50Hertz Annual Report 2012

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50Hertz Annual Report 2012

Denmark

Energinet.dk Denmark

SchleswigHolstein

Rostock

Güstrow

Hamburg

Schwerin

Neubrandenburg

Mecklenburg-WesternPomerania

Brandenburg

Lower Saxony

PSE Poland

SaxonyAnhalt

Berlin 220

Frankfurt (Oder)

Potsdam

TenneT

110

380+220

Magdeburg

Cottbus

Halle

Leipzig

110

Saxony

Dresden Weimar

Erfurt

Jena

Eisenach

Hesse

Gera Chemnitz

Thuringia

Zwickau

ˇ EPS C Czech Republic

Bavaria line

Switching Station (in large part with transition to distribution system operators)

line planned / under construction

380 kV

220 kV

line

220 kV

380 kV

Operating voltage ( kV )

380 kV planned / under construction As at : December 2012

TenneT

Legend

380 / 220 kV Other companies

Other companies

System users :

380 kV

Our customers include the regional distribution system operators as well as power plants, pump storage plants, wind farms and big industry connected to the transmission system.

110 380 / 220 kV

HVDC/DC link

400 kV

Grid connection offshore

150 kV

Grid connection offshore planned / under construction

150 kV

Conventional power plant ( lignite- or hard-coal fired, or gas turbine power plant ) under construction Pump storage plant Wind power plant onshore / offshore planned / under construction Wind power plant offshore application

50Hertz at a glance Value

Share in Germany

109,360 km²

~ 31 %

Length of lines

9,980 km

~ 28 %

Maximum load

approx. 15 GW

~ 21 %

approx. 98 TWh

~ 20 %

approx. 42,900 MW

~ 26 %

– of which renewable energy

21,410 MW

~ 31 %

– of which wind energy

12,420 MW

~ 40 %

Surface area

Electricity consumption (according to electricity sales to final consumers as per EEG) Installed capacity

Employees Turnover – of which grid Substations and switching stations As at the end of December 2012

757 EUR 8.6 billion (as per IFRS) EUR 0.8 billion 65

Contents

Shaping the energy transition

6

On track with energy Our profile Company’s executive bodies Interview Report of the Supervisory Board Milestones in 2012 Staying poised Crossing borders Transparency and dialogue Cooperation with science and research Planning for the grid of the future New technologies Grid extension onshore Catching wind at sea Corridors of ecological value Commitment out of conviction Our employees – well equipped

8 9 10 12 16 18 22 23 24 27 30 32 34 38 40 42 44

Report on the fiscal year 2012 of 50Hertz Transmission GmbH

48

Business and general background conditions 50 Fiscal year 64 Statement of financial position 64 Income statement 66 Cash flow statement 67 Statement of changes in fixed assets 68 Notes to the financial statements 70 Company boards 84 Audit opinion 85

Report on the fiscal year 2012 of 50Hertz Offshore GmbH Business and general background conditions Fiscal year Statement of financial position Income statement Cash flow statement Statement of changes in fixed assets Notes to the financial statements Audit opinion

86



88 94 94 96 97 98 100 107

01

Shaping the energy transition

On track with energy

8

Our profile

9

Company’s executive bodies

10

Interview

12

Report of the Supervisory Board

16

Milestones in 2012

18

Staying poised

22

Crossing borders

23

Transparency and dialogue

24

Cooperation with science and research

27

Planning for the grid of the future

30

New technologies

32

Grid extension onshore

34

Catching wind at sea

38

Corridors of ecological value

40

Commitment out of conviction

42

Our employees – well equipped

44

On track with energy

As Europe’s champion in the integration of renewable energy sources, we set the standard for putting the energy transition into effect. The foundation for accelerated energy transition was laid in 2011. In putting the 13th Act to amend the Atomic Energy Act (Atomgesetz – AtG) into effect, Germany’s policymakers have resolved to completely phase out nuclear power by 2022 and together with the amendment to the Energy Act (Energiewirtschaftsgesetz – EnWG) and Grid Extension Acceleration Act (Netzausbaubeschleunigungsgesetz – NABEG), established the legislative base

for the energy transition. Comprehensive reorganisation of energy infrastructure is necessary for the energy supply of tomorrow. Modernization and appropriate extension of the electricity grid are important steps towards the success of the energy transition. This can only succeed if the different dimensions – security of supply, economic success and ecological compatibility – are harmonised with social acceptance. It is with this goal in mind that we are putting the energy transition on track.

Shaping the energy transition Annual Report 2012 • 9

Our profile 50Hertz – energy for a world in motion As a transmission system operator in the heart of Europe, we are committed to the secure integration of renewable energy sources, development of the European electricity market and maintaining high security of supply standards. We take care of the operation, maintenance, planning and extension of the transmission system – with voltage levels of 150, 220, 380 and 400-kilovolt – in northern and eastern Germany. At a length of some 9,750 kilometres, our grid covers an area of 109,360 square kilometres. This is similar to the distance from Berlin to Rio de Janeiro.

We are pioneers in the development of versatile, sustainable and reliable electrical systems for the energy transition; in the process, we link onshore and offshore assets and create new opportunities.

We ensure the grid integration of more than 20 gigawatt wind turbine and photovoltaic systems, including over 40 per cent of the wind power capacity installed in Germany, by feeding the electricity into our grid and forwarding it to the centres of consumption. We are Europe’s pioneer in this area. Our grid forms the backbone for the secure supply of electricity to more than 18 million people – 24 hours a day, seven days a week, 365 days a year. Our name says it all! ‘50 Hertz’ is the set-point frequency in the electricity grid and forms the basis for the secure supply of electricity. The core mission of every transmission system operator is to maintain the stability of this system frequency at all times. Together with our national and international part­ ners, we keep the pulse of European electricity supply at a steady ‘50 Hertz’. Moreover, we drive forward development of the electricity market by reliably integrating the various

renewable energy sources into the grid and extending our grid in line with demand. Entirely in the spirit of the European Union’s requirement for independence and neutrality of grids, we work transparently and without discrimination. We are a self-contained transmission system operator and at the same time part of the international Elia Group. Our shareholders include the Belgian transmission system operator Elia System Operator NV/SA (Elia), which holds 60 per cent of the shares, and the Australian infrastructure fund Industry Funds Management (IFM), which holds 40 per cent.

