a big challenge. We therefore held power hubs in the North Sea. These would connect onshore debate on the energy transition. In the Netherlands and listen to the concerns and needs of those affected and many meetings in this process, including individual talks energy markets with offshore wind power and use smart Germany, we work closely with communities and provide all relevant information to evaluate and discuss. and other events where we inform our stakeholders. solutions to integrate the wind-powered electricity into the governments, local, regional and national. For example, We want all stakeholders’ views to be listened to and onshore energy grid, including power to gas. during 2019, we participated as a partner in the Dutch considered. At the same time, we want to build a better Innovative collaborations to unlock flexibility climate agreement (Klimaatakkoord). We are one of the understanding of our work, developed patiently over time Working with our stakeholders also means enabling, Finding new solutions in digital technology and signatory members of this agreement and have committed through clear and transparent communication. This is encouraging and partnering with entities that can help us the market ourselves to follow up on the measures that were agreed essential to our licence to operate and our reputation unlock flexibility in the energy market. We need to do this As we rely on more renewable energy sources, TenneT is upon. Announced in June 2019, the agreement is the result as a responsible corporate citizen. because matching supply and demand while managing a also working with partners to explore new digital solutions of a multi-stakeholder consensus on how to transition to a higher infeed of renewable energy sources carries significant that can help us balance electricity supply and demand. low carbon economy, contributing to solutions that will For larger projects, we open dedicated information centres, technological and capacity challenges. There are several To help keep the grid balanced, TenneT is looking for help the Netherlands achieve its target to reduce carbon to ensure everyone has the chance to make their voice areas where we are increasingly working in partnerships new (decentralised) sources that can offer flexibility, emissions by 49% by 2030. Likewise, in Germany, we are heard and using their feedback to help us minimise the to overcome these challenges, including collaborations such as household batteries and electric cars, and working with government and multiple stakeholders to impact of our work. to explore the integration of the electricity and gas ‘prosumers’ who generate their own electricity from find solutions that will help achieve the targets of the power networks. solar and wind installations. Energiewende. These include a 65% share of renewables We measure the quality of our stakeholder engagement in in the energy mix by 2030 and a 55% reduction in carbon a bi-annual reputation survey, conducted in the Netherlands Coupling electricity and gas grids By working with different suppliers and ‘aggregators’, and emissions compared to 1990. and Germany. The latest evaluation rated our reputation TenneT is working with Gasunie to find answers to the by applying innovative blockchain technology, the capacity among our stakeholders highly for the third consecutive energy transition. A joint project, called Infrastructure of all these sources can be harnessed, and consumers Another example of our dialogue with our stakeholders is time. We are proud of this and work hard to earn this trust Outlook 2050, proposes a scenario where the electricity can also participate directly in the energy market. the first TenneT E-TOP, a meeting we organised in 2019. as working closely with our stakeholders is at the heart of and gas energy infrastructures are seamlessly integrated. In 2019, TenneT did two pilot projects, where we use Together with CEOs and other experts in the energy sector, our work and key to our success. Our stakeholders are One of the principal benefits of this is that it allows wind- a blockchain technology platform to aggregate power we discussed the energy transition and how we can further defined as all those who are affected by our actions and generated electricity to be stored, after conversion into from electric cars and household batteries. This provides accelerate it. The aim was to find opportunities for more who have an effect on our organisation and services. hydrogen gas using power-to-gas technology (electrolysis). flexibility, helping to balance the grid and prevent cooperation on important issues with respect to the energy Energy storage will be increasingly important to keep congestion. In the Netherlands, TenneT is working with transition and system integration. We aim to build on solid public awareness of the electricity supply and demand in balance and coping sustainable energy supplier Vandebron, while in Germany complexity and challenges faced by TenneT in the energy with the fluctuations in weather-dependent renewable we work with Sonnen E-services. transition, with a strong emphasis on TenneT’s strategic energy sources. input and appreciation for our contribution to the Dutch Climate Tables. 50 Integrated Annual Report 2019 - TenneT Holding B.V. 51


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    Solve societal challenges with stakeholders and through partnerships Our performance in 2019 TenneT has also been working with other partners to unlock The aim is to promote fair, transparent, sustainable grid We are also currently working together with the respective Outlook flexibility through new market concepts. An example is a development to enable the growth of renewables and authorities and other involved stakeholders to include their We believe in the power of partnership. Our philosophy partnership with the Dutch Distribution System Operators achieve full decarbonisation in line with the Paris views as we in the process of updating our policy with is that we can achieve more by working with partners (DSOs) to launch GOPACS, a new smart solution to reduce Agreement. For more information about how we partner respect to magnetic fields. than acting alone. With a challenge of the scale of the congestion in the electricity grid by using flexible power from up and aim to lead as a green grid operator, please read energy transition, we consider it is essential to work the market. It is an important step to mitigate capacity the chapter ‘Creating value to transition to a low carbon In our view, forming long-term partnerships within and with multiple partners to find the solutions that can shortages in the electricity grid (congestion) and help keep economy’. outside the TSO playing field is an opportunity to drive shape our energy future. the Dutch grid reliable and affordable. GOPACS is a good the energy transition. Initiatives like crowd balancing example of active collaboration between TenneT and Giving back to society need strong partnerships between several industries TenneT’s goal is to embrace the opportunities of regional grid operators (DSOs). As a company with a strong social purpose, we also give and the public domain. digitalisation, data and flexibility, to be a green and back to society through several partnership initiatives, such responsible grid operator. Innovation will be essential Furthermore, TenneT, has been working with 25 partners as supporting sports activities for underprivileged children to manage the balancing act of securing supply, while (TSOs, Universities and Industry) as consortium lead, to with the Johan Cruyff Foundation, and supporting nature also making choices that are affordable and sustainable. better understand the impact of the upcoming converter through a partnership with the Nationale Park de Hoge TenneT is in a pioneer role, exploring new project dominated power system on secure operation. This is a Veluwe, located near our Dutch head office in Arnhem. partnerships in the wind power storage and automobile research project called MIGRATE (Massive InteGRATion Furthermore, we have supported a visitor centre at the industry to find the answers we need to succeed in of power Electronics). This is an important TSO research UNESCO World Heritage Site of Norderney Island in the the new energy age. Only truly pioneering partnerships project funded by the European Commission and its role Wadden Sea. We also help to connect refugees with and inventions will deliver these answers and help us is to find solutions to the technological challenges of the employers through our partnership with the Refugee Talent in our ambition to transition to a low carbon economy. power system stability. In particular, it tackles the growing Hub. We welcomed six new colleagues through this impact of Power Electronic (PE) devices on the dynamic partnership, helping them gain relevant work experience stability of the grid. The project is delivering internationally at TenneT. Our Rising You partnership strives to achieve recognised results that aim at maximisation of the amount the same goal. Rising You aims to help refugees by training of RES installed in the system while keeping the system them to work at heights. Through initiatives like this, we help stable. In particular, it helps clarify the need for new control refugees gain relevant work experience, which benefits us, and protection schemes and possibly new connection rules but also our suppliers in search of talent. to the grid and suggests requirements for future measures, methods and tools for a secure operation while the share What could prevent us from realising our goals? of PE converters is steadily growing. To be able to drive the energy transition and lead as a green grid operator, it is important to create societal acceptance of Innosys 2030, a collaborative project that explores the energy transition. Lack of acceptance could lead to the innovations to boost grid flexibility and automation is another inability to fulfil our ambitions and delay the transition to a example of TenneT has worked together with other partners low-carbon economy. to find new solutions to help shape the future energy landscape. This program was initiated by the German Societal acceptance of our assets remains important. government and the four German TSOs. TenneT’s construction and operation of substations, underground cables and transmission lines, and Partnering with NGOs investments in sustainable energy solutions may affect We also work together with NGOs to realise our ambitions, a large number of people and interests. Because grid specifically to lead as a green grid operator. We enter into expansion projects take years to develop and cost hundreds key partnerships in which we share knowledge and of millions of euros, the impact of project delays, difficulties information and define actions together to enhance our or shutdowns may be significant. impacts. Examples of this include the “Vlinderstichting”, with respect to our nature ambitions, MVO Nederland, The expansion of our high-voltage electricity grid may where we work together in the “Groene netten” coalition significantly alter landscapes in a way that can affect to achieve certain common goals with other companies the livelihood of surrounding residents. The debate in the Infrastructure sector and the “Natuur & Milieu” and with respect to potential health risks related to our North Sea Foundation, where we extended a partnership overhead transmission lines and magnetic fields is ongoing. to promote environmental responsibility in our offshore As TenneT, our aim is to comply with rules and regulations projects. Next to this, we also work together with other and take sufficient caution in the construction and operation NGOs and TSOs in the Renewables Grid Initiative (RGI). of our assets. 52 Integrated Annual Report 2019 - TenneT Holding B.V. 53


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    Interview with Friedrich Kunz & Alexander Heim Power-to-gas with partners Element Eins is an important step forward in the energy transition, demonstrating how renewable electricity can be transported and stored as green hydrogen gas. “Element Eins underlines that “The energy transition needs innovations play a crucial role in diversification, innovation and the energy transition. This pilot advanced engineering to succeed. project converts green electricity The planned construction of this to gas and enables us to explore major power-to-gas plant addresses new ways of transporting and these needs and helps the storing renewable energy. development of the energy transition. This will allow renewable energy to be used in a If we take a cross-sector technical approach and use larger variety of ways, while reducing greenhouse our expertise in a purposeful and focused way, we will gas emissions. Moreover, we can explore its succeed. Power-to-gas in combination with the existing contribution to energy networks in order to make gas network has great potential and can help offer the better use of existing infrastructures.” flexibility and storage solutions we need to meet ambitious renewable energy targets.” Friedrich Kunz Advisor Market Development TenneT Alexander Heim Project leader Element Eins Thyssengas


