Stedin Holding N.V. (below: Stedin Group) is a public limited liability company under Dutch law with its registered office in Rotterdam, is a holding company of subsidiaries and is registered with the Chamber of Commerce under number 24306393.

Stedin Group's main activity is to ensure safe, reliable and affordable energy supply. The grid managers of Stedin Group, Stedin Netbeheer and Enduris, achieve this on the one hand by building and managing the electricity and gas networks and preparing them for the future and on the other hand by facilitating the energy market. Stedin Netbeheer operates in the provinces of South Holland and Utrecht as well as parts of the North-East Friesland and Kennemerland regions. Enduris operates in the province of Zeeland. The subsidiary DNWG Infra provides energy infrastructure services to business customers. Utility Connect is a joint operation with Alliander that focuses on data communication for smart meters.

Stedin Netbeheer and Enduris operate alongside five other Dutch regional grid managers in a regulated market. Each regional grid manager is a monopolist within its own service area. Regulation means that the work performed by the grid operator is set out in law and that the rates are set by the Netherlands Authority for Consumers and Markets (ACM). The regulatory model encourages grid operators to perform as well as possible (in terms of efficiency and quality) by using a benchmark model.

More information on the composition of the Group is provided in note 3 Operating segments and the list 36 Overview of subsidiaries.

The consolidated financial statements have been prepared by the Board of Management of Stedin Group. The 2019 financial statements have been signed by both the Board of Management and the Supervisory Board of the company in the meeting of 23 March 2020 and were adopted by the General Meeting of Shareholders on 13 May 2020.

Unless otherwise stated, all amounts in this annual report are in millions of euros. The historical cost principle is applied. In derogation from this, certain assets and liabilities, including property, plant and equipment and derivatives, are measured at fair value. Unless stated otherwise, these accounting policies have been consistently applied for all financial years included in these financial statements. The accounting policies applied in the financial statements are based on the assumption of the company’s continuity.

No events occurred in 2020 that represent a significant uncertainty for the equity and results as at the end of the financial year on 31 December 2020. For more details, see our annual report.

Coronavirus

The coronavirus has led to the necessary postponement of work – mainly customer-related work – and the rescheduling of work. With a negative impact of around €6 million on the operating result, the overall impact was limited. The impact of COVID-19 was mainly reflected in lower revenue from heavy-use customers and higher costs for absence of own staff due to illness and quarantine measures if they experienced symptoms of illness. This was partly offset by lower costs of contracted work due to the lower level of activity.

Energy transition

The energy transition presents, besides the operational challenge, above all a financing challenge. Stedin expects it will need to invest around 7 billion in the period up to 2030. This amount will be financed in part by positive operational cash flows and can in part be borrowed, but Stedin also expects to need an amount of between €750 million and €1 billion in additional equity. Stedin is engaged in talks on this with its shareholders. To meet the equity requirement in the short term, Stedin will request capital of 200 million.

Changes in corporate income tax rate

In December 2020, the Upper House of Dutch Parliament approved the bill to increase the corporate income tax rate to 25% in 2021 and subsequent years. Calculations performed in 2019 still applied rates of 25% for 2020 and 21.7% as from 2021. These were the future statutory rates in 2019, but they were changed back to 25% in 2020. This means that the deferred tax assets and liabilities are settled at the rate of 25%. The measurement of the deferred tax assets and liabilities as at 31 December 2020 is based on the rate of 25%. For the explanation, see 17 Deferred tax assets and liabilities.

The consolidated financial statements of Stedin Group have been prepared in conformity with IFRS as applicable at 31 December 2020 and as adopted by the European Union (EU) and with the definitions of Part 9, of Book 2 of the Dutch Civil Code. IFRS comprises both the IFRS standards and the International Accounting Standards issued by the International Accounting Standards Board (IASB) and the interpretations of IFRS and IAS standards by the IFRS Interpretations Committee (IFRIC) and the Standing Interpretations Committee (SIC) respectively. Where necessary, the accounting policies of joint operations and associates have been aligned with those of Stedin Holding N.V. The consolidated financial statements have been prepared using the going concern and accruals concepts.

Amended IFRS standards and interpretations

The following amendments to IFRS standards that have been adopted by the European Commission with effect from the financial year 2020 are relevant to Stedin Group and have been applied in preparing the consolidated financial statements.

Interest Rate Benchmark Reform – amendments

The IASB published the 'Interest Rate Benchmark Reform – phase II' (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) as a response to the potential consequences of the IBOR reform for financial reporting if an interest rate benchmark is replaced.

Interbank offered rates (IBORs) are interest rate benchmarks such as LIBOR, EURIBOR and TIBOR, which represent the costs of obtaining unsecured loans in a specific combination of currencies and maturities as well as in a specific interbank loan market. Recent market developments have called into question the long-term viability of those benchmarks.

These amendments do not have consequences for the financial statements of Stedin Group, because there have been no changes to the market interest rate used for hedge accounting. Apart from this, Stedin only recognises financial instruments on the balance sheet that are linked to Euribor, which already complies with the European Benchmark Regulation arising from this amendment and therefore does not need to be replaced.