As a European transmission system operator, we are a member of the ‘European Network of Transmission System Operators for Electricity’ (ENTSO-E). 50Hertz has its headquarters in Berlin. At the heart of our company is the transmission control centre in Neuenhagen bei Berlin. This is where the flow of energy through the grids is monitored and action to ensure a stable energy system taken so as to guarantee the balance between generation and consumption at all times. The maintenance of our transmission system in the areas of the federal states of Berlin, Brandenburg, Hamburg, Mecklenburg-Western Pomerania, Saxony, Saxony-Anhalt and Thuringia as well as the substations and switching stations is organised in six regional centres. Our customers and partners include the distribution system operators of the regional utility companies situated in our control area whose installations are directly connected to the transmission system, operators of the power plants connected to the transmission system, pumped storage stations, wind farms, large industrial consumers, transit customers, control area customers as well as partners pursuant to the Renewable Energy Sources Act (ErneuerbareEnergien-Gesetz – EEG) and the Law on the Conservation, Modernization and Development of Combined Heat and Power (Gesetz für die Erhaltung, die Modernisierung und den Ausbau der Kraft-Wärme-Kopplung – KWKG).

10 • Annual Report 2012 Shaping the energy transition

Company’s executive bodies 50Hertz Transmission GmbH is a wholly owned subsidiary of Eurogrid GmbH (Eurogrid) and has its headquarters in Berlin. The listed Belgian electricity transmission system operator Elia System Operator NV/SA (Elia) and the Australian infrastructure fund Industry Funds Management (IFM) have an indirect interest in Eurogrid GmbH via Eurogrid International CVBA, which has its headquarters in Belgium.

50Hertz is controlled and overseen by Eurogrid GmbH and a codetermined supervisory board consisting of six members. Members of the Supervisory Board The Supervisory Board of 50Hertz is composed of the following members:

Daniel Dobbeni

Chairman of the Board of Directors of Eurogrid International CVBA, Braine-I’ Alleud/Belgium – Chairman –

Ulrich Freese*

Vice Chairman of the Mining, Chemical and Energy Industries Union, Spremberg – Vice Chairman – (until 18 December 2012)

Peter Hausmann*

Member of the Central Board of Executive Directors of the Mining, Chemical and Energy Industries Union, Hanover – Vice Chairman – (since 18 December 2012)

Markus Berger

Chief Officer Asset Management at Elia System Operator NV/SA, Rhode-Saint-Genèse/Belgium (since 22 August 2012)

Florian Guddat*

Master craftsman for electrical power systems, Großschwabhausen (until 22 August 2012)

Werner Kerschl

Investment Director at Industry Funds Management (UK) Ltd, London/United Kingdom

Andrea Ludwig*

Electrical engineering technician, Berlin (since 22 August 2012)

Dr. Lutz Pscherer*

Electrical engineer, Berlin

Jacques Vandermeiren

Chairman of the Executive Committee of Elia System Operator NV/SA, Antwerp, Belgium (until 22 August 2012)

* Employee representative

Shaping the energy transition Annual Report 2012 • 11

Board of Directors 50Hertz is represented outwardly by either two chief officers or one chief officer and one authorised signatory. The chief officers are appointed or removed by 50Hertz’s Supervisory Board. Members of the Board of Directors Boris Schucht, Berlin, Chairman Dr. Dirk Biermann, Berlin, Markets and System Operation (since 1 April 2012) Hans-Jörg Dorny, Neuenhagen bei Berlin, Human Resources Udo Giegerich, Berlin, Finances Dr. Frank Golletz, Dresden, Technology

From left to right: Hans-Jörg Dorny, Udo Giegerich, Boris Schucht, Dr. Dirk Biermann, Dr. Frank Golletz

12 • Annual Report 2012 Shaping the energy transition

Interview with Boris Schucht, Chairman of the Board of Directors We saw the energy transition gain momentum in 2012. What did you find especially gratifying and what have been the biggest challenges so far? Boris Schucht: I am pleased about the improved investment framework for extending the energy grids. Deficits have been remedied and the large-scale investment programme on the capital markets is now financially feasible. The Federal Government has adopted a change in policy in relation to regulatory recognition of the capital costs for extending the grid. This is based on an agreement between the Federal Network Agency and us system operators and takes into account our call for fair and reliable conditions.

Moreover, 50Hertz has put into effect two key projects for extending and reinforcing the grid. These are the commissioning of the Northern Line between Schwerin and Hamburg, which, to quote the German Chancellor at the official opening, is a milestone for the future of electricity supply, and the innovative installation of high-temperature conductors on the heavily used line from Remptendorf in Thuringia to Redwitz in Bavaria. There has also been significant progress in the approval procedures for a number of transmission line construction projects. Construction of the second section of the important Southwest Interconnector between Erfurt and Altenfeld has been approved and started and the grid connection for the offshore wind farm Baltic 2 in the Baltic Sea is now in the construction phase, too. The first German Grid Development Plan has been drawn up and represents the basis for our future investments. This was a truly Herculean task and one of major importance to 50Hertz. With that said, the other legal adjustments for system security and improving the offshore investment frame-

Shaping the energy transition Annual Report 2012 • 13

work are also positive developments in terms of successful implementation of the energy transition.

is something that will continue to have the highest priority within the company.

The substantial liquidity requirement for EEG management in 2012 was secured thanks to successful interim financing. In calculating the EEG surcharge, a liquidity buffer of ten per cent was applied for the coming year for the first time, meaning the impact of EEG management on the company will be improved in the future.

What course has 50Hertz set within the company for coping with the challenges posed by the energy transition?