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    Statements of the Executive Board Our performance in 2019 Statements of the Executive Board The Executive Board is responsible for designing and operating TenneT’s risk management and internal control system, and for reviewing its effectiveness. In control statement The risk management and internal control system The Executive Board is responsible for designing and does not provide full assurance that corporate objectives operating TenneT’s risk management and internal control will be achieved, nor does it give full assurance that system, and for reviewing its effectiveness. material errors, losses, fraud or violations of laws and regulations will not occur in the operational processes The risk management and internal control system consists and/or the financial reporting. of the following elements: • The enterprise risk management system aimed to Taking the above into account the Executive Board is of the identify, analyse, define mitigating measures and monitor opinion that TenneT’s risk management and internal control the development of risks relevant to TenneT; system provides reasonable assurance that the financial • The internal control framework aimed to manage and reporting does not contain any errors of material significance control critical processes, including control self- and that the risk management and internal control system assessments to document the effectiveness of control has operated adequately in the year under review. processes; • Business plans and quarterly reports with information Statement of responsibility on corporate objectives and their achievement; We confirm that, to the best of our knowledge, the financial • Internal audits of critical processes and follow-up statements for the period 1 January to 31 December 2019 to audit findings with relevant management; have been prepared in accordance with IFRS, as adopted • Actions based on recommendations made in by the EU, and with Part 9, Book 2 of the Dutch Civil Code; the external auditor’s management letter; that the disclosures in the financial statements are a true • A decentralised internal Letter of Representation (LOR) and fair view of TenneT’s assets, liabilities, financial position process, resulting in a company-wide LOR signed by and results as a whole; and that the disclosures in the the Executive Board. annual report give a true and fair review of TenneT’s performance, results and position, together with a The Executive Board reviews and analyses the strategic, description of the most significant risks and uncertainties operational, financial and compliance risks to which TenneT it face. Furthermore, the Group has adequate resources is exposed. It also regularly assesses the design and to remain in operation during the next 12 months and effectiveness of the risk management and internal control consequently the financial statements have been prepared system. The results of these assessments are shared on a going concern basis. with the Audit, Risk & Compliance Committee, acting as a committee of Supervisory Board (also acting as audit Arnhem, 9 March 2020 committee), the Supervisory Board and the external auditor. M.J.J. van Beek * O. Jager * T. Meyerjürgens B.G.M. Voorhorst * *Statutory Director 56 Integrated Annual Report 2019 - TenneT Holding B.V. 57


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    Our Executive Board Our performance in 2019 Our Executive Board M.J.J. (Manon) van Beek B.G.M. (Ben) Voorhorst O. (Otto) Jager T. (Tim) Meyerjürgens Chair Executive Board / Chief Executive Officer Member of the Executive Board / Chief Operating Officer Member of the Executive Board / Chief Financial Officer Member of the Executive Board / Chief Operating Officer 49, Dutch (f) 60, Dutch (m) 50, Dutch (m) 44, German (m) Initial appointment: 1 August 2018 Initial appointment: 1 December 2007 Initial appointment: 1 August 2013 Initial appointment: 1 March 2019 Reappointment: 1 December 2019 Second appointment: 1 August 2017 End of first appointment: 28 February 2023 End of second appointment: 31 July 2021 Other positions qualitate qua: Other positions qualitate qua: Other positions qualitate qua: Other positions qualitate qua: • Chair of the Aufsichtsrat TenneT TSO GmbH • Member Board TenneT TSO B.V. • Member Board TenneT TSO B.V. • Member Board TenneT TSO B.V. • Member Board TenneT Verwaltungs GmbH • Member Board TenneT TSO GmbH • Member Board TenneT TSO GmbH • Member Board TenneT TSO GmbH • Member of the Supervisory Board of Relined B.V. • Member Board TenneT Verwaltungs GmbH Other positions: Other positions: until 31 December 2019 • Member Board TenneT Offshore GmbH • Chair Supervisory Board Kanker.nl Foundation • Member of the Board of Netbeheer Nederland • Chair Board Giving Back Foundation • Member of the Cooperation Board of TSCNET Other positions: Other positions: • Chair Board Refugee Talent Hub Foundation Services GmbH • Member Advisory Council of the New CFO • Chair Supervisory Board foundation • Member of Advisory Board Top Woman of • Member of the Supervisory Board of ETPA Executive Program, Erasmus University Rotterdam • Member Executive Board WAB the Year Foundation (Wind Energy Association Bremerhaven) • General Member Board of German-Dutch Chamber • Member Advisory Board Offshore Wind Energy MBA of Commerce DNHK • Member Board of Trustees German Offshore Wind • Council of the Thinktank Agora Energiewende Energy Foundation • Member Advisory Board Federal Association of Wind Farms Offshore • Member Board of Directors FGH (Forschungsgemeinschaft für Elektrische Anlagen und Stromwirtschaft e. V.) • Board of Trustees FGE (Forschungsgesellschaft Energie e. V.) • Member of the German National Committee of CIGRE 58 Integrated Annual Report 2019 - TenneT Holding B.V. 59


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    Supervisory Board Report Supervisory Board Report Revised strategy Strengthening the grid with new investments, including In various sessions the Supervisory Board discussed the onshore and offshore grid connections and cross-border revised strategy with the Executive Board which resulted interconnectors, are just as crucial to security of supply as in four strategic pillars at the end of the second quarter smooth maintenance. The Supervisory Board discussed Supervisory of 2019. In October 2019, an update on related strategic maintenance and renewal including topics such as: initiatives was on the agenda. the health index; strengthening the relationship between maintenance and renewal improving the prognosis for asset Financing renewal; holistic consideration of measures for aged assets; Board Safeguarding the company’s financial health is one of TenneT’s strategic pillars. TenneT’s financing position, financing structure and overall financing plan were also improving decisions on planned outages; taking risk management prioritisation further and developing an unambiguous strategy for out-sourcing and in-house Report assessed by the Supervisory Board, including shareholder objectives, the long-term continuity of the company and short-term liquidity needs. Topics discussed included the knowledge. Composition of the Executive Board financing structure of the TenneT Group, cash flow and At the start of 2019, two directors of TenneT Holding B.V., liquidity forecasts, equity solutions and several debt Lex Hartman and Wilfried Breuer, left the company. financing instruments. The Supervisory Board is keeping a The Supervisory Board wants to thank them both for their The Supervisory Board (SB) supervises the Executive Board and advises it on setting close eye on the balance between the Shareholder’s focus significant contribution in building up TenneT to where it and achieving strategic goals. In this report, the Supervisory Board details how it on the Dutch investment portfolio and the equity needs for stands today. We are pleased to see that TenneT found the entire TenneT Group. Given the company’s significant a suitable successor for Wilfried Breuer within their fulfilled its role in 2019: a truly transitional year. The energy transition is in full swing, investment programme, further equity will be needed to company as Tim Meyerjürgerns was appointed as COO with grid operators an indispensable link in making this happen. But besides changes ensure TenneT’s credit rating, which is crucial to execute as of 1 March 2019. in the external world, TenneT itself has embarked on a transitional journey as a TenneT’s strategy. The SB actively discussed alternatives company. And all this while successfully safeguarding a safe working environment with the Executive Board as well as the shareholder. Ben Voorhorst’s term as statutory director of TenneT Holding B.V./COO expired on 1 December 2019. Our shareholder and continuous security of supply. Investment portfolio reappointed him for a term of 1.5 years per the nomination Next to the assessments of Project Budget Applications and of the Supervisory Board. The Supervisory Board Exception Reports, the Supervisory Board and management appreciates that Ben Voorhorst agreed to a new term, discussed the potential investment volume for the next 10 helping to safeguard continuity in the Executive Board in Safety and security of supply International cooperation and a high degree of onshore and years, mainly based on grid investments driven mainly by these times of transformation. Safety at TenneT is an important area of focus for the offshore connectivity are crucial to realising the energy the requirements of the energy transition. The SB carefully Supervisory Board, with TenneT’s safety performance transition and securing an uninterrupted and cost-efficient assessed the strategic, societal, financial, and technical Composition of the Supervisory Board benchmarked against peers and overall best-performing supply of electricity. aspects of investments and maintenance, in line with its In May 2019 the Supervisory Board was expanded with companies. The Supervisory Board continued to monitor mandate. It takes a broad and long-term view, as these three new members and now consists of seven people. the implementation of TenneT’s Safety Vision closely and We believe that it is in society’s interest that TenneT and its factors can lead. Besides these considerations, we also The appointments were made with the retirement rota in evaluated the safety track record of TenneT and its European counterparts cooperate and expand their role have to look at TenneT’s long-term investments in the mind as the terms of two SB-members expire in 2020. contractors. Suppliers that do not meet TenneT’s safety of facilitating the energy transition. However, balancing context of a fast-changing market affected by the inflow of The three new members of the Supervisory Board followed targets are a point of particular attention. In its meetings, European goals with national security of supply interests renewables and technological developments. We do a three-day introductory programme in which all aspects the Supervisory Board discussed significant individual can be challenging. not want TenneT to build too much and burden society of the company were covered. Each new member also safety incidents, as well as lessons learned and best with under-utilised assets. participated in specific introductory sessions, focused on practices from other industries. At the same time, the Other main topics of attention the areas of expertise of the Supervisory Board committees Supervisory Board is well aware of the demands the energy Besides safety and security of supply, the other main Maintenance and renewal efforts they joined. The Supervisory Board also actively participated transition puts on people and the system. areas of focus for the Supervisory Board in 2019 were: While undertaking substantial and complex investments in the TenneT Leadership and Cultural Transformation • TenneT’s revised strategy to allow for the inflow of renewables in Germany and programme. Members of the Supervisory Board continue Further integration of the European markets, as well as • The financing need the Netherlands, TenneT must also focus on maintaining to reflect on their personal leadership styles and the team upgrading the Dutch and German electricity grids, are • The sizeable investment portfolio, its existing grid. As such, performing maintenance with dynamics. needed to ensure security of supply. TenneT is a thought • Grid maintenance efforts minimum downtime and disruption is continuously a leader in establishing a single European energy market and • HR related topics including the composition and focal point. has more interconnectors in place across national borders remuneration of the Executive Board. than any other TSO in Europe. 60 Integrated Annual Report 2019 - TenneT Holding B.V. 61


