Report of the Supervisory Board

This year was largely characterised by the challenges inherent in the energy transition and the means of financing it. In performing our duties, we focus on long-term value creation. Considerable time and attention were additionally devoted to the search for a new CEO and COO. The CTO was also reappointed in 2021.

A number of specific topics that were addressed in 2021 are described below.

Topics

Strategy

Progress on strategy, based on the three strategic spearheads, is a recurring topic for discussion in the Supervisory Board. The strategic spearheads have been translated to ten clear objectives, which will be central in the coming year also. With the aid of a strategic dashboard, Stedin informs the Supervisory Board about execution and progress with regard to the objectives that have been formulated. Many of the tasks related to good grid management and the energy transition are driven by customer demand.

Strategic topics are regularly reviewed in the Supervisory Board meetings. The annual two-day session provides an opportunity for additional in-depth examination of such topics. In a session this year, we extensively considered market facilitation, regulation and administering the energy system. The energy transition is changing the energy system, and with it the way in which Stedin facilitates market parties. Consideration was given to what this means for the work of the Market department and how it is preparing for future developments. In relation to the topic of regulation, in-depth consideration was given to the problems that arise as the rising costs of the energy transition heighten the discrepancy between increased costs and revenues. This resulted, amongst other things, in the plan for addressing long-term financing together with our shareholders.

Other topics that were considered in depth during the year were the Energy Act (which replaces the current Electricity Act and Gas Act) and Transmission Capacity; congestion unfortunately occurs at certain places in Stedin’s service area, too.

DNWG company visit

During the two-day session, we also reserved time to visit our colleagues at DNWG. This visit gave the Supervisory Board a better understanding of the effect of the strategic themes that are important to Stedin on day-to-day working practice. Examples are the energy transition and the integration of DNWG and Stedin.

Strategy recalibration

Looking ahead to 2022, the recalibration of the strategy for the period 2023-2027 will be an important theme. This is necessary because our current strategy only covers the period until the end of 2022. This year, a team with new Board of Management members took office; they will work intensively, including with our shareholders, on detailing the strategy for the coming years with the aim of producing a good and well-supported plan.

Composition of the Board of Management

Several important changes took place in the Board of Management in 2021. In September 2020, the imminent departure of the former CEO Marc van der Linden was announced. Finding a successor in this role and the search for a new COO were important tasks for the Supervisory Board in 2021. Both positions have now been filled, and with the arrival of Koen Bogers (CEO) and Trudy Onland (COO), the Board of Management is complete once again. The process of reappointing David Peters (CTO) was also completed in 2021, and his next term of office commences in January 2022. The new members of the Board of Management have already become well acquainted with the shareholders and other municipalities. In addition, the Supervisory Board and the full Board of Management spent much time together in close consultation during the two-day session in July. The Supervisory Board is very pleased that the right people were found and has every confidence in the Board of Management’s ability to successfully fulfil its challenging task of leading Stedin in these turbulent times.

Financing of the energy transition

Stedin has a substantial need for capital in order to finance the energy transition. This is to be met by various routes. In 2021, this topic was frequently discussed by the Supervisory Board and between the Board of Management and the Supervisory Board. We are pleased that this resulted in an equity injection of €200 million by the shareholders and the issue of cumulative preference shares. That was an important step. Given the substantial need for capital, it is essential that we as Stedin seek a broader basis of contributions towards the financing of Stedin. The Supervisory Board furthermore notes that regulations and the new method decision are lagging behind reality. The reality is that Stedin proactively undertakes investments and that the current regulatory regime fails to take this sufficiently into account. Cooperation on all fronts is of great national and international importance in that connection, as this issue concerns the sustainable future of the Netherlands, and the cost of the energy transition will be enormous.

Stakeholder management and the role of the Supervisory Board as a ‘social antenna’

Stedin is a unique company, not least because of the great diversity of stakeholders with an interest in seeing Stedin thrive. The Supervisory Board fulfils an important role in acting as Stedin’s ‘social antenna’ and ensuring that decision-making takes careful account of the interests of society in general and those of our stakeholders in particular. In that respect, the Supervisory Board pays attention to the different roles that stakeholders can perform. A shareholder of Stedin, for example, has not only a financial relationship but also a political relationship and a customer relationship with the company, amongst other things. Zooming in on various key stakeholders, Stedin joins with Alliander and Enexis in actively engaging with politicians at the national level with the aim of ensuring that there is proper consideration, now and into the future, for the grid managers’ interests. In dialogue with the regulator ACM as well, Stedin’s position was clearly highlighted, and possibilities for improvement in relation to the method decision were addressed. We interact with stakeholders on all fronts, while ensuring visibility of Stedin’s interests.