That the energy transition continues to advance at a rapid pace is also demonstrated by the fact that electricity generated from renewable energy sources now accounts for 35 per cent of consumption in the control area of 50Hertz. This means that the Federal Republic’s climate policy objectives for 2020 were attained in the areas of the new federal states and the city states of Hamburg and Berlin as early as 2012. Never before was 50Hertz so much in the public eye. Has the role of the grids now been accepted? Boris Schucht: The growing number of visits, requests and also appointments at EU, national and regional level shows how much interest there is in our competence as a neutral expert, especially with regard to the system integration of renewable energy sources. 50Hertz is the only company to have been certified an ownership unbundled transmission system operator in Germany at the first attempt. This reinforces our credibility and position in Germany and Europe as an independent and transparent system operator. We have also significantly expanded our platform for information and dialogue further. Also in this respect, our transparency initiative involving publication of our load flow data on the Internet also represents a benchmark in the industry. We are breaking new ground in terms of supporting the approval procedures as well. Early information for and comprehensive dialogue with the people in the regions affected by extension of the grid are of central importance to us and have become an integral part of all our grid development activities. We were the first transmission system operator to promptly introduce the compensation payments for communities now possible under law. We plan to continue down this new path with resolve. 2012 also presented a number of difficult situations that caused headaches. We were able to manage the electrical system reliably at all times. However, on occasion we were faced with adversity, such as the tornado at Pulgar, which thanks only to the impressive dedication and commitment shown could be remedied quickly. And we also learned a lot while successfully warding off the first cyber-attack on 50Hertz, which crippled our Web portals for days. Security

Boris Schucht: The changes in the internal organisational structures with which we are preparing for major investments are essentially implemented and the new processes are improving all the time. We have taken more than 60 new employees on board. Cooperation within the Elia Group continues to develop positively and this year has seen us establishing joint development programmes, not least in the area of human resources. The first joint purchasing projects were implemented and a group function was introduced for common benefit in the form of IT. The important ‘Purchase to Pay’ workflow improvement project for the procurement process has taken shape. Our efficiency programme, ‘Mehrtz’, has gained momentum and already yielded measurable success in 2012. However, the energy transition is not a 50Hertz project; only the cooperation of many players will make it a success. In addition to the intense contact with politicians, government agencies, environmental organisations and other social stake­holders, cooperation with distribution system operators and market participants has been intensified further at natio­ nal level. At international level we have concluded agreements with our Polish colleagues to improve the unplanned loop flow situation. In 2012, we significantly advanced preparations for the European lighthouse project ‘Combined Grid Solution’, which together with the Danish transmission sys­tem operator Energinet.dk will see us establishing a new cross-border connection for the first time in Europe by linking two offshore wind farms. Under the auspices of the ‘Renewables Grid Initiative’ (RGI), which we launched together with European environmental organisations three years ago, we have developed best practises for more transparency, acceptance and citizen participation in the extension of the grid. What will be the biggest challenges of shaping the energy transition successfully in the future, too? Boris Schucht: Unfortunately, extension of the grid is still not keeping pace with the rapid expansion of renew­able energy sources. Once again, 2012 saw 50Hertz being forced to intervene frequently to maintain system stability in the grid and thus in the market. The result of that are high grid costs. Consequently, there is an urgent need for change – for economic reasons alone. Given the high grid utilisation and continually increasing renewable energy sources, the grid urgently needs to be developed further by 50Hertz.

14 • Annual Report 2012 Shaping the energy transition

For that reason, 50Hertz plans to invest some four billion euro specifically in the further integration of renewable energy sources to maintain a high level of supply security and develop Europe’s internal electricity market in the coming decade. However, it is reducing the planning and approval procedures, which can take ten years at present, substantially without compromising the right the citizen has to partici­ pation that presents the real challenge. Investment in re­organising the energy supply system thus requires a politi­cal framework that guarantees more planning and investment certainty. NABEG represents a good basis for that and adoption of the Federal Requirement Plan Act (Bundesbedarfsplangesetz – BBPIG) in the coming year will be another crucial milestone for accelerated extension and reorganisation of the grid in Germany. That being said, we also see that a fundamental amendment to the Renewable Energy Sources Act is now needed and that the issue of fair dis­tribution of grid charges is becoming increasingly virulent.

The expenses incurred year after year, every year more than EUR 100 million is incurred because the carrying capacity from northeast to southwest Germany is insufficiently developed, are ultimately included in the grid charges of 50Hertz and thus the price of electricity. One of the main bottlenecks is the transportation of wind-generated electricity from northeast Germany to Bavaria via Thuringia. Here, the new ‘Thuringian Electricity Bridge’ is urgently needed. It will cost EUR 250 to 300 million. This 40-year investment will pay for itself within just a few years because it will eliminate most of today’s bottleneck-related expenses. There is no doubt that extending the grid costs money; however, not extending can sometimes be considerably more expensive.

Shaping the energy transition Annual Report 2012 • 15

Will the costs become the Achilles heel of the energy transition? Boris Schucht: The biggest risk to the energy transition is waning acceptance among the general public. This basic acceptance can only be maintained if we are able to con­ tinue providing maximum security of supply at affordable energy prices. Even if it is clear to all that the energy transition will not come for free, the cost for households and the economy must not run out of control. It will be important to reform the EEG to make it economically efficient and to develop integration of renewable energy sources with the system and market further. We will be pleased to involve ourselves as a source of information and point of contact in the associated dialogue.

And finally, despite all the new challenges we must not jeopardise the maintenance of high levels of supply security. We are accustomed to high standards in Germany and at 50Hertz do everything to ensure it remains so. This is a Herculean task because the very rapid and fundamental system reorganisation increases the risk of systemic and human errors. Ultimately, the complex overall system must not be overstretched if we want to complete the energy transition and at the same time ensure a high level of supply security. Our entire model of prosperity is reliant on a functioning power supply system – in Germany and in Europe. However, the reorganisation is manageable if we all pull in the same direction.