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    Supervisory Board Report Supervisory Board Report The Supervisory Board believes that the Leadership These dialogues were held with members of the Supervisory In 2019, the SIC met five times; on four of these occasions Within the framework of the Management Letter the and Cultural Transformation should reach everyone in Board only, but their reflections were also shared with the the meeting of the SIC was incorporated in a plenary following topics were discussed: the organisation and engaged in individual and team Executive Board. The Supervisory Board plans to continue Supervisory Board meeting, due to the size and • Impact of the organisational re-structuring on the internal dialogues around personal, leadership and company values these facilitated dialogues in 2020. importance of the investment portfolio. The SIC consists control and governance structure following TenneT’s and their relation to the strategic agenda and role of the of Rien Zwitserloot, Edna Schöne, Pieter Verboom and revised strategy needs to be evaluated. For example, Supervisory Board. The SB met eight times in 2019, with 94% of the Stijn van Els. further aligning TenneT’s control structure between its SB-members present at the meetings. To safeguard geographical locations, in terms of design and operation, These sessions are facilitated by individual experts. Other a high level of engagement, external positions of the Audit, Risk & Compliance Committee may support an effective oversight and monitoring topics addressed in these dialogues included ethics and members are discussed on an annual basis. The Audit, Risk & Compliance Committee (ARCC), function over the achievement of strategic and financial communication styles. as a committee of SB, monitors the company’s financial objectives. It was noted that the importance of internal reporting, including quarterly and annual reports, financing, controls has been developing continuously. risk management and internal control, internal audit, the • The unification of ERP systems offers an opportunity independent external audit of the financial statements to make the internal control framework more robust. Audit, Risk Remuneration and and Strategic and the evaluation of the external auditor. It is crucial to properly embed IT risk management Supervisory Compliance Appointments Investments SB attendance 2019 Board Committee Committee Committee within this project on a broad level. In 2019, the ARCC consisted of Pieter Verboom (Chair), • Regulatory risks e.g. how these risks are treated from A.F. van der Touw (chair) 7/8 4/4 4/5 - Essimari Kairisto and Ab van der Touw. The committee an accounting point of view (IFRS and underlying). P.M. Verboom (vice-chair) 8/8 4/4 - 4/5 held four meetings attended by the CEO, the CFO, • The update on the three key audit matters R.G.M. Zwitserloot 8/8 - - 5/5 the senior manager for Internal Audit and the company’s • Underlying vs. IFRS reporting; L.J. Griffith 8/8 - 5/5 - external auditor. For relevant agenda topics, the senior • Growth in renewable energy sources and E.M Schöne 1) 5/6 - - 3/4 managers of Financial Control and Business Control as the implications for grid expenses; E. Kairisto 1) 5/6 2/2 - - well as the Lead Compliance & Integrity Officer also joined • Third-party claims A.C.C.. van Els 1) 6/6 - 3/3 4/4 the meetings. As in previous years, the ARCC also spoke several times to the external auditor without any Executive Risk management Total attendance 94.0% 100.0% 92.3% 88.8% Board members being present. No additional material topics Individual interviews were conducted with members of the 1 Appointed as per 1 May 2019. arose from these meetings. Supervisory Board as part of the 2019 annual strategic risk assessment. Accommodating the rapid growth of the The composition of the Supervisory Board complies with Committees As in previous years, the CFO had additional meetings with company while controlling risk was a key challenge in the Electricity Act, which stipulates that the majority of its Strategic Investment Committee the chair of the ARCC. The senior manager Internal Audit the strategic risk assessment. The Executive Board was members have no direct or indirect links to legal entities (or The Strategic Investment Committee (SIC), as a committee also met with the members of the ARCC separately, to responsible for determing the final set of strategic risks as shareholders thereof) engaged in the production, purchase or of the SB, reviews investment proposals exceeding discuss the Audit Plan for 2020. mentioned in the section ‘Risk management and internal supply of electricity or gas. It was noted that Essimari Kairisto EUR 50 million and advises the Supervisory Board on such control’. Quarterly progress reports on large projects were is member of the Supervisory Board of Fortum Oyj, however proposals. In 2019, the SIC assessed 20 Project Budget Management Letter reviewed by the Strategic Investment Committee and it was concluded that this does not result in any conflict Applications and Exception Reports as preparation for The Management Letter was discussed with the external subsequently by the Supervisory Board. These reports of interest. For more information on the members of the decision making by the SB. auditor and the EB in the ARCC meeting - and was also focused on project management, with specific attention Supervisory Board as well as the (re)appointment schedule, included in the plenary SB agenda. The ARCC/SB noted paid to timely delivery, risks of delays and interruptions, and please visit our website. that the external auditor classified the control environment societal demands that could lead to delays and/or projects The SIC assesses whether a proposal is compatible with the at TenneT as stable in 2019. As the company rapidly becoming more expensive. Ongoing education company’s economic, financial, and technical objectives, as increases in size and complexity, a robust and effective In 2019, an in-depth workshop was held to discuss the well as with TenneT’s risk profile and the impact an internal control framework is an important backbone for Compliance and integrity Infrastructure Outlook 2050, together with the Supervisory investment will have on stakeholders. The dilemmas the SIC management to remain in control of expanding business Compliance and integrity topics require constant attention. Board of Gasunie. More information regarding this joint discussed this year included facilitating the energy transition operations. The internal control framework is important in The Supervisory Board welcomed the newly project is included in the ‘Solve societal challenges with versus affordability for society. The SIC also monitors supporting the ‘in control’ statement by management as appointed Lead Compliance & Integrity Officer and the stakeholders and through partnerships’ chapter. timeliness, quality, cost efficiency and the risks associated included in the management board report. Room for strengthening of the team. The Supervisory Board Furthermore, the so-called Powerflow Model, which with large projects, on the basis of the quarterly investments improvement is still present, but whether the company should discussed quarterly compliance and integrity reports, with visualises the physical challenges of system operations reports. In light of the volume and complexity of TenneT’s aim to maximise controls deserves careful consideration a focus on lessons learned from all four cases investigated that we face every day, e.g. frequency, avoiding congestion, project portfolio, ample time for a dialogue on the reporting given the additional effort and cost this would cause. as well as on prevention and education. The Supervisory n-1, need for perfect traffic forecast and need for is catered for. In 2019 areas of focus included the availability Board suggested to invite external players for workshops on redispatch, was presented in a separate session. of resources was a focus point; next to the availability of lessons learned by other companies. suitable human resources and the supplier market, especially pro-active supplier management. 62 Integrated Annual Report 2019 - TenneT Holding B.V. 63


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    Supervisory Board Report Supervisory Board Report Regulation The RAC consists of Laetitia Griffith, Ab van der Touw With three out of seven Supervisory Board members being Also in 2019, Supervisory Board meetings ended with an The Supervisory Board continued to discuss the and Stijn van Els and met five times according to the female, the percentage of female representatives on evaluation of the meeting. Open feedback on topics such implications of TenneT operating in a regulated environment regular meeting schedule. The meetings were also attended our Supervisory Board is currently above 30%. For the as setting the agenda, the quality of documents submitted, in the Netherlands and in Germany. Relevant issues include by the CEO, the CFO and the senior manager HR. RAC diversity and inclusion will be a top priority in 2020. and the effectiveness and atmosphere of the meeting was striking a balance between regulatory optimisation and deemed valuable. creating value for society as well as the balance between Succession planning and performance Remuneration attracting investors and increasing grid tariffs. Selection and succession concerning TenneT’s Executive During 2019, the Supervisory Board frequently discussed Contact with the works councils Board are an important task for the Supervisory Board. the remuneration policy for Executive Board members with Fostering good relations with the works councils, Assurance tender As part of this, the Supervisory Board conducts the Shareholder. The SB aims to have a remuneration policy which represent employee interests, is important to The current contract with regard to assurance services performance appraisals of the members of the Executive in place which enables the company to attract suitable the Supervisory Board. As such, Laetitia Griffith and for TenneT expires on 31 March 2020. TenneT has started Board. The Remuneration & Appointments Committee employees. Although the SB’s responsibility doesn’t extend Stijn van Els, both appointed as Supervisory Board a new tender procedure. The ARCC was engaged in the gathers input for these appraisals during a Supervisory beyond EB-members, any remuneration policy set for the members on the nomination by the Dutch Works Council, selection phase, the initial offers and the presentations and Board meeting not attended by the Executive Board. EB has impact throughout the company. The SB fully regularly met with members of the Dutch Works Council advised the Supervisory Board on the nomination for the To gather more insight into Executive Board team recognises that TenneT is a state-owned company and as during the year to keep abreast of employee issues and appointment of the new auditor by the Shareholder. dynamics as well as in individual functioning, such it has to respect certain limitations on remuneration concerns, especially in the framework of TenneT Supervisory Board members meet annually with packages. Nevertheless, the SB strives for a remuneration Transformation. Through their membership of the Integrated reporting and audit individual Executive Board members. Besides policy which reflects the complexity and size of the Aufsichtsrat of TenneT TSO GmbH, both Laetitia Griffith TenneT’s financial statements for the 2018 financial year, the assessing the performance of the Executive Board, company. So far, discussions with the Shareholder and Rien Zwitserloot were also in close contact with 2019 internal quarterly reports and the 2019 interim results the Supervisory Board also discussed the performance on this topic have not yet been concluded. the representatives of the German Works Council in were all discussed by the Supervisory Board during the year. of TenneT’s wider senior management team, including the Aufsichtsrat. These meetings also covered the independent auditor’s for planning. Composition of the Supervisory Board report, internal audit reports, results from internal risk and In the second half year of 2018, the RAC started the The Supervisory Board welcomed the joint session held in control assessments, the 2020 budget and the Integrated Ancillary positions process of selecting and nominating new members of November with the Dutch Works Council and the Executive Performance Plan 2020-2022. At the request of the RAC a policy was drafted regarding the SB. Many factors are weighed in the composition of Board because it presented a good opportunity to get to the ancillary positions of Executive Board members, TenneT’s Supervisory Board, including the nature of the know each other better in an informal setting. Financial statements including topics such as time to be spent and remuneration company, its diversity and the required expertise and The Supervisory Board examined the Integrated Annual paid. In within reason the Supervisory Board welcomes background of its members. In May 2019, the Supervisory Company Secretary Report 2019, the financial statements 2019 and independent Executive Board members engaging in ancillary activities Board nominated three new members to join it and these The Supervisory Board would like to thank the auditor’s report, the assurance report of the independent not linked to their employment; time spent is explicitly were appointed by the Shareholder Stijn van Els was company secretary, Saskia van Rassel, who stepped auditor related to non-financial information, the management discussed in the yearly performance dialogue. co-nominated by the Dutch Works Council exercising its down in January 2020. Her support for the Supervisory letter and the audit results report issued by TenneT’s external right of recommendation. The works council conducted Board and the Executive Board was highly valuable auditor. This review is based on the Audit, Risk and HR Strategic plan this selection and nomination process in close collaboration and greatly appreciated. Compliance Committee’s preparatory work and advice. As a The RAC discussed with HR their work towards with the RAC. result, the Supervisory Board endorses the documents and establishing a harmonised people operating model to Closing words recommends that the General Meeting of Shareholders effectively organise TenneT’s demand and supply in Evaluation of the Supervisory Board TenneT’s significant achievements are only made possible by adopts the financial statements. The Supervisory Board the Netherlands and Germany. The Supervisory Board evaluated its own performance the hard work, dedication and continuous commitment of its recommends that the General Meeting of Shareholders at the end of 2018, supported by an external consultant. employees. We would like to thank them wholeheartedly or discharges the Management Board members from liability in Diversity The outcome was discussed in early 2019. One of the their efforts during this year. respect of its management of the company and releases the TenneT aims for its Executive Board and Supervisory Board topics addressed was the duration of the meetings. Supervisory Board from liability in respect of its supervision. to be comprised of people from diverse backgrounds with Previously, it was agreed not to spend a whole day on The Supervisory Board advised and oversaw the policies a range of experience, skills and knowledge. TenneT values regular SB-meetings. However reducing them to half a of the Executive Board during 2019, helping to ensure that Remuneration & Appointments Committee this diversity and believes it contributes positively to the way day was considered by some to be too short. Furthermore, TenneT continues to play a leading role in the fast-changing The Remuneration & Appointments Committee (RAC), situations are assessed and decisions are made. Bearing finding a balance between dialogue/discussion and and challenging European electricity market. We look as a committee of SB, is tasked with the company’s in mind the Dutch Civil Code and the Dutch Corporate decision making remains a point of attention. Another topic forward continuing our work in 2020. remuneration policy and the remuneration of individual Governance Code, the Supervisory Board set a gender addressed in the evaluation was allowing ample time to board members. The Remuneration & Appointments diversity target for 30% female directors, both executive attend to the increasingly complex issue of stakeholder Committee also establishes criteria for (re)appointing new and non-executive. The Supervisory Board is aware that management. statutory Executive Board and Supervisory Board members even after the appointment of Manon van Beek as CEO, and supervises the recruitment process. Furthermore, it is TenneT’s Executive Board could further increase in diversity. responsible for the management review and succession planning for the Executive Board. 64 Integrated Annual Report 2019 - TenneT Holding B.V. 65