COVID-19-related rent concessions – amendment to IFRS 16

In May 2020, the IASB issued COVID-19-related rent concessions (amendment to IFRS 16) that provide practical relief to lessees in accounting for rent concessions occurring as a direct consequence of COVID-19, by introducing a practical exemption to IFRS 16, effective from October 2020.

This amendment has no impact on the financial statements of Stedin Group, as no rent concessions have been agreed between Stedin Group and the lessors.

Revised Conceptual Framework

The IASB has revised the Conceptual Framework. The IASB has also updated references in standards so that they refer to the new Framework. The IASB has not amended standards to reflect the changes in the framework, such as revising definitions of assets and liabilities in the standards.

The amendments introduced have no effect on the financial statements of Stedin Group.

Definition of materiality – amendments in IAS 1 and IAS 8

The IASB has implemented amendments in the definition of materiality in response to the concerns experienced by entities in making materiality judgements when preparing financial statements.

These amendments have no impact on the financial statements of Stedin Group.

IFRS 3 – 'Definition of a business'

The IASB has issued 'Definition of a Business (Amendments to IFRS 3)', aimed at resolving the problems arising when an entity determines whether it has acquired a business or a group of assets.

These amendments have no impact on the financial statements of Stedin Group.

New IFRS standards and interpretations relating to subsequent financial years

The following new IFRS standards are relevant to Stedin Group and have been adopted by the European Commission but are not mandatory for 2020. They will be applied from 1 January 2021:

Amendments to IFRS 10 and IAS 28 – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The amendments to IFRS 10 and IAS 28 deal with situations where there is a sale or contribution of assets between an investor and its associate or joint venture. Specifically, the amendments state that gains or losses resulting from the loss of control of a subsidiary that does not contain a business in a transaction with an associate or a joint venture that is accounted for using the equity method are recognised in the parent’s profit or loss only to the extent of the unrelated investors’ interests in that associate or joint venture. Similarly, gains and losses resulting from the revaluation of investments retained in any former subsidiary (that has become an associate or a joint venture that is accounted for using the equity method) at fair value are recognised in the former parent’s profit or loss only to the extent of the unrelated investors’ interests in the new associate or joint venture.

The effective date of the amendments has yet to be set by the IASB; however, earlier application of the amendments is permitted. It is anticipated that the application of these amendments may have an impact on the Group's consolidated financial statements in future periods should such transactions arise. Stedin Group has no other, undisclosed proposed transactions that may have an impact.

Amendments to IAS 1 – Classification of Liabilities as Current or Non-current

The amendments to IAS 1 affect only the presentation of liabilities as current or non-current in the balance sheet and not the amount or timing of recognition of any asset, liability, income or expenses, or the information disclosed about those items.

The amendments clarify that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period, specify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability, explain that rights are in existence if covenants are complied with at the end of the reporting period and introduce a definition of ‘settlement’ to make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services.

The amendments are applied retrospectively for annual periods beginning on or after 1 January 2023, with early application permitted. These amendments have no impact on the financial statements of Stedin Group.

Amendments to IFRS 3 – Reference to the Conceptual Framework

The amendments update IFRS 3 so that it refers to the 2018 Conceptual Framework instead of the 1989 Framework.

These amendments have no impact on the financial statements of Stedin Group.

Amendments to IAS 37 – Onerous Contracts – Cost of Fulfilling a Contract

The amendments specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs that relate directly to a contract consist of both the incremental costs of fulfilling that contract (examples would be direct labour or materials) and an allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract).

The amendments apply to contracts for which the entity has not yet fulfilled all its obligations at the beginning of the annual reporting period in which the entity first applies the amendments. Comparatives are not restated. Instead, the entity shall recognise the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings or another component of equity, as appropriate, at the date of initial application.

The amendments are effective for annual periods beginning on or after 1 January 2022, with early application permitted. It is anticipated that these amendments will have no impact on the financial statements of Stedin Group.

Annual improvements to IFRS Standards 2018-2020

The annual improvements include amendments to four standards.

Amendments to IFRS 1 and IAS 41 do not apply to Stedin Group, as Stedin Group is not a first-time adopter of IFRS (IFRS 1) nor an agricultural business (IAS 41). The amendment to IFRS 16 regards only the removal of an illustrative example and therefore does not apply to the financial statements of Stedin Group.

The amendment that may have an impact is the following:

IFRS 9 'Financial Instruments'

The amendment clarifies that, in applying the ‘10 per cent’ test to assess whether to derecognise a financial liability, an entity only includes fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other’s behalf.

The amendment is applied prospectively to modifications and exchanges that occur on or after the date the entity first applies the amendment.

The amendments are effective for annual periods beginning on or after 1 January 2022, with early application permitted.

Stedin Group has not opted for early application of this amendment and will examine its possible consequences for the financial statements later, but it anticipates that this amendment will not have a significant impact on the financial statements.