16 • Annual Report 2012 Shaping the energy transition

Report of the Supervisory Board

Meetings of the Supervisory Board The Supervisory Board convened for its ordinary meetings on 8 March, 20 September and 18 December 2012. It also convened on 22 August for an extraordinary and constitutive meeting.

Dear Sir or Madam,

Consultations and resolutions of the Supervisory Board centred on the following: the future development of the company’s financing structure in view of the requirements associated with the considerable growth in the volume of electricity produced using renewable energy sources and the conclusion of appropriate agreements with financial institutions via Eurogrid GmbH, including provision of the required collateral; the termination of an agreement with Mitteldeutsche Netzgesellschaft Strom mbH on the structure of separate transmission charges; the introduction and transparent organisation of compensation payments to cities and municipalities in connection with the construction of new overhead lines pursuant to the Grid Extension Acceleration Act (Netzausbaubeschleunigungsgesetz; the planning and construction of a new headquarters against the backdrop of the growth in the company and associa­ ted human resources, and acquisition of the required plot. Furthermore, the Supervisory Board has considered the progress of the legislative and regulatory framework on an ongoing basis and extensively monitored the progress of the first German Grid Development Plan at length. Members of the Supervi­sory Board have obtained a comprehensive overview of organisational and personnel development within the company and consulted specifically on the structure of staff secondments between the company and shareholders and the protection of high training standards by acquiring a grid simulation system. Finally, the Supervisory Board has consulted at length on the business plan for 2013 and recommended its approval.

In the previous financial year, the Supervisory Board of 50Hertz Transmission GmbH, which is formed optionally and by way of codetermination, performed the duties incumbent on it pursuant to the company’s articles and law with the greatest diligence. It frequently supervised and advised the Board of Directors in the management of the company and while doing so supported the strategic development of the company as well as its material transactions. The Supervisory Board familiarised itself in detail with the business outlook, the basic legislative and, in particular, re­gulatory conditions and resulting impact on business develop­ment, the strategic direction and operational planning, including financial, investment, and personnel planning, of the company and its subsidiary by means of written reports and oral presentations by the Board of Directors at its meetings. Members were presented with ample opportunity for discussion and deliberation, including with the Board of Directors, during meetings. Meetings and specific discussions were always carried out in an open, constructive at­mos­phere and in the spirit of trust. Workforce represen­ tatives who sat on the Supervisory Board prepared for each meeting in part by means of separate preliminary discussions with the chief officers. The chairman and vice chairman of the Supervisory Board also consulted with the chairman of the Board of Directors regularly between meetings and were adequately informed about events relevant to managing the company and assessing its outlook and development. The Supervisory Board was thus involved in all material business decisions early on and after detailed deliberation and consultation granted its approval where necessary pursuant to the company’s articles and law. Resolutions of the Supervisory Board were normally passed during its meetings. In addition, three resolutions were passed by way of a written procedure for reasons of urgency. The Supervisory Board scrutinised any matter for which a resolution was necessary with regard to legality, regularity and profitability. Conflicts of interest were not disclosed by members of the Supervisory Board, nor did circumstances that would suggest the existence of a conflict of interest become known.

Annual Financial Statements for 2012 Using the report by elected auditors Ernst & Young as a basis, the Supervisory Board discussed the annual financial statements for the 2012 financial year and the management report at its meeting on 8 March 2013. As a result of the audit of the annual financial statements and management report, Ernst & Young issued an unqualified audit opinion. The head auditor gave a point-by-point explanation of the findings of the audit during the meeting on 8 March 2013 and answered any associated questions raised by the Supervisory Board. As a result of the written and oral report of the auditor and its own detailed investigations and deliberations, the Supervisory Board concludes that the audit by Ernst & Young was carried out properly and is consistent with statutory requirements. Furthermore, it notes that no

Shaping the energy transition Annual Report 2012 • 17

Mr Dobbeni as chairman and Mr Freese as vice chairman. Moreover, the members of the Supervisory Board elected Mr Dobbeni, Mr Freese and Mr Kerschl as members of the Executive Committee and assigned its competence and powers.

objections have been raised with respect to the annual financial statements and management report of the company or any statements made by the Board of Directors in this regard. Matters concerning chief officers The Supervisory Board has passed a resolution to prolong the appointment of Mr Boris Schucht as Chairman of the Board of Directors up until January 2018 and adapt his con­tract of employment. Moreover, it has considered the retirement of Mr Hans-Jörg Dorny from the Board of Directors, whose appointment as Chief Human Resources Officer ends on 30 September 2013, and consulted on how this position will be filled in the future. The Supervisory Board has in this context also passed a resolution to reach an agreement with Mr Dorny, on the basis of which he will support the company in an advisory capacity for six months from the date of his retirement. Furthermore, the Supervisory Board has monitored personal and corporate objectives of the chief officers and accounted for the corresponding agreements made for 2011 with Mr Boris Schucht, Mr Hans-Jörg Dorny, Mr Udo Giegerich and Dr. Frank Golletz. Any matters concerning chief officers were first consulted on by the Executive Committee of the Supervisory Board and then decided by the entire Supervisory Board. Composition of the Supervisory Board During the reporting period, the tenure of members of the Supervisory Board ended according to the company’s artic­les with the discharge resolution of the shareholders for the fourth financial year after the start of the tenure. As a result of the elections, which were conducted in accordance with the company’s articles, Mr Daniel Dobbeni, Mr Markus Ber­­ger, Mr Werner Kerschl, and – at the proposal of IG BCE – Mr Ulrich Freese were appointed members of the Super­ visory Board by shareholders. The employees elected Dr. Lutz Pscherer and Ms Andrea Ludwig as their Supervisory Board representatives. The new Supervisory Board’s constitutive meeting was on 22 August 2012 and it elected