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    Remuneration policy Supervisory Board Report Remuneration policy Service agreement and compensation Pensions for early termination The directors participate in a pension regulation according The remuneration policy has been determined by the Shareholder and is effective Directors are appointed as statutory directors for a period to pension as defined in the collective labour agreement as of 2011. The most important elements of the current remuneration policy are of four years. The total set of agreed employment terms and as applicable for all employees in the Netherlands. and conditions is recorded in a service agreement for an The employers and employee contribution for the directors described below. undefined period. If the contract is terminated by the is the same as for all other employees. The applicable company within that period, compensation (‘severance pay’) pension regulations define the pensionable salary up to Employment market reference group If, in the opinion of the Supervisory Board, the will be limited to the equivalent of one year’s salary. the fiscal maximum of EUR 107,593 (gross pension). Remuneration for the directors of TenneT Holding B.V. maximum remuneration as required by the shareholder No severance pay is offered in case of voluntary leave or (TenneT) has been set using a benchmark, comparison leads to unacceptable risks to the organisation because in the event of termination by the company for urgent cause. TenneT directors receive the same compensation as with organisations competing in the same business the available candidates do not have the right profile TenneT employees with an income above the fiscal and employment markets as TenneT. These organisations or necessary experience, the Supervisory Board shall Other allowances and secondary benefits maximum pension salary. The compensation is based on include: consult the Shareholder. The total remuneration package for directors includes an the fiscally allowed age dependent premium percentages • International transmission system operators (TSOs); appropriate and fiscally acceptable allowance for necessary up to fiscal maximum pension salary. These percentages • Infrastructure operators; The Supervisory Board decides on the annual increase expenses, the use of a lease car (of a type comparable are also applied above the fiscal maximum pension salary • Installation specialists/engineering firms; in the base salary. If the total remuneration of a statutory to those provided to directors of similar organisations) of EUR 107,593, to calculate the contributions. After tax, • Construction companies; director has reached its maximum, further increases will be including possible private use, accident and directors’ the resulting net contributions are paid to the directors. • Financial institutions. limited to the structural increments as agreed upon in the and officers’ liability insurance, and thirty days’ paid leave Collective labour agreement which is applicable to all Dutch per annum. Employment contracts of directors The companies in the benchmark group are divided TenneT employees. appointed before 2011 into three sub-groups, (semi) public (50%), private (25%) Secondary benefits also include a nominal contribution The current remuneration policy as described above does and international TSOs (25%). The remuneration norm Variable remuneration towards health insurance premiums and the choice of not affect the agreed employment terms and conditions of for TenneT directors has been determined on the basis To further encourage the achievement of the company’s other flexible individualised benefits as well as a directors appointed before 2011. of the level of the (weighted) median of the subgroups objectives, part of the directors’ remuneration is linked percentage of the fixed salary in the form of an and the specific responsibilities of the position concerned. to certain challenging targets. The variable remuneration employer’s contribution to a life-course savings scheme. Revision of the policy criteria support the realisation of TenneT’s strategic The percentage is established by the collective labour In 2019 the revision of the policy is discussed on several As part of its analysis, the shareholder tests the objectives and therewith long-term value creation. agreement. The above benefits are applicable to all occasions with the Shareholder. remuneration norm for TenneT directors against a group These are set in advance by the Supervisory Board and TenneT employees in the Netherlands. The company of reference companies relevant to TenneT, comprising 75% include those of a public or societal nature and focus on does not extend loans, loan guarantees or advances against (semi) public and 25% private companies. long-term value creation. The annual variable remuneration future earnings to any director. of the company’s statutory directors is limited to 20% of The Remuneration & Appointments Committee takes note their fixed annual salary. of the individual Executive Board member’s view concerning the level and structure of their own remuneration. Performance criteria fall into four categories: security of supply and safety, strategy, operations and finance. Remuneration norm The comparative weighting of these performance categories The benchmarking method as applied by TenneT results varies from one year to the next, and differs according to in a ‘norm’ level of remuneration for TenneT directors the individual director’s portfolio. The criteria are a mix of that exceeds the maximum desired by the Shareholder quantitative and qualitative targets. Each category includes of EUR 383,160 (as of 1 January 2019). certain public or societal objectives and does not account for less than 20% of the total. If, within a reasonable period On the appointment of a new statutory director, the after determining the variable remuneration, it is established Supervisory Board shall, at the request of the Shareholder, that the award needs to be adjusted as a result of factors limit the sum of fixed and variable remuneration. For 2019, unknown when the award was made, the Supervisory this limit is set at EUR 383,160. Board shall decide whether and the extent to which the award of the variable remuneration needs to be revised. 66 Integrated Annual Report 2019 - TenneT Holding B.V. 67


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    Board remuneration Supervisory Board Report Board remuneration M.J.J. van Beek B.G.M. Voorhorst O. Jager Realised Maximum Realised Maximum Realised Maximum The section on the board remuneration specifies the current remuneration for the statutory directors in 2019, their success at meeting set targets and the resulting Secure supply today and tomorrow 21.0% 25.0% 21.0% 25.0% 21.0% 25.0% Energise our People and our organisation 22.0% 25.0% 22.0% 25.0% 22.0% 25.0% awards of variable remuneration. The report also specifies the remuneration received Safeguard our financial health 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% by the members of the Supervisory Board. Drive the Energy Transition 20.0% 25.0% 20.0% 25.0% 20.0% 25.0% Total variable remuneration realised in 2019 88.0% 100.0% 88.0% 100.0% 88.0% 100.0% Remuneration of the statutory directors Total remuneration The table below shows the realisation for the quantitative Financial Health. Each pillar contains quantatitive and Variable Fixed remunera- Total targets Security of Supply Today and Tomorrow, Energise qualitive targets. remunera- tion remunera- Gross Net Total 2019 (in EUR thousand) tion (annual) tion Pension pension pension Other our People and our Organisation and Safeguard our M.J.J. van Beek 320 56 376 26 27 53 12 Target 1) Realised B.G.M. Voorhorst 286 50 336 25 35 60 16 Secure supply today and tomorrow O. Jager 283 50 333 24 23 47 21 SAIDI NL 110/150kV ≤ 2,00 min 0,94 min Total 889 156 1,045 75 85 160 48 ASIDI NL 220/380kV 0,00 min 0,00 min ASIDI GE 220/380kV 0,00 min 0,0002 min Variable Fixed remunera- Total ASIDI Offshore ≤ 628hrs 597 hours remunera- tion remunera- Gross Net Total Energise out People and our organsation 2018 (in EUR thousand) tion (annual) tion Pension pension pension Other Total Recordable Incident Rate ≤ 3,2 4.8 M.J.J. van Beek 1) 103 21 124 8 9 17 4 Investigation Index 100.00% 95.00% J.M. Kroon 2) 272 44 316 38 4) 150 4) 188 11 Safeguard our financial health U.T.V. Keussen 3) 59 N/A 59 44 - 44 2 EBIT ≥ 692M 768M B.G.M. Voorhorst 276 48 324 23 31 54 19 ROIC ≥ 4,4 5.1 O. Jager 269 49 318 23 23 46 19 1 As to the more qualitative criteria with respect to Secure Supply Today and Tomorrow and Drive the Energy Transition Total 979 162 1,141 136 213 349 55 the Supervisory Board concluded that most of the targets have been met. These targets are linked to long-term value creation. 1 From 1 September 2018. 2 January - September 2018, Mr. Kroon left TenneT 30 September 2018. Pension cost For the Dutch statutory directors the secondary benefits 3 January - February 2018, Mr. Keussen left TenneT 28 February 2018. The pensions of all Dutch statutory directors are as included in the remuneration table, include the 4 Including a pension compensation of EUR 87,045 of his individual pension plan over the period October 2018 – June 2019. administered by the ABP Pension Fund. The pension contribution to the so-called “levensloop” savings accrual is based on an average pay system till the fiscal scheme based on the collective labour agreement, Fixed remuneration Variable remuneration maximum (gross pension). Over the fixed remuneration a contribution to health insurance and a budget for Due to the adjustment of the variable remuneration to 20%, The Supervisory Board decided on the statutory directors’ above the fiscal maximum the Dutch statutory directors flexible terms of employment. the Supervisory Board decided in July 2019 to equalise the variable payment realisation percentages over 2019 based can participate in a net pension system. fixed remuneration of the other two statutory board on the achievement of present criteria. The criteria are Each statutory director received a monthly allowance members to 90% of the fixed remuneration of the CEO. linked to the four strategic pillars of the sharpened strategy. Other allowances and secondary benefits for necessary business expenses, of EUR 2,196 a year. With this adjustment their remuneration is aligned to the The realised percentages are included in the table below. All statutory directors use a company car, the value of This monthly allowance is not included in the table as it is a remuneration policy. In accordance with the indexation The Supervisory Board has concluded that there are no the private use of this car as shown in the table is based compensation of costs and not a remuneration component. as of July 2019 and the indexation in February 2020 current insights that might lead to the revision of the on the taxable value in the domestic country. In addition, for employees as determined by the collective labour variable remuneration paid out in former years. with respect to the private use of leased vehicles, the The total remuneration paid to the statutory directors agreement for TenneT, the salaries of all statutory directors customary addition to taxable income is applicable for is reconciled to and further disclosed in the will be indexed by 1% as of January 2020 and 3.5% as of personal income tax purposes. note 3.2.2 of the consolidated financial statements. February 2020. The company does not reimburse its directors for any personal income tax consequence resulting from the private use of leased cars. 68 Integrated Annual Report 2019 - TenneT Holding B.V. 69


