Enexis financial policy
*
*General
The objective of the financial policy is to secure funding of the Enexis Group through timely, continuing and adequate access to the international capital and money markets and at the same time to optimise the Group’s funding structure, costs and risks. The financing policy is approved by the Management Board of Enexis and is implemented by the Treasury Department of Enexis.
The Treasury Department has the following duties:
Advising on and effecting external and internal funding transactions
Conduct of day-to-day cash management
Mitigating exchange-rate, inflation and interest-rate risks
Coordinating the Cross Border Lease (CBL) restructuring and compliance
Maintaining contacts with banks, CBL investors, rating agencies and other financial stakeholders regarding Treasury-related matters
The Treasury Department has no profit target and is a cost centre. It uses a defensive financial policy with regard to open financial positions and derivatives. Treasury acts in accordance with its mandate as described in the Treasury Charter and within the statutory frameworks of the Electricity and Gas Act, the Independent Grid Management Act and the Financial Management of Grid Managers Decree (hereinafter, “the Decree”).
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*Dividend policy
The dividend policy of Enexis is based on a pay-out ratio, defined as a percentage of the annual profit after tax of Enexis Holding NV available for distribution, excluding tangible non-cash book profits.
Enexis dividend policy:
For the financial years 2009 and 2010: a pay-out ratio of 30%
After 2010 : a pay-out ratio of 50% subject to the compulsory investments by law being secured
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*Credit rating policy
The company has obtained and maintains credit ratings with two rating agencies (currently Standard & Poor’s (S&P) and Moody’s).
The company will obtain these credit ratings for Enexis Holding NV and Enexis BV.
The target long-term credit rating for both entities is a minimum of S&P A flat/ Moody's A2, both with stable outlook.
This credit rating target provides a buffer in relation to the minimum statutory required creditworthiness of an ‘investment grade rating (BBB/Baa2)’ for Enexis BV, as stated in the Decree.
The single A credit rating is in line with the principles of the Regulator in the compensation according to the weighted average cost of capital (WACC) and thereby in line with the funding costs.
In order to retain the same credit rating for Enexis Holding NV and Enexis BV, our policy is to limit the structural subordination of debt as far as possible.
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*Target financial key figures
The financial key figures on the basis of which Enexis is managed derive from:
the minimum financial key figures as established in the Decree
a conservative financial business policy and associated key figures in order to retain the current published credit ratings
the regulatory WACC as basis for the return on capital
On the basis of the Decree, Enexis BV as a grid manager has a statutory obligation to meet the following financial key figures with regard to interest coverage, debt coverage and capital structure:
| Statutary compulsory key figures | |
|---|---|
| EBIT interest coverage | >=1.7 x |
| FFO interest coverage | >=2.5 x |
FFO / Total debt | >=11% |
| Total debt / (equity + total debt) | <=70% |
In addition, the Decree states as a requirement that at the time of the unbundling, the ratio of total debt to (equity plus total debt) may not be higher than 60%. This key figure may increase to a maximum of 70% if this is the result of compulsory investments in the regulated network after the unbundling.
As an alternative to the statutory compulsory key figures, the Grid Manager can obtain a credit rating of at least investment grade BBB/Baa2. In this case the credit rating is sufficient to meet the statutory requirements and compliance with the above-stated key figures is no longer a requirement.
To support the objective of obtaining a stable credit rating at the desired level, the Enexis management uses the following key figures for both Enexis Holding NV (consolidated) and Enexis BV as minimum measures for its financial policy:
| Target financial key figures Enexis | |
|---|---|
| EBIT interest coverage | >=2.5 x |
| FFO interest coverage | >=4.0 x |
| FFO / net interest-bearing debt | >=20% |
| Net interest-bearing debt / (Equity + net interest-bearing debt) | <=55% |
The above-stated key figures provide a buffer compared to the minimum figures in the Decree and thus constitute the relevant key figures for the financial policy and the Planning & Control cycle of Enexis. By meeting these key figures, we expect to have sufficient potential and flexibility for growth and future investment.
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*Relevant legislation and regulation
The requirements in this respect are based on the Dutch Electricity and Gas Act of 2003, the Independent Grid Management Act of 2006 and the Financial Management of Grid Managers Decree of 2008.
The policy of Enexis is to continually meet the requirements of the relevant legislation and regulation by means of applying the right financial structures and ensuring that the statutory financial ratios or credit rating are amply met.
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*Banking policy
Enexis will build and maintain long-term relationships with at least six banks (the ‘core banking group’) in order to secure the availability of adequate stand-by banking facilities. The core banking group will include banks established in the Netherlands and international banks, all of whom will have adequate standing, a wide range of products and strong credit ratings.
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