Mr Ulrich Freese resigned from the Supervisory Board of the company with effect from 30 November 2012 in view, but not in legal recognition, of the demands of the Federal Network Agency in connection with certification of the company as a fully unbundled transmission system operator. Following that, Mr Peter Hausmann was elected as member of the Supervisory Board by the shareholders at the proposal of IG BCE. His election as vice chairman and member of the Executive Committee was carried out by the members of the Supervisory Board at the meeting on 18 December 2012. The members of the Supervisory Board thank Mr Freese for his long, dedicated and accomplished participation for the benefit of company. In December 2012, the shareholders, 50Hertz Transmission, the Central Works Council and IG BCE concluded an agreement on the continuation of codetermination at 50Hertz, which has proven to be an effective and the right model for cooperation between employers and employees in the interest of the company. Other business No transactions took place between the company and its affiliates and chief officers or their dependents other than those mentioned above. No contracts were concluded between the company and members of the Supervisory Board. No loans were made to members of the Supervisory Board. Moreover, transactions that would require the input or approval of the Supervisory Board did not come to its notice by other means. The Supervisory Board expresses its thanks to the company’s Management, the Works Council members and all employees for their commitment and professional accomplishments during 2012. Berlin, March 2013 For the Supervisory Board

Daniel Dobbeni (Chairman)

18 • Annual Report 2012 Shaping the energy transition

Milestones in 2012 5 January 2012 – Wind power record in the control area of 50Hertz 50Hertz registers a new record at the beginning of the year. More than 10,000 megawatts of wind-generated electricity is fed into the control area of 50Hertz simultaneously for the first time. Grid stability has not been compromised and System Management is coping with the situation confidently. 3 February 2012 – Planning approval decision for the second section of the Southwest Interconnector The Thuringia State Administration Office concludes the plan­ning approval procedure for the second line section of the Southwest Interconnector between Vieselbach and Alten­feld. Conclusion is another important step towards transporting the renewable electricity produced in the north­ east of Germany to the centres of consumption in the southwest of Germany. 30 January 2012 – Briefings on the first Grid Development Plan 50Hertz and the other German transmission system operators report on the path towards the first Grid Development

Plan during two briefings in Berlin. More than 160 represen­ tatives of citizens’ groups and the political, business and scientific communities assemble in Berlin. Furthermore, distribution system operators are also informed about the process on 1 February. 2012 sees grid development plan­ning being conducted jointly for the first time with the involvement of the public and numerous events throughout Germany from the outset. 3 February 2012 – Foundations adopted for the marketing and accounting of EEG electricity by means of the market premium model 50Hertz and the other German transmission system operators set the stage for the accounting of directly marketed EEG electricity by means of the newly introduced market premium model (www.eeg-kwk.net). 24 February 2012 – Agreement on the approval of investment budgets 50Hertz and the other German transmission system operators welcome the out-of-court settlement with the Federal Network Agency in respect of the approval of investment budgets. Settlement of the pending proceedings guarantees greater legal certainty and defines an appropriate regulatory framework for much-needed investment in the extension of the grid. 13 March 2012 – Information campaign for the Uckermark Line 50Hertz sets up a hotline for the Uckermark Line and other projects. Interested citizens can ask questions about the progress of the procedure, technical background and grid extension via a free telephone number. 20 April 2012 – Publication of load flow data 50Hertz publishes the load flow data for its grid on the Internet at www.50hertz.com/lastflussdaten. This means that any interested party can trace the load condition on single or multiple lines for the previous day or earlier. 27 April 2012 – The first 50Hertz supplier briefing 200 national and international guests learn about the strategic direction of procurement at 50Hertz, the challenges of offshore grid connections, the new approaches for overhead lines and the 50Hertz order to payment process. This event constitutes the starting signal for direct, transparent and cooperative dialogue with suppliers.

Shaping the energy transition Annual Report 2012 • 19

30 May 2012 – The first Grid Development Plan for electricity is published and consultation has begun The first Grid Development Plan for electricity is introduced by chief officers from the transmission system operators in a press conference after it was presented to President of the Federal Network Agency Jochen Homann in the presence of German Chancellor Dr. Angela Merkel, Federal Minister of Economics and Technology Dr. Philipp Rösler and Federal Environment Minister Peter Altmaier. This consultation pro­ vides the general public with an opportunity to engage in and comment on the Grid Development Plan (electricity) 2012.

6 June 2012 – 50Hertz illustrates the latest grid development activities to the political, business and environmental decision makers of East Brandenburg. 50Hertz illustrates the company’s grid development activities for the north of Berlin and the Uckermark at a briefing organised by the East Brandenburg Chamber of Industry and Commerce together with the environmental organisation Deutsche Umwelthilfe and the regional planning group Oderland Spree based on the slogan ‘Networks for the Energy Transition’.

Bahnhof opposite the main railway station in the ‘Europacity’ development area. It is being sold by CA Immo and covers a total area of 8,145 square metres. The total investment amounts to EUR 13.2 million. 11 July 2012 – Discussion on the Southwest Inter­ connector on Thuringian local television 50Hertz and Martin Gude, head of Energy Policy at the Thu­ringian Ministry for Economic Affairs, discuss the planned power line with District Administrator Petra Enders and spokes­woman of the citizens’ group ‘Schalkau’, Margit Heinz, during ‘Sonneberg konkret’, a talk show on Thuringian local television. The discussion was chaired by two editors from the local newspaper ‘Freies Wort’ and the parties involved all considered the dialogue with the Ministry for Economic Affairs and the spokespeople on the ground to be a step in the right direction. 30 August 2012 – 50Hertz’s fifth security conference marked by the energy transition Representatives from the areas of electricity generation, trans­mission and distribution as well as universities, associations, government agencies and consulting firms speak with each other about the current and future security of electricity supply against the backdrop of the energy transition at the fifth security conference hosted by 50Hertz in Hamburg. 3 September 2012 – 50Hertz continues construction of the second section of the Southwest Interconnector 50Hertz continues its construction activities for the second section of the 380-kilovolt Southwest Interconnector from Vieselbach to Altenfeld. That was preceded by the Court’s decision on an expedited procedure in favour of 50Hertz that was filed in conjunction with the suit opposing the planning approval decision.