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    Board remuneration Supervisory Board Report Remuneration ratio The remuneration ratio to senior management is measured The total remuneration received by the Supervisory Board in The remuneration ratio to employees is measured by by comparing CEO annual total compensation with median their capacity as Supervisory Board members in 2019 was comparing CEO annual total compensation with median annual total compensation, including fixed salary, variable as follows: annual total compensation, including fixed salary, variable remuneration and pension benefits of senior management 2019 2018 remuneration and pension benefits of all other employees. employees. Fixed Committee Fixed Committee (in EUR thousand) remuneration fee Total remuneration fee Total Remuneration ratio 2019 2018 2017 A.F. van der Touw 29 12 41 16 7 23 P.M. Verboom 23 12 35 24 14 38 Remuneration ratio to employees 5.4 5.6 7.5 L.J. Griffith 21 5 26 20 7 27 Remuneration ratio to senior management 2.1 2.2 2.8 R.G.M. Zwitserloot 21 5 26 20 11 31 E.M Schöne 1) 14 4 18 - - - Remuneration of the Supervisory Board In May 2019 the Shareholder appointed three new members E. Kairisto 1) 14 5 19 - - - The remuneration policy for the Supervisory Board defines for the Supervisory Board. A.C.C. van Els 1) 14 7 21 - - - the remuneration for the different roles and committees of A.W. Veenman - - - 5 2 7 the Supervisory Board. Each Supervisory Board member is The responsibilities on the committees are as follows: S. Hottenhuis - - - 12 7 19 either a member or chair of one or two committees. Total 136 50 186 97 48 145 The changes in the Supervisory Board during 2019 and the Audit, Risk Remuneration and and Strategic impact on the remuneration of the Supervisory Board are Supervisory Compliance Appointments Investments reflected in the table above. Board Committee Committee Committee A.F. van der Touw Chair Member Member At the end of 2018, the composition of the Aufsichtsrat of P.M. Verboom Vice-chair Chair Member TenneT TSO GmbH had to be reassessed due to changed R.G.M. Zwitserloot Member Chair legal requirements (given the size of the company in L.J. Griffith Member Chair Germany). The Aufsichtsrat is a governance body for the E.M. Schöne 1) Member Member German corporate units; it’s therefore not considered a E. Kairisto 1) Member Member committee of the Supervisory Board. Two members of the A.C.C. van Els 1) Member Member Member Supervisory Board of TenneT Holding BV (Mr Zwitserloot and Mrs Griffith) are also member of the Aufsichtsrat and 1 Appointed as per 1 May 2019. received, just like the other Aufsichtsrat members, a remuneration of Euro 15.000 over 2019 for this role. The Shareholder decided to introduce an annual indexation The Supervisory Board remuneration was indexed with Mrs Van Beek, CEO of TenneT Holding BV and (qualitate of the Supervisory Board remuneration following the 3% as of 1 January 2019 and will be indexed with 1% as qua) Chair of the Aufsichtsrat, waived the remuneration. collective labour agreement, as of 1 January 2015. of January 2020 and 3,5% as of February 2020. (EUR) Chair 29,105 per annum Vice-chair 23,409 per annum Member 20,890 per annum Audit, Risk and Compliance Committee 6,959 per annum Remuneration and Appointment Committee 5,504 per annum Strategic Investment Committee 5,504 per annum 70 Integrated Annual Report 2019 - TenneT Holding B.V. 71


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    Our Supervisory Board Supervisory Board Report Our Supervisory Board A.F. (Ab) P.M. (Pieter) R.G.M. (Rien) L.J. (Laetitia) E.M. (Edna) E. (Essimari) A.C.C. (Stijn) van der Touw Verboom Zwitserloot Griffith Schöne Kairisto van Els Chair of the Supervisory Vice Chair Supervisory Member of the Member of the Member of the Member of the Member of the Supervisory Board / Member of the Board / Chair Audit, Supervisory Board / Supervisory board / Supervisory board / Supervisory Board / Board / Member Strategic Audit, Risk & Compliance Risk & Compliance Chair of the Strategic Chair of the Member Strategic Member of the Audit, Investments Committee / Committee / Member Committee / Investments Committee Remuneration & Investments Committee Risk & Compliance Member Remuneration & Remuneration & Member of the Strategic Appointment Committee Committee Appointments Committee Appointments Investments Committee Committee 64, Dutch (m) 69, Dutch (m) 70, Dutch (m) 54, Dutch (f) 48, German (f) 53, German and Finnish (f) 55, Dutch (m) Initial appointment: Initial appointment: Initial appointment: Initial appointment: Initial appointment: Initial appointment: Initial appointment: 1 June 2018 18 September 2012 24 November 2010 1 July 2015 1 May 2019 1 May 2019 1 May 2019 End of first term: End of second term: End of third term: Expiry second term: Expiry first term: Expiry first term: Expiry first term: 1 June 2022 18 September 2020 24 November 2020 1 July 2023 1 May 2023 1 May 2023 1 May 2023 Principal position: Principal position: Principal position: Principal position: Principal position: Principal position: Principal position: • Former CEO Siemens • Former CFO of RFS • Former CEO of • Former State Councillor in • Member Executive Board • Former CFO Hochtief • Former CEO Shell Germany Nederland Holland Holding Wintershall AG the Advisory Division of Euler Hermes AG Solutions AG (until 1 April 2018) • Former Executive Vice the Dutch Council of President and CFO of Other positions: State Other positions: Other positions: Schiphol Group • Member of the • Member Supervisory • Vice-president Executive Aufsichtsrat TenneT Other positions: Board Fortum Oyj Committee VNO/NCW Other positions: TSO GmbH • Member of the • Member Supervisory • Vice-president Board • Managing Director • Member of the Aufsichtsrat TenneT TSO Board Freudenberg SE Deutsch-Niederländische DESAJO BV as of Supervisory Board of GmbH • Member Supervisory Handelskammer 1 March 2019. Royal VOPAK N.V. • Chair Supervisory Board Board Applus+ • Chair Supervisory Board • Expert lay member of the • Member of the Holding Nationale Goede Services SA Universiteit Leiden Dutch Enterprise Court Supervisory Board of Doelen Loterijen • Chair Board Dutch Amsterdam Capital • Chair board Nederlands Bach Association Trading Commodities Filmfonds • Chair Board Fonds Group B.V. • Member of the Slachtofferhulp • Member of the Supervisory Board of • Chair Supervisory Supervisory Board of Gassan Diamonds B.V. Board NIBA Amsterdam Capital • Member of the • Member Board GAK Trading FS Holding B.V. Supervisory Board of Foundation • Member of the ABN AMRO • (External) member Supervisory Board of Ondernemingskamer Vroon B.V.s Gerechtshof ’s Gravenhage 72 Integrated Annual Report 2019 - TenneT Holding B.V. 73


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    Corporate governance Governance and risk management The meeting may also discharge the Executive Board Diversity and Supervisory Board members from liability from their Diversity is disclosed in the Supervisory Board report. respective activities in the past year. Other shareholder meetings are held as and when deemed necessary by the Deviations from the Dutch Corporate Governance Code Governance Executive Board, Supervisory Board or Shareholder. Certain principles and best-practice provisions in the Code External auditor do not apply to TenneT. The reasons why and to what The General Meeting of Shareholders has the power to extent TenneT decided not to or could not adopt these and risk appoint external auditors to audit the financial statements prepared by the Executive Board. These auditors report to the Supervisory Board and the Executive Board, and their particular principles and best-practice provisions are explained below: management findings are presented in an independent auditor’s report, an assurance report, a management letter and an audit results report. 2.1.3, 3.1.3: Not applicable: no Executive Committee has been established at TenneT. 2.3.8: Not applicable: no delegated Supervisory Board The performance of the external auditors is evaluated member is employed by TenneT. by the Executive Board and the Audit, Risk & Corporate governance Compliance Committee and, if necessary, also by the entire Supervisory Board. 2.3.2: If the Supervisory Board has more than four members, the Code stipulates that the board shall appoint from among its members an Audit Committee, a As a transmission system operator, TenneT plays an important role in society. The external auditors attend all meetings of the Audit, Remuneration Committee, and a Selection and We believe in having a solid governance structure, effective oversight and a Risk & Compliance Committee. They also attend Appointments Committee. The TenneT Supervisory Board Supervisory Board meetings when the independent auditor’s has combined the tasks of the latter two committees into a transparent accountability to all stakeholders. To that end, we comply with the report on the financial statements is discussed and the Remuneration and Appointments Committee. Dutch Corporate Governance Code (hereafter: the Code), insofar as it is applicable. financial statements approved. 2.7.5 - 2.8.3, 3.3.2, 3.3.3: Not applicable: these provisions Internal auditor do not apply to TenneT because it only has one shareholder, The internal auditor attends all meetings of the Audit, namely the Dutch state. Corporate governance structure Supervisory Board Risk & Compliance Committee. TenneT’s corporate governance structure comprises the The Supervisory Board of TenneT Holding B.V. oversees Chapter 4: Regarding paragraph 4.1 TenneT complies with Executive Board, the Supervisory Board and the General TenneT’s general policies and strategy. It carries out its Compliance & integrity officers the Code. Paragraphs 4.2 – 4.4 are not applicable to Meeting of Shareholders. Additionally our internal auditor duties in the interests of the company and its stakeholders, TenneT has a Lead Compliancy & Integrity Officer and a TenneT because it only has one shareholder, namely the and external auditor play an important role in this structure. and also takes into account relevant aspects of corporate Local Compliance & Integrity Officer. All material compliance Dutch state. social responsibility. TenneT has a two-tier board structure, and integrity cases are shared and discussed with the Audit, Executive Board as specified in the Electricity Act. Risk & Compliance Committee. Chapter 5: Not applicable, given TenneT’s two-tier board The Executive Board of TenneT Holding B.V. has three structure, this chapter is not applicable. statutory directors and one non-statutory director. The All information about the Supervisory Board (such as its Related parties Executive Board members have joint authority to represent rules and resignation schedule) is available on our corporate Related party transactions are disclosed in note 7.2 to the company. Each board member also holds limited website. the consolidated financial statements. individual power of attorney. Three members of the Executive Board of TenneT Holding B.V. are managing General Meeting of Shareholders directors of TenneT TSO B.V., three members of the All shares in TenneT’s capital are held by the Dutch state, Executive Board are managing directors of TenneT TSO which is represented by the Ministry of Finance. Under the GmbH and one of these three members is managing Electricity Act, only the Dutch state may hold voting director of TenneT Offshore GmbH. interests in the company. A General Meeting of Shareholders is held within six months of the end of each The Executive Board is responsible for TenneT’s general financial year. The agenda for this meeting includes a policies and strategy, which includes regulated and non- discussion of the integrated annual report, the adoption of regulated activities. the financial statements, and a dividend proposal. 74 Integrated Annual Report 2019 - TenneT Holding B.V. 75