Climate, Energy Transition & Sustainability

Events in 2021 underlined the importance of finding a solution to the problem of climate change. The energy transition and the use of sustainable energy sources are essential conditions for the success of this endeavour. The pace of decision-making and implementing measures is therefore being raised at the global, European and national level. In that connection, the Supervisory Board observes that the grid managers, and hence Stedin also, have a new key role in facilitating the acceleration in the energy transition. That requires Stedin to be in a position to make the right investments on time, those investments should be responsibly financed and laws and regulations should permit the fulfilment of a new key role. It is essential that Stedin be able to facilitate the energy transition through its grids and that action be taken to prevent the network from forming a bottleneck. While disappointing, the fact that Stedin was forced to report capacity limitations in 2021, for the first time, was to be expected. A future-proof grid and grid management are criteria for a successful, accelerated energy transition. Stedin accepts its responsibility in this regard, as is also shown by its actions to electrify its vehicle fleet and reduce its environmental footprint. In 2021, the Supervisory Board also approved the issue of Stedin Group’s second green bond. This is in keeping with the strategy for sustainable business operations.

Safety

The Supervisory Board notes that all the efforts that have been made in the past few years in the field of safety have clearly produced results for all those involved, including customers and the environment. The safety ratios were again improved in 2021. The Supervisory Board monitors safety within the company via a periodic dashboard. Safety awareness in a broad sense is given considerable attention within the company, through the execution of the multi-year safety programme HRO (High Reliability Organisation). The Supervisory Board endorses the importance of this programme for a company such as Stedin.

Resilient employees

The Supervisory Board also views the shortage of technical staff as a major constraint. Stedin has made good progress with strategic personnel planning. In addition, Stedin actively invests in people. The In-house training school is amongst the many resources available to Stedin for providing its own training programmes. We are therefore proud that a further 208 employees were trained as fitters this year.

Supervisory Board’s role as employer

In 2021, the Supervisory Board conducted performance reviews with the members of the Board of Management. Amongst the topics addressed were the progress of the annual plan, achievement of the strategy and personal development.

Other important topics

In addition to the topics singled out above, the Supervisory Board devoted attention to the following topics:

• The preparation of the meetings of shareholders;
• Prioritisation and establishment of the material topics and materiality matrix of Stedin Group
• Approval of the internal audit annual plan;
• Public affairs;
• Cybersecurity.

Composition, working method and meetings

The Supervisory Board held five regular meetings in 2021, two specifically to consider the annual report and half-year report and several extra meetings that were organised for the purpose of discussing long-term financing. The regular meetings were always preceded by a consultation of the Supervisory Board, behind closed doors. The full Board of Management attended the Supervisory Board meetings. The agendas for the meetings were prepared by the secretary, in consultation with the Board of Management and the chair of the Supervisory Board.

The Supervisory Board has appointed Elise Reeker as company secretary with effect from 13 February 2021. She is succeeding Suzanne van Nieuwenhuijzen.

Dick van Well stepped down as a member of the Supervisory Board with effect from 12 February 2021. Theo Eysink's term of office as a member of the Supervisory Board was set to expire on 1 February 2021; at the Extraordinary General Meeting of Shareholders (EGM) of 12 February 2021, he was reappointed for a second term of four years by the general meeting.

Committees

The Supervisory Board has two committees, the Audit Committee and the combined Selection, Remuneration and Appointments Committee (SRA Committee). The committees prepare decision-making for the Supervisory Board in the area of responsibility concerned and advise the Supervisory Board. All members of the Supervisory Board have access to the documents as well as the draft and finalised minutes of the committees. In the next Supervisory Board meeting to be held, feedback from the committees is provided by the chairs of the AC and SRA committees and decision-making takes place.

Audit Committee

Theo Eysink chairs the Audit Committee. The regular topics discussed in the Audit Committee are the internal risk management and control systems, cybersecurity, treasury, internal audit and compliance. In this year’s meetings, extensive attention was also given to the long-term financing, the finance transformation plan, the performance benchmark of the grid managers and the further development of control information. The meetings, of which seven were held in 2021, are attended as standard by the CFO, the internal audit manager and the external auditor Deloitte. The Compliance Officer attends as a guest at least twice a year. The terms of reference of the Audit Committee have been posted on the Stedin Groupwebsite.