27 June 2012 – Brandenburg’s Minister for Economic Affairs Ralf Christoffers visits 50Hertz’s 380-kilovolt cable tunnel Brandenburg’s Minister for Economic Affairs Ralf Christoffers visits 50Hertz’s 380-kilovolt transverse connection in Berlin as part of his ‘Energy Tour’ to obtain detailed information about 380-kilovolt cable technology. 50Hertz is one of the few transmission system operators in Europe to have gained experience in the operation of AC underground cable systems at extra high voltage level.

7 September 2012 – 50Hertz fosters commitment to the environment The German ‘Clean Tech Media Award 2012’, which as a gold partner 50Hertz sponsors, is presented in Berlin. CEO of 50Hertz Boris Schucht sits on the jury panel and makes the presentation for the ‘Energy’ category. The winning entry is a micro-hydro power plant developed by the company Hydro Power Smart for regions without electricity. The microhydro power plant replaces the diesel generator, which is not environmentally friendly and more expensive.

11 July 2012 – 50Hertz has its new headquarters in the centre of Berlin 50Hertz has contractually secured a plot for its new headquarters. The grounds are located on Heidestrasse next to the Museum of Contemporary Art in the Hamburger

28 September 2012 – The first ‘Political & Regulatory Affairs Day’ hosted by 50Hertz 50Hertz discusses political and regulatory issues associated with the energy transition with its customers. Participants and host agree that important issues should be communi-

20 • Annual Report 2012 Shaping the energy transition

cated to the policymakers point by point. 50Hertz and its customers will cooperate even more closely in the future in order to share and consult on their respective position. 28 September 2012 – Dresden University of Technology and 50Hertz intensify their partnership against the backdrop of the energy transition 50Hertz and the Dresden University of Technology sign an outline agreement on intensifying cooperation in research and development projects implemented due to the energy transition. 4 October 2012 – Tornado damages transmission towers at Pulgar Transmission towers belonging to the 380-kilovolt line bet­ween Pulgar and Vieselbach are heavily damaged by a tornado in the local area. Experts from 50Hertz bring the situation under control immediately, thus preventing any bottlenecks in supply.

7 October 2012 – Rennsteig Autumn Run 50Hertz continues its regional commitment in Thuringia as a main sponsor of the Rennsteig Autumn Run. More than 400 participants start the historic half-marathon route. Running enthusiasts from 50Hertz also mastered this section of the Rennsteig Marathon. 18 October 2012 – The fourth EEG conference hosted by 50Hertz marked by the political debate on the EEG Attended by some 250 people, 50Hertz hosts the fourth conference to discuss the latest trends and challenges against the background of the political debate on the legislative changes in the EEG support scheme. The conference in Berlin is attended by system operators, electricity traders and distributors, stock market experts, installation operators, IT experts and auditors from Germany, Austria and Switzerland as well as the Federal Network Agency. 19 October 2012 – The 2012 customer meeting 50Hertz holds the yearly meeting with board members and chief officers of major customers in its control area in Potsdam. This is the format with which 50Hertz maintains personal contact with its customers and creates a platform for continuous dialogue on current topics. 9 November 2012 – Certification as Germany’s first ownership unbundled transmission system operator 50Hertz is the only operator in Germany to have been certified an ownership unbundled transmission system operator by the Federal Network Agency. This certification confirms that 50Hertz complies with the unbundling requirements. Moreover, the company receives confirmation that 50Hertz has the financial, material, human, and technical resources to perform its mission as a transmission system operator.

Shaping the energy transition Annual Report 2012 • 21

20 November 2012 – Cyber-attack on internet platforms belonging to 50Hertz 50Hertz is exposed to a cyber-attack by a so-called botnet – a group of networked computers – for the first time. As a result, the internet platforms operated by 50Hertz are shut down temporarily and protection/countermeasures initiated promptly and successfully. There is no impact on security of supply at any time. 26 November 2012 – Federal Environment Minister and Brandenburg’s Prime Minister visit 50Hertz’s transmission control centre Federal Environment Minister Peter Altmaier and Brandenburg’s Prime Minister Matthias Platzeck learn about the challenges of operating the transmission system during the winter at 50Hertz’s transmission control centre (TCC).

Minister of Economics and Technology Dr. Philipp Rösler and in so doing increases the capacity of this key northeastsouthwest connection by an initial 300-megawatt. 5 December 2012 – European declaration on transparency, acceptance and citizen participation in the extension of the grid Under the auspices of the ‘Renewables Grid Initiative’ (RGI), 50Hertz, together with European transmission system ope­ rators and non-governmental organisations, signs ‘European Grid Declaration II’ in the presence of EU commissioners Günther H. Oettinger and Janez Potočnik. The Declaration deals with the issues of acceptance, transparency and public participation in relation to grid extension based on the integration of renewable energy sources.

27 November 2012 – Approval of Grid Development Plan 2012 by the Federal Network Agency 50Hertz and other German transmission system operators welcome approval of the first German Grid Development Plan by the Federal Network Agency. The Federal Network Agency praised the transmission system operators for the submission of a coherent approach to stable electricity supply in 2022 and acknowledged that the use of HVDC lines is pioneering and appropriate. The Authority’s decision brings about planning certainty for the lines confirmed. 28 November 2012 – Parliamentary evening on offshore wind energy 50Hertz and the State of Mecklenburg-Western Pomerania jointly organise a parliamentary evening dedicated to the development of offshore energy generation and opportu­nities for the region, which was attended by some 140 guests. Investors and project planners present their plans for the Baltic Sea. Federal Environment Minister Peter Altmaier and Mecklenburg-Western Pomerania’s Prime Minister Erwin Sellering underline the importance of sound offshore development in the Baltic Sea to the success of the energy transition. 4 December 2012 – Reinforcement of the electricity grid at the line bottleneck in Thuringia by means of a high-temperature conductor 50Hertz puts the first aluminium conductor steel support (ACSS) high-temperature conductor into live operation in Germany’s extra high voltage grid in the presence of Federal