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    Risk management and internal control Governance and risk management Risk management and internal control TenneT regards the following factors as crucial to realise • Structure: policies (e.g. corporate enterprise risk the full value of risk management and internal control for management policy), IT-systems, reports, processes etc. State-of-the-art risk management and internal control is key to efficient and effective the organisation. They are designed in line with stakeholder • People: roles and accountabilities, profile, education and risk-based decision making throughout the TenneT organisation. requirements: skills etc. • Competencies: risk culture and competencies at management level etc. Risk management and internal control • To provide transparency to the boards, internal and objectives external auditors and shareholders so they Key factors of Risk Management Framework To actively apply and advance our risk management system, stay informed about the most significant risks potentially we periodically identify and continuously manage impacting strategic objectives uncertainties (comprising risks and opportunities) affecting the realisation of TenneT’s strategic and operational TenneT’s enterprise risk management and internal control • Risk competence objectives. By applying top notch standards within TenneT’s frameworks are based on ISO 31000 and COSO standards Competencies • Culture and behavior internal control system, we also enhance the efficiency and and are compliant with the requirements of applicable laws effectiveness of our day-to-day processes. and regulations like Dutch Corporate Governance Code, the German Control and Transparency in Business Act • Roles The key objectives of TenneT’s risk management and and the German Accounting Law Reform Act. • Accountabilities People internal control system are: • Rewards & Sanctions • To identify and assess uncertainties with a potentially Enterprise risk management at TenneT is clustered in: negative or positive impact on strategic and operational • Strategic risk management • Policy (department, process and project) objectives • Operational risk management, including project Structure • IT-system • To create risk awareness and open culture of addressing risk management • Training & processes risks and opportunities • Process risk management (such as internal control) • To provide a uniform risk management framework and • Other risk domains, such as asset risk and portfolio tools, which enables the organisation to take risk based management • Strategic objectives decisions founded on relevant, reliable and Stakeholder • Operational Targets timely information and to ensure efficient priority based Requirements • Project Targets • Process Targets resource allocation Risk management and internal control The principles of risk management should be taken into Corporate risk management facilitates top down and account in all activities performed at and for TenneT. bottom up dialogues and workshops as well as special Furthermore, at the heart of the governance system, risk topic analyses. The resulting outcomes provide Mission, Risk management and internal control is interlinked with other management with insights to help take risk-based decisions Business Achieve Vision & Core Management second line of defence functions like risk transfer, business that support the achievement of objectives set at all Objectives Objectives Values Process control, project control and the compliance office as well as organisational levels. third line of defence functions, such as internal audit. Board Level Department, Process & Project Level Derive business objectives strategic objectives • Department level • Project level and internal control processes • Process level (end-to-end) 76 Integrated Annual Report 2019 - TenneT Holding B.V. 77


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    Risk management and internal control framework Governance and risk management Three lines of defence Risk management and internal control framework Supervisory Board (ARCC) Oversight In 2019 TenneT’s full risk management and internal control Project risk management (PRM) cycle was reviewed and subsequently revised. The aim of To meet challenges arising from the enormous investment Executive Board Oversight this was to further strengthen risk management and internal portfolio and related objectives, TenneT started around ten control as a link between goal setting and decision-making. years ago to implement project risk management, first with As a result, state-of-the-art assessment and prioritisation a focus on large projects. PRM aims to boost the likelihood 1st Line 2nd Line 3rd Line External of Defence of Defence of Defence tools and tailor made approaches like adjusted bow-ties of realising project goals on time, on budget and with Audit were introduced in strategic and operational risk a high level of quality. For all large projects, dedicated Own and manage Monitor risk and Provide independent Provide independent management processes. We also increased internal project risk managers systematically review and manage risk and control control in support assurance to the assurance concerning (front line operating of management Executive Board and control focus on the establishment of application controls risks together with project leads within the quality and effectiveness of Lines management). (risk, control, and Supervisory Board 1, 2 & 3 as far as due to increasing level of automation of core and supporting uniformity standards safeguarded by corporate risk compliance functions concerning the relevant (external processes. management. Project risk management has reached a put in place by effectiveness of Lines audit). high maturity level within TenneT. management). 1 & 2 (internal audit). Strategic risk management (SRM) SRM focusses on future events and trends which may Risk & portfolio management Business Risk & Control Internal Management Audit affect strategic objectives in positive or negative ways To strengthen security of supply, TenneT’s asset Business Control (risks vs. opportunities). Corporate risk management helps management uses condition monitoring and risk based the Executive Board to derive and assess uncertainties assessments to plan maintenance and investments. Grid Others and design risk response strategies. Furthermore, constraints are identified by analysing grid components and Compliance TenneT’s strategic risk position is shared and discussed failures and by monitoring the necessary transport capacity. & Integrity with the Supervisory Board and the Audit, Risk & These constraints are assessed according to the risk they Compliance Committee. pose to TenneT’s objectives. Should the risk exceed a predefined level, responses are proposed and included. In 2019 the strategic risk assessment, performed as part of Executive Board interviews and workshops, was strongly Internal control (IC) focussed on the current strategy. Taking a forward-looking Our internal control framework is designed to support and approach, potential risk scenarios were identified, prioritised safeguard the realisation of our process objectives, as well and evaluated. Scenarios related to TenneT’s core playing as fulfil our legal obligations and establish the reliability fields, i.e. trends capable of changing the playing field or of our internal and external reporting. To assess the even creating new playing fields for TSOs. To broaden the effectiveness of this framework and identify opportunities approach, challenges in the fields of ESG (Environmental, for improvement, a control self-assessment is performed by Social and Governance) corporate social responsibility control owners and validated by management twice a year. have been taken into account. The risk management & internal control team performs quality assessments on the outcomes. Internal audit Operational risk management (ORM) randomly checks selected control self-assessments during Operational risks affecting the various business units and the year to form an independent opinion. The outcomes of corporate departments are regularly updated documented these control self-assessments provide direct input for the and evaluated in the course of interviews and workshops Letter of Representation procedure. Identified issues are with senior management to assess the adequacy of reported to the risk management & internal control team, mitigating actions. TenneT’s corporate risk management & which monitors and follows up on mitigating steps with internal control team facilitates the organisation to review the relevant business owners. Overall control effectiveness its risks, opportunities and related responses. is reported in our State of Risk report. TenneT’s updated, operational risk position is part of the Letter of Representation (LoR). We strive for a high-quality and harmonised TenneT wide internal control framework. Our framework has gradually shifted from a core finance perspective towards a business objective driven approach with the inclusion of core business- and non-financial reporting processes. 78 Integrated Annual Report 2019 - TenneT Holding B.V. 79


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    Compliance and integrity Governance and risk management Compliance and integrity There have been 35 data leaks and/or irregularities in 2019 (2018: 49). Where required, they have been reported to the With compliance and integrity, we aim to prevent, detect and respond to compliance relevant authorities. Sessions on the lessons learned were risks that threaten the realisation of TenneT’s strategy and objectives and may lead to held and mitigating measures taken. We also conducted an internal audit on the data protection organisation in 2019. economic or reputational harm. In addition to having clear guidance from corporate and local policies (like the Supplier Code of Conduct, Policy on Gifts & Hospitality, TenneT did not identify any fraud, bribery or corruption Whistleblower Policy, Conflict of Interest Policy and Investigation Policy), the right tone breaches with material impact in 2019. Material impact at the top, leadership principles and a training and communication plan are essential is defined in our risk matrix as a severe breach that has a significant adverse effect on TenneT’s reputation and/or elements of a well-functioning compliance and integrity management system. financial position. As part of Transforming TenneT, TenneT revisited the Besides the day-to-day management of compliance risks organisational design of the company to be prepared for and supporting, advising and handling compliance cases, future growth. The ongoing reorganisation envisages that the project to align the existing compliance management data protection officers will become part of the Compliance system with the ISO 19600, a best practice for international & Integrity department. Furthermore, the team is expected compliance management systems (CMS), made progress to grow with additional resources. The Head of the in 2019. We expect the outline of the CMS and a multi-year Compliance & Integrity department will report directly strategy and implementation plan to be in place by to the CEO and will be part of the Senior Management. mid-2020. We have also implemented the updated At the start of 2019, a new Head Compliance & Integrity Supplier Code of Conduct and Conflicts of Interest Policy. Officer was appointed. The Regional Compliance & Integrity Officer in Germany has not changed. A company-wide mandatory e-learning about compliance and integrity and data protection was rolled out in April for Besides the presence of Compliance & Integrity Officers in the first time. The next e-learnings on REMIT (the regulation the Netherlands and in Germany, TenneT has a Compliance on wholesale energy market integrity and transparency) and & Integrity Committee that deals with compliance and information security were launched in early 2020. integrity issues, comprising members from relevant E-learnings on compliance-related topics will be part of functions (Risk Management & Internal Control, Internal a training curriculum and the HR performance management Audit, Corporate Safety & Security, Human Resources system, i.e. a personal ‘licence to operate’. Corporate, trusted counsellors and Compliance & Integrity Officers). The objective of the committee is to share In 2019, 23 alleged compliance-related breaches were company information on compliance and integrity risks, reported (2018: 18). Three of these alleged violations were raise awareness and mitigate risks by taking action. reported via the whistleblower portal. Four cases resulted The committee met twice in 2019. in compliance investigations, of which two are closed and two in progress. After an initial assessment, the other TenneT also has an independent committee that deals alleged breaches did not result in a compliance investigation with sexual harassment, a whistleblowing policy and a and the majority of the alleged breaches have been closed. procedure for internal and external compliance and integrity None of the breaches were of a material nature that would issues. In the Netherlands, employees can report any have justified disciplinary action. The outcome of the concerns confidentially to either a trusted counsellor or a alleged breaches and investigations has no material Compliance & Integrity Officer, and if the concerns relate impact on the company. to sexual harassment or violence, they can report them to the committee dealing with sexual harassment. In Germany, The Compliance & Integrity Officers have received more employees can report these concerns to their Compliance & than one hundred requests for advice throughout the year. Integrity Officer and the works council. In addition, The majority of the questions relate to gifts, hospitality employees as well as external parties can report compliance and conflicts of interest, but some also relate to the and integrity issues through an independent whistleblower interpretation of legal directives and guidelines, portal, freely accessible on the internet. information security and integrity matters. 80 Integrated Annual Report 2019 - TenneT Holding B.V. 81