Selection, Remuneration and Appointments Committee

Hanne Buis is the chair of the Selection, Remuneration and Appointments Committee. A lot of attention was paid to the selection of a new CEO and COO and the reappointment of the CTO. The recruitment and selection of a new member of the Supervisory Board was one of the topics; in line with the governance agreements, consultation took place on this with the delegation of shareholders. Other topics included the continuing education for Supervisory Board members, self-assessment and the amendment of the profile for the Supervisory Board (adopted in the General Meeting of Shareholders in September 2020). The remuneration of the Board of Management members and Supervisory Board members for 2021, which is in accordance with the adopted remuneration policy and respects the limits of the Senior Executives in the Public and Semi-Public Sector (Standards for Remuneration) Act, is described in the Remuneration report for 2021 section. The terms of reference of the Selection, Remuneration and Appointments Committee have been posted on the Stedin Groupwebsite.

Self-assessment and education

The self-assessment was carried out in several steps in 2021, supported by an external facilitator. The outcomes of questionnaires and individual interviews were presented to the Supervisory Board and discussed at the offsite retreat in July. The main outcomes of this process were shared with the members of the Board of Management. One of the results this led to was further enhancement of the Supervisory Board’s role in acting as a sparring partner for the members of the Board of Management.

As members of the Supervisory Board, we believe it is important to develop continually. The world around us is changing rapidly, and we will have to change with it if we are to serve effectively in our role. In addition, we elected to receive refresher training, in the form of a customised Nyenrode programme, in two modules (Developing Corporate Governance and Leadership in Transition Processes).

Independence of members of the Supervisory Board

The articles of association and the terms of reference of the Supervisory Board include provisions on the independence of Supervisory Board members. The composition of the Supervisory Board is such that its members are able to operate independently and critically in respect of one another, the Board of Management and any particular interests involved. The independence requirement for supervisory board members pursuant to the Corporate Governance Code is complied with in full. A permitted exception applies with regard to independence within the meaning of the Electricity Act and the Gas Act, as Annie Krist also serves as CEO of GasTerra.

Supervisory Board members report their ancillary positions, if any, to the chair and the secretary of the Supervisory Board. None of the Supervisory Board members exceeds the maximum number of supervisory positions at large Dutch companies or major foundations. The topic of ‘ancillary positions’ was discussed last year in the Supervisory Board meeting on 29 September 2021. No material transactions occurred in 2021 that involved potential conflicts of interests between the company and Supervisory Board members.

Contacts with shareholders

In 2021, the contacts between Stedin and the shareholders were intensified, mainly in connection with the process concerning the long-term financing. Within the Supervisory Board, the chair in particular was closely involved in this process, and consultation regularly took place with the other Supervisory Board members. There was also regular contact with a delegation of the shareholders’ committee on and involvement in the process of appointment and reappointment of directors. There were four meetings of shareholders, two of which took place in digital or hybrid form. These meetings of shareholders were chaired by the chair of the Supervisory Board.

Contacts with the Works Council

In the context of broadly weighing up stakeholder interests, the Supervisory Board sets great store by good contact with the Works Council. A ‘tripartite consultation’ takes place twice a year; in 2021, this was in July and in December. Besides the members of the Supervisory Board, these are attended by the members of the Board of Management and a delegation from the Works Council. The topics that were discussed in 2021 were stakeholder management and cybersecurity. The chair of the Audit Committee was present when the full-year figures were discussed by the Works Council. This year too, there was pleasant collaboration between the Works Council, the Board of Management and the Supervisory Board. We are proud of the mature manner in which we enjoy a close relationship with the employees through employee participation. You can read more about the Works Council in the section on Good employment practice.

Recommendation to the shareholders concerning the financial statements

The financial statements were prepared by the Board of Management and audited by Deloitte Accountants B.V., which issued an unqualified opinion on them. The members of the Board of Management and the Supervisory Board have signed the financial statements. The Supervisory Board submits the 2021 financial statements to the General Meeting of Shareholders for adoption in 2022, together with the dividend proposal for the 2021 financial year. It is furthermore proposed to the General Meeting of Shareholders to discharge the Board of Management in respect of its management in the financial year 2021 and the Supervisory Board in respect of the supervision exercised over the Board of Management in the same financial year.

Word of thanks

The Supervisory Board wishes to thank the employees, management, the Works Council and the Board of Management for their considerable involvement, professionalism and commitment. We wish to thank the shareholders for their support and the trust they place in Stedin. We would also like to thank Judith Koole who, following her retirement as COO in 2020, had responsibility for specific strategic and administrative tasks in 2021.

Lastly, a word of thanks to the former chair of the Board of Management, Marc van der Linden, who ensured a smooth transfer of his duties to Koen Bogers, who took over the role of chair of the Board of Management with effect from 1 June 2021. We wish the Board of Management as newly composed every success.

Rotterdam, 17 February 2022

The Supervisory Board

Doede Vierstra (chair)
Hanne Buis
Theo Eysink
Arco Groothedde
Annie Krist