18 December 2012 – Commissioning of the 380-kilovolt Northern Line attended by German Chancellor Dr. Angela Merkel and Prime Minister Erwin Sellering 50Hertz formally commissions the new ‘Wind Busbar’ bet­ ween Schwerin and Hamburg in the presence of German Chancellor Dr. Angela Merkel and Mecklenburg-Western Pomerania’s Prime Minister Erwin Sellering. This new extra high voltage line increases the security of supply in the greater Hamburg area and leads to improved balancing of the wind-generated electricity in northern Germany. 22 December 2012 – Deployment of phase shifters to improve control of cross-border electricity flows 50Hertz and the Polish system operator PSE Operator have agreed to improve coordination of unplanned electricity flows on the German-Polish border. Entirely in the spirit of the single European electricity market, this will strengthen system security and produce additional trading capacity at the border.

22 • Annual Report 2012 Shaping the energy transition

Staying poised By cooperating nationally and internationally in the deployment and operation of our transmission system, we contribute to a secure and reliable electricity supply system. Moreover, in the interest of secure energy supply, we take responsibility for the system by implementing any measures necessary to avert risks to or failures in the security and reliability of the electricity supply system.

» Our colleagues in the TCC work under extreme pressure to integrate renewable energy sources into the grid such that stable operation of the system is ensured 24 hours a day, 365 days a year.«

In particular, the 2011/2012 winter gave rise to a tight situa­ tion on the electricity market. The electricity supply system was exposed to an extremely high load. Only due to the mammoth efforts of 50Hertz and other German transmission system operators and resorting to existing international connections was it possible to guarantee stable system operation and security of supply. Once again, 2012 saw 50Hertz being forced to intervene frequently in the grid and thus the market for reasons of system stability – a total of 262 days during the year. Renewable energy installation operators had to be instructed to temporarily throttle their production on a total of 77 days (as compared to 45 days in 2011) to prevent overloading the grid. This option for stabilising the system is always applied as a very last resort after switching-related interventions have already been carried out and conventional installations reduced. High utilisation of the grid and a continually increasing share of renewable energy sources vividly illustrate the need to extend and develop further the grid of 50Hertz. Accelerated approval procedures and greater acceptance of these important

Gunter Scheibner, Head of System Security

Wind turbines with an installed capacity of some 12,420 mega­­watts, some 50 megawatts of which from offshore wind

‘50 Hertz’ is the set-point frequency in the electricity grid and forms the basis for the secure supply of electricity. Our core mission is to maintain the stability of this system frequency at all times. We control the generation/consumption ratio and safeguard reserves so as to be able to compensate for variances at all times in close cooperation with our neighbours.

turbines, are located in the control area of 50Hertz. That cor­responds to about 40.2 per cent of the capacity installed in Germany and an increase of some seven per cent as compared to 2011. As compared to the year-end figure for 2011, the capacity of photovoltaic systems installed in the control area of 50Hertz increased by about 104 per cent and now stands at about

To put the energy transition into effect, our mission is to guarantee security of supply and European electricity trading while integrating renewable energy sources at the same time. A major task, since the control area of 50Hertz is marked especially by a high and sharply rising proportion of renewable energy sources coupled with relatively sustained low electricity consumption when compared nationally. After the moratorium on nuclear power entered into force in March 2011, the control area of 50Hertz was marked by increased north-south and east-west load flows in 2012, too. 50Hertz registered a new record at the beginning of the new year. More than 10,000 megawatts of wind-generated electricity was simultaneously fed into the control area for the first time on 5 January 2012. The stability of the grid was not compromised. And the 10,000-megawatt mark was exceeded again at 2:45 PM on 12 January. This time it was a case of carrying 10,186 megawatts of zero-CO2 wind power to consumers.

7,220 MW. At 10,208 megawatts, the maximum simultaneous feed-in from wind turbines in the 50Hertz control area was reached on 5 October 2012. At 14,979 megawatts (momentary figure), the maximum feed-in to the 50Hertz transmission system was seen on 6 November 2012.

and much-needed infrastructure projects are essential for the successful and rapid extension of the grid. At the same time, the winter months have shown how important it is to strengthen cooperation at international level.

Shaping the energy transition Annual Report 2012 • 23

Crossing borders The location of our grid in the heart of Europe means that 50Hertz plays a key role in European electricity exchange. We connect the grids in Denmark, Poland and the Czech Republic with Germany. For all players in society to benefit from free competition, we are committed to transparent and non-discriminatory access to the grid, as well as to the development of coordinated and harmonised market mechanisms at European level.

Close cooperation between all the national and European system partners is of key importance. Our system respon­si­bility is accounted for by working closely with other German and European transmission system operators in the ‘Regio­ nal Group Continental Europe’ and the ‘System Operation Committee’ of ENTSO-E (‘European Network of Transmission System Operators for Electricity’). Partners of equal importance include the distribution system operators and producers in the 50Hertz control area. Above and beyond that, we participate actively in the security initiatives TSC (TSO security cooperation) and Coreso, the independent security centre for Central and Western Europe, and are an active member of the committees of ENTSO-E. One example of successful cooperation at international level is the cross-border expansion of the Grid Control Cooperation. Germany’s Grid Control Cooperation was progressively expanded to include Denmark, the Netherlands, Switzerland, the Czech Republic and Belgium between October 2011 and October 2012. Opposing imbalances are – if transmission capacity is available – now no longer balanced out in