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    Key risks Governance and risk management Risk appetite Key risks Risk appetite is the amount and type of risk TenneT is willing to take or not to take, Strategic risks are presented in the section “Our performance in 2019”. in pursuit of value, relative to its major business objectives. This section includes regulatory, reporting, other operational and compliance risks. TenneT’s risk appetite was set by the Executive Board The following graph summarises risk appetite and trends on Regulatory risks for each of our strategic pillars. It is communicated by risks and opportunities assessed by the Executive Board. To Regulatory risk Risk-mitigating actions management, endorsed by the Executive Board and learn more about specific strategic risks please refer to the • Inability to meet exacerbating efficiency targets imposed by • TenneT performs regular reviews of processes and disseminated throughout the company. In terms of the section ‘Our performance in 2019’. incentive regulation. Especially taking into account a strongly organizational structure and introduced lean management. amount of risk that we are willing to accept in relation growing company and the need of investments in innovation. Additionally, TenneT scrutinises the results of efficiency audit by the regulators and disputes or starts litigation, if needed. to our strategic goals, we differentiate between the • TenneT is unable to achieve a reasonable return on its invested • In the Netherlands, TenneT constructively discusses with the following categories: capital as the regulated return continues to decline due to the low ACM the regulatory parameters for the next regulatory • Risk averse (low risk appetite), interest environment and stricter regulatory incentives on its total period. In general, no material changes are expected in • Risk neutral (medium risk appetite) expenditures. ACM's WACC approach. In Germany the discussions focus • Risk-taking (high risk appetite). on the remuneration of investments. Europe • The 'Clean Energy Package' (CEP) has entered into force. It requires • Advocate at the ministry and regulator that redispatch and Risk appetite and trend score a.o. that TSOs provide to the market 70% of the total cross-border other costs are reasonably covered since they arise as an transmission capacity, a number hardly possible without extensive effect of changes in European law. Constantly follow up the and costly redispatch activities. The CEP however allows a linear development of the action plan both in the making (until end Risk Appetite Risk Opportunities fade-in until 2024 if an action plan is provided by governments. This 2019) and in the implementation to ensure technical and Strategic goal Goal description Trend Trend plan might impose costly and hard-to achieve measures on TenneT. financial feasibility of the proposed actions within the - + - + Other provisions of the CEP have a financial impact e.g. how TSOs required timeframe. In addition, TenneT puts resources in the have to use congestion revenues. relevant working groups at European level (ENTSO) to shape Drive the as a green grid operator and a methodologies which are developed at that level such that energy thought leader. they are not harmful for TenneT. transition The Netherlands Energise our • The ACM has initiated the start of the next regulatory period • TenneT is in a constructive dialogue with the ACM to ensure with an inclusive and safe environment people and (starting 2022 with an expected duration of 5 years). The ACM will reasonable efficiency targets and cost recovery. However, where people enjoy coming to work. organisation set the regulatory parameters relating a.o. to the efficiency (based similar to the 6th regulatory period (2014 - 2016), there is a on the international TSO benchmark), cost of capital and recovery risk that TenneT will need to dispute the applied efficiency Secure supply by maintaining the grid to meet reliability of operational expenditures such as procurement of energy and targets before court. TenneT is advocating the regulation today and targets and operating it to its maximum ancillary services. There is the risk that the ACM sets to strict includes forward looking challenges, such as cost recovery tomorrow capability. regulatory incentives, particularly relating to efficiency. for congestion management and positive incentives for innovation. by implementing a regulatory framework to Germany Safeguard support our strategy, and delivering a return • BMWi plans to introduce incentives on redispatch costs. Most • TenneT discusses constructively with BMWi, BNetzA, our financial in line with what our capital providers expect, probably there will be an amendment of the incentive regulation Federal Ministries and Members of the Parliament to achieve health and raising the necessary external financing. including a determination competence for BNetzA to design the an appropriate incentive scheme. Key objectives of TenneT's specific scheme. There is a risk that this scheme does not reflect engagement is to exclude exogenous impacts from the the degree to which redispatch costs can really be influenced by the model and to limit the expected risk of the incentive TSOs. Specifically, there is a risk that completely exogenous scheme. impacts such as influences of the Clean Energy Package (e.g. cross border capacity 70 %) or weather conditions (thus RES infeed), are incentivised. • It is discussed to adjust the remuneration of investments. BMWi • TenneT explains how the financing of investments is to be supposes misplaced incentives to complete investments too late, managed and which incentives are currently in place. but based this thesis on flawed calculations. There is a risk that the Furthermore TenneT together with the other three TSOs investment remuneration scheme changes although there are no delivered correct calculations, showing that there are no misplaced incentives in reality. misplaced investments. In general TenneT argues that the consistency of the investment framework is crucial for the energy transition. 82 Integrated Annual Report 2019 - TenneT Holding B.V. 83


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    Key risks Governance and risk management Reporting risks Compliance risks The table below presents TenneT Holding’s most important The table below presents risks and mitigating actions, reporting risks. grouped according to the three areas general/legal, financial and technical compliance. Reporting risk Risk-mitigating actions • Financial statements do not give a true and fair view of the • Internal control framework, including control Compliance risk Risk-mitigating actions company's financial position, financial performance and cash flows. self-assessments and Letter of Representation procedure. General / Legal compliance Risk-mitigating actions Financial statements are not compliant with applicable laws and • Non-compliance with European or national laws and regulations, • Actively involve experts from Legal Affairs, Procurement, regulations. e.g. regarding health, safety and environment, labour, tendering and Human Resources, Safety & Security, Regulation, etc. • Incorrect (regulatory) reports or information to BNetzA, ACM and/or • Internal and external audit reviews and follow-up on findings. energy markets. Monitoring by Compliance via the LOR procedure. tax authorities. • Use of internal accounting manuals. • Train employees. • Intensive monitoring of internal activities by the Regulatory • Risk of fraud and/or conflict of interest. • Corporate Gifts & Hospitalities policy. department. • Increase cultural awareness via internal communication • Position papers. messages and face-to-face training sessions. • Data analytics. • Non-Compliance with Code of Conduct. • Content of the Code of Conduct is confirmed by all (new) employees via written consent. Operational risks • Compliance Experts explain the principles in the Code of Conduct via training sessions. The table below details TenneT Holding’s most important • Non-compliance with bilateral agreements between TenneT and • Ensure adequate registration of decisions and contracts by operational risks. other TSOs, suppliers, customers, etc. Legal Affairs and other departments involved. Operational risk Risk mitigating actions • Non-compliance with GDPR. • Company-wide process- and data analyses. Awareness • Limited availability of adequate resources – external and internal • Strategic procurement planning and development based on campaigns and trainings and ISO 27001 certification. workforce, material and services. deep demand analyses. • Non-compliance with permits and licenses. • Provide regularly training and awareness programs. • Further integration of external service providers (e.g. via Financial compliance Risk-mitigating actions EPCm). • Non-compliance with financial and tax laws and legislation, e.g. • Actively involve experts from Finance & Control, Treasury, • Further develop employer branding and recruiting process. IFRS, local GAAP, the Dutch Corporate Governance Code, the Tax and Legal departments. Monitoring by Compliance via • Development and qualification of new suppliers and markets. German Control and Transparency in Business Act, the German the internal LOR procedure. Accounting Law Reform Act, etc. • Ensure availability of accounting manuals, treasury statute, • Risk of outages caused by progressing obsolescence of high • Adapt reinforcement strategy to current developments. voltage equipment. etc. • Continuously improve the asset risk based approach. • Use internal and external experts as advisors, if and when • Bundled project portfolio with optimised outage necessary. requirements. • Non-compliance with financing agreements. • Frequent knowledge update by means of training, external • Lacking pro-active safety culture and behaviour. In conjunction with • Further development of safety leadership and behaviour. audit/expert reviews, etc. high pressure on people and projects that might increase the risk of • TenneT successfully completed a re-audit of Safety Culture work-related incidents and accidents. • Quality control by participations control and / or treasury Ladder Level 3. Technical compliance Risk-mitigating actions • (Cyber) Terrorist or state attack against critical infrastructure. • Implementation and certification of Corporate Information • Non-compliance with electricity laws and technical codes, ENTSO-E • Actively involve experts from Asset Management and Security Management System (ISO 27001). operational handbook, electrical safety regulations and standards, System Operations. Assessments by the technical • Improvement projects focusing on protection of physical etc. compliance and quality officer. Use of four eye-principles. assets. • Cooperate with regulatory authorities through the Corporate • Improved detective controls such as new tooling and Asset Owner department. improved security processes. • Involve authorised electrical safety experts and technical • Regular cyber crisis management exercises. strategists. • Update disaster recovery plans with regards to new cyber • Technical Audits. threats. • Public resistance and political opposition against large DC projects • Early involvement of stakeholders, proactive consultation resulting in significant project delays. about identified issues and transparent communication. • Intense talks with political stakeholders on all levels in order to guarantee efficient planning. 84 Integrated Annual Report 2019 - TenneT Holding B.V. 85


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    Financial Statements Financial statements 87 Consolidated financial statements 88 Notes to the consolidated financial statements 95 Company financial statements 147 Notes to the company financial statements 149 Other information 154 Profit appropriation 154 Independent auditor’s report 155 Assurance report of the independent auditor 162 About this report 165 Reconciliation of non-IFRS financial measures 170 SWOT Analysis 171 Key figures: five-year summary 172 Glossary 173 86 Integrated Annual Report 2019 - TenneT Holding B.V. 87


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    Consolidated financial statements Financial statements Consolidated financial statements Consolidated statement of comprehensive income For the year ended 31 December (EUR million) Consolidated statement of income Attributable to equity holders of the company For the year ended 31 December (EUR million) Equity Equity attribut- attribut- able to Non- Notes 2019 2018 Unappro- able to owners control- Hedging Retained priated ordinary Hybrid of the ling Total reserve earnings result * shares securities company interest equity Revenue 3.1 4,422 4,269 Notes 6.2.1 6.2.1 6.2.1 6.2.1 6.2.2 Grid expenses 3.2.1 -1,955 -2,283 Personnel expenses 3.2.2 -229 -214 2018 Depreciation and amortisation of assets 4.1, 4.2, 5.1 -973 -700 Other comprehensive income to be reclassified to profit or loss in subsequent Other operating expenses 3.2.3 -217 -235 years: Other (gains)/losses -6 -26 Amortisation of hedges 6.2.1 -1 - - -1 - -1 - -1 Total operating expenses -3,380 -3,458 Taxation 3.4 - - - - - - - - -1 - - -1 - -1 - -1 Share in profit of joint ventures and associates 5.3 35 69 Operating profit 1,077 880 Items not to be reclassified to profit or loss in subsequent years: Finance income 3 1 Re-measurement of defined benefit pensions 7.1.1 - 5 - 5 - 5 - 5 Finance expenses 3.3 -207 -182 Taxation 3.4 - -2 - -2 - -2 - -2 Finance result -204 -181 - 3 - 3 - 3 - 3 Profit before income tax 873 699 Total other comprehensive income 2018 -1 3 - 2 2 - 2 Income tax expense * 3.4 -243 -181 Profit for the year * - - 397 397 31 428 90 518 Profit for the year 630 518 Total comprehensive income 2018 -1 3 397 399 31 430 90 520 2019 Profit attributable to: Other comprehensive income to be Equity holders of ordinary shares * 6.2.1 541 397 reclassified to profit or loss in subsequent years: Hybrid securities 6.2.1 33 31 Amortisation of hedges 6.2.1 -2 - - -2 - -2 - -2 Owners of the company 574 428 Taxation 3.4 - - - - - - - - Non-controlling interests 6.2.2 56 90 -2 - - -2 - -2 - -2 Profit for the year 630 518 Items not to be reclassified to profit or loss * Income tax 2018 changed from -189 to -181 compared to the 2018 IAR due to a change in IAS 12 explained in note 1.3. As a result profit in subsequent years: for the year also changed. Re-measurement of defined benefit pensions 7.1.1 - -137 - -137 - -137 - -137 Taxation 3.4 - 40 - 40 - 40 - 40 - -97 - -97 - -97 - -97 Earnings per share attributable to the equity holders of ordinary shares For the year ended 31 December (EUR per share) Total other comprehensive income 2019 -2 -97 - -99 - -99 - -99 Notes 2019 2018 Profit for the year - - 541 541 33 574 56 630 Total comprehensive income 2019 -2 -97 541 442 33 475 56 531 Basic and diluted earnings per share 3.5 2,705 1,985 * Unappropriated 2018 result changed from 389 to 397 due to a change in IAS 12 explained in note 1.3. 88 Integrated Annual Report 2019 - TenneT Holding B.V. 89


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    Consolidated financial statements Financial statements Consolidated statement of financial position Consolidated statement of financial position For the year ended 31 December (EUR million) For the year ended 31 December (EUR million) Assets Notes 2019 2018 Equity and liabilities Notes 2019 2018 Non-current assets Equity Tangible fixed assets 4.1 18,541 16,049 Equity attributable to ordinary shares 6.2.1 4,696 3,964 Right-of-use assets 4.2 392 - Hybrid securities 6.2.1 1,120 1,120 Intangible assets 5.1 160 111 Equity attributable to owners of the company 5,816 5,084 Investments in joint ventures 5.3.1 605 529 Non-controlling interests 6.2.2 744 796 Investments in associates 5.3.2 33 37 Total equity 6,560 5,880 Deferred tax assets 3.4 83 15 Non-current liabilities Other financial assets 5.4 61 42 Total non-current assets 19,875 16,783 Borrowings 6.3 9,137 7,964 Contract liabilities 4.3 340 308 Current assets Deferred tax liability 3.4 63 124 Inventories 5.8 66 68 Provisions 5.7 1,163 774 Account- and other receivables 5.5 2,085 2,509 Lease liabilities 4.2 286 - Income tax receivable 3.4 46 60 Net employee defined benefit liabilities 7.1.1 361 208 Cash and cash equivalents 6.4 901 1,253 Other liabilities 3 3 Total current assets 3,098 3,890 Total non-current liabilities 11,353 9,381 Assets of disposal group classified as held for sale 5.2 - 3 Current liabilities Total assets 22,973 20,676 Borrowings 6.3 565 756 Contract liabilities 4.3 3 3 Income tax payable 3.4 242 84 Provisions 5.7 248 86 Other financial liabilities 79 71 Lease liabilities 4.2 108 - Account- and other payables 5.6 3,815 4,414 Total current liabilities 5,060 5,414 Liabilities of disposal group classified as held for sale 5.2 - 1 Total equity and liabilities 22,973 20,676 References relate to the notes starting with note 1 ‘Basis for reporting’. These form an integrated part of the consolidated financial statements. 90 Integrated Annual Report 2019 - TenneT Holding B.V. 91


  • Page 49

    Consolidated financial statements Financial statements Consolidated statement of changes in equity Consolidated statement of cash flows For the year ended 31 December (EUR million) For the year ended 31 December (EUR million) Attributable to equity holders of the company Notes 2019 2018 Equity Equity attribut- Paid-up attribut- able to Non- Operational activities and Share Unappro- able to owners control- called-up premium Hedging Retained priated ordinary Hybrid of the ling Total capital reserve reserve earnings result shares securities company interest equity Operating profit 1,077 880 (EUR million) Notes 6.2.1 6.2.1 6.2.1 6.2.1 6.2.1 6.2.1 6.2.2 Non-cash adjustments to reconcile profit to net cash flows: Depreciation, amortisation and impairment of assets 4.1, 5.1 973 700 At 1 January 2018 100 1,380 4 1,787 442 3,713 1,018 4,731 857 5,588 Result on disposal of assets 4.1 6 22 Profit for the year - - - - 397 397 31 428 90 518 Share in profit of joint ventures and associates 5.3 -35 -69 Total other comprehensive Dividends received from joint ventures and associates 5.3 38 47 income - - -1 3 - 2 - 2 - 2 Movements in provisions and other (financial) liabilities and assets 70 -14 Total comprehensive 1,052 686 income - - -1 3 397 399 31 430 90 520 - Working capital adjustments excluding EEG working capital: Dividends paid 6.2.1 - - - - -147 -147 - -147 -79 -226 (Increase)/decrease in account- and other receivables 5.5 -18 32 Capital repayment 6.2.1 - - - - - - - - -72 -72 (Increase)/decrease in inventories 2 10 Transition effect IFRS 9 1.2 - - - -1 - -1 - -1 - -1 Increase/(decrease) in account- and other payables 5.6 -71 82 Issue of hybrid securities 6.2.1 - - - - - - 101 101 - 101 Increase/(decrease) in contract liabilities 4.3 32 25 Distribution on hybrid Increase/(decrease) in current financial liabilities 8 -23 securities 6.2.1 - - - - - - -30 -30 - -30 -47 126 Appropriation remaining prior year result * - - - 295 -295 - - - - - Income tax paid (net) -200 -239 At 31 December 2018 100 1,380 3 2,084 397 3,964 1,120 5,084 796 5,880 Net cash flows from operating activities excluding EEG Profit for the year - - - - 541 541 33 574 56 630 working capital 1,882 1,453 Total other comprehensive income - - -2 -97 - -99 - -99 - -99 EEG working capital adjustments: Total comprehensive (Increase)/decrease in EEG receivables 5.5 -88 73 income - - -2 -97 541 442 33 475 56 531 - (Increase)/decrease EEG deposits > 3 months 5.5 250 -250 Dividends paid 6.2.1 - - - - -120 -120 - -120 -36 -156 Increase/(decrease) in EEG payables 5.6 -718 137 Capital contribution 6.2.1 - 410 - - - 410 - 410 - 410 -556 -40 Capital repayment 6.2.1 - - - - - - - - -72 -72 Net cash flows from operating activities 1,326 1,413 Distribution on hybrid securities 6.2.1 - - - - - - -33 -33 - -33 Investing activities Appropriation remaining prior year result - - - 277 -277 - - - - - Purchase of tangible and intangible fixed assets 4.1, 5.1 -2,720 -2,324 At 31 December 2019 100 1,790 1 2,264 541 4,696 1,120 5,816 744 6,560 Proceeds from sale of tangible and intangible fixed assets 4.1, 5.1 4 - Capital contribution to joint ventures and associates 5.3 -73 -92 * 2018 Appropriation remaining prior year result changed from 303 and -303 into 295 and -295 due to a change in IAS 12 explained Interest received 3 1 in note 1.3. Net cash flows used in investing activities -2,786 -2,415 Financing activities Net financing Proceeds from borrowings 6.3 1,731 1,930 Repayment of borrowings 6.3 -756 -917 975 1,013 Continuation > 92 Integrated Annual Report 2019 - TenneT Holding B.V. 93


  • Page 50

    Notes to the consolidated financial statements Financial statements < Continuation Consolidated statement of cash flows Notes to the consolidated financial statements For the year ended 31 December (EUR million) We are continuously improving our financial reporting to make it more relevant and Notes 2019 2018 understandable to our stakeholders. These financial statements focus on the key Other financing activities (financial) topics for 2019. Like last year, the notes to the consolidated financial Payment of lease liabilities 4.2 -129 - statements have been grouped into seven sections relating to key topics and figures Interest paid -167 -170 Dividends paid to ordinary shareholders of the company 6.2.1 -120 -147 from a business perspective. Accounting policies are indicated with i, while key Proceeds from capital contributions 6.2.1 690 350 assumptions and estimates are identified by using + in front of the header. Proceeds from issue of hybrid securities 6.2.1 - 100 Distribution on hybrid securities 6.2.1 -33 -30 Dividends paid and capital repayments to non-controlling interests 6.2.2 -108 -151 1. Basis for reporting 96 5.4 Other non-current financial assets 122 133 -48 1.1 General 96 5.5 Account- and other receivables 123 Net cash flows from financing activities 1,108 965 1.2 Basis for preparation 96 5.6 Account- and other payables 124 1.3 Changes in EU-endorsed published IFRS 5.7 Provisions 125 Net change in cash and cash equivalents -352 -37 standards and interpretations effective in 2019 97 Cash and cash equivalents at 31 December 6.4 901 1,253 1.4 Basis for consolidation 98 6. Capital structure and financing 127 Cash and cash equivalents at 1 January 6.4 1,253 1,290 1.5 Significant accounting judgements, estimates 6.1 Capital management 127 -352 -37 and assumptions 98 6.2 Equity 129 1.6 Foreign currency 99 6.3 Borrowings 132 1.7 Changes in presentation 99 6.4 Cash, cash equivalents and bank overdrafts 134 6.5 Fair values 134 2. Segment information 100 6.6 i Accounting policies for financial instruments 135 2.1 Segment analysis 100 6.7 Financial risk management 135 2.2 i Accounting policies applied for underlying financial information 101 7. Other disclosures 139 2.3 Regulatory deferral accounts: reconciliation to 7.1 Net employee defined benefit liabilities 139 IFRS figures 101 7.2 Other commitments and contingencies 143 7.3 Related parties 144 3. Results for the year 104 7.4 Consolidated subsidiaries 144 3.1 Revenue 104 7.5 Events after the reporting period 145 3.2 Operating expenses 106 3.3 Finance expenses 107 Company financial statements 146 3.4 Income tax 107 3.5 Earnings per share 110 Notes to the company financial statements 148 4. Grid investments, other tangible fixed 8.1 Company accounting policies 148 assets and related commitments 111 8.2 Other operating expenses 148 4.1 Tangible fixed assets 111 8.3 Finance income 148 4.2 Right-of-use assets and lease liabilities 113 8.4 Finance expenses 148 4.3 Contract liabilities 115 8.5 Investments in subsidiaries 148 4.4 Commitments and contingencies related to 8.6 Investments in joint ventures and associates 149 investments 116 8.7 Other financial assets 149 8.8 Account- and other receivables 149 5. Other invested capital including 8.9 Equity 150 working capital and provisions 117 8.10 Borrowings 150 5.1 Intangible assets 117 8.11 Account- and other payables 150 5.2 Business combinations 119 8.12 Events after the reporting period 151 5.3 Investments in joint ventures and associates 119 94 Integrated Annual Report 2019 - TenneT Holding B.V. 95

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