these six countries. In each country, it has been possible to reduce the control energy employed by up to 20 per cent. This rise in efficiency lowers the cost of the energy transition for consumers and reduces CO2 emissions by avoiding frequent changes in capacity during the provision of control energy to conventional power plants. The Grid Control Cooperation was developed by 50Hertz and the other three German transmission system operators (Amprion, TenneT and TransnetBW) and continuously expanded to include other countries. Unplanned cross-border electricity flows and their influence on secure system management have long been the subject of heated debate between European transmission system operators, regulators, and the European Commission. To improve the coordination of these electricity flows, 50Hertz and the Polish system operator PSE Operator have agreed on better coordination at the German-Polish border. Virtual phase shifters will be deployed there at short notice when electricity flows from Germany exceed a defined limit and could compromise system stability in Poland. This means that coordinated intervention in the operation mode of the power plants will make it possible to simulate the balancing effect of a phase shifter transformer. To that end, on 18 December 50Hertz and PSE Operator signed an agreement to use virtual phase shifters in the short term, as well as a letter of intent for the joint use of physical phase shifter transformers. Improved control of cross-border electricity flows will strengthen system security, expedite the integration of renewable energy sources and promote the single European energy market. »Coordinated action between the system operators and all other national and European system partners is of central importance to continuing to guarantee high levels of system security under the energy transition, in parti­c ular, with regard to concerted action vis-à-vis system operation, to joint training on how to cope with possible critical grid situations and to the exchange of data in realtime among all the partners in the electrical system.« Dr. Dirk Biermann, CEO Markets & System Operations

24 • Annual Report 2012 Shaping the energy transition

Transparency and dialogue Against the backdrop of the energy transition, the grid and the operation of the electrical system are increasingly becoming the focus of public attention. The expansion and hardening of the transmission systems – a vital component for the success of the energy transition – can only succeed on the basis of broad social acceptance. All areas of society – politics, business, science and civil society – are called upon in equal measure to make a constructive contribution. 50Hertz is committed to maximum transparency, providing information early on and open dialogue. At the same time, fast and appropriate information to the public on an ongoing basis and the participation of all relevant sections of society in transmission line construction projects are the focus. In

Urban planner Elke Brennenstuhl has worked at 50Hertz since March 2006. She has been involved in the Uckermark Line project from the outset: »We are on the right track. The briefing held in the ‘Blumberger Mühle’ was a success and beneficial to our reputation even though it did not conclude with the resolution of every conflict.«

April 2012, 50Hertz was the first German transmission system operator to start publishing its load flow data on the Internet. In so doing, we satisfy the public’s need for transparency in relation to the complex business of the system operator. An animated map provides interested parties with the opportunity to view the latest situation on the grid, display a period as a film or download the data as a file. For the ‘Uckermark Line’ transmission line project, 50Hertz visited the towns and cities along the transmission route in a travelling information centre. Contact with the local population was the focal point of the information tour with tent, booth and information booklets. Special supplements in the local press entitled ‘More knowledge’ complemented the tour with facts and information about the construction of the planned 115 kilometre-long Uckermark Line. With expert support from the University of Duisburg-Essen, measurements on electromagnetic fields were also performed to

allay any fear of adverse effects on health among the local population. 50Hertz also set up a hotline for the Uckermark Line and, for example, together with the Minister of Economic Affairs Ralf Christoffers and the citizens’ group ‘Biosphäre unter Strom’ invited interested parties to a briefing. The guests spoke about issues related to health, conservation, routing and economic necessity. Citizens were also able to learn about the status of the planning approval procedure by means of a display. For example, an exhibit showed the different routing options discussed in the course of the procedure, which now spans six years. Furthermore, background information about the required limits for electric and magnetic fields were presented, plus a diagram showing the areas where compensation measures are planned along the transmission route. We have also broadened our Web-based offering significantly in relation to our transmission line construction projects and provide a newsletter subscription that affords interested citizens and institutions with up-to-date information on the progress of the project. A download area provides additional information about all the issues surrounding the extension of the grid. In the course of the 380-kilovolt Northern Line, Southwest Interconnector, Uckermark Line, 380-kilovolt Northern Ring Berlin and 380-kilovolt Line Bärwalde-Schmölln projects, 50Hertz held a total of 21 briefings for affected citizens and about 30 discussions with stakeholder groups up until end of 2012. Needless to say, we will remain in contact with our partners and the local population in the future. To contribute to a better understanding of operating realities and the electricity system among policymakers, we support the legislative process by making proposals and providing transparent information early on. In addition, we regularly approach government agencies and politicians with regard to important matters such as the regulatory framework, approval procedures and investment conditions. The Public Affairs department also maintains regular dialogue with partners and decision makers. This involves workshops at regional, national and European levels as well as holding political discussions with all parties. The ‘Renewables Grid Initiative’ (RGI), which we helped to establish in 2010, is a thus far unparalleled European platform for dialogue. Together with other transmission system operators and non-governmental organisations, we discuss the challenges of grid extension and try to bring about a better understanding of and more acceptance for the extension of the electricity transmission systems, which are necessary for the integration of renewable energy sources. 2012 was

Shaping the energy transition Annual Report 2012 • 25

dominated by best practises for socially compatible and environmentally responsible action in the course of European transmission line construction projects. Together with the European transmission system operators and non-governmental organisations, we drafted ‘European Grid Declaration II’ under the auspices of the RGI in 2012. Following ‘Declaration I’ on the compatibility of grid extension and conservation, this now addresses issues such as transparency, acceptance and public participation in relation to grid extension based on the integration of renewable energy sources. The Declaration was formally signed in December in the presence of EU commissioners Günther H. Oettinger and Janez Potočnik. The Declaration takes up the results of a series of workshops on the planning and approval processes conducted by the RGI in 2012. Some of the examples dealt with there, which are also reflected in the final declaration, were developed by 50Hertz, such as the practise of publishing load flow data, a hotline and a travelling information centre. We regularly receive delegations in our technical installations. Leading politicians like Federal Environment Minister Peter Altmaier, Federal Minister of Economics and Technology Dr. Philipp Rösler and Brandenburg’s Prime Minister Matthias Platzeck have visited our TCC in Neuenhagen bei Berlin. They learned about the challenges of operating the transmission system, especially during the winter, in the TCC. Moreover, the Minister for Economic Affairs of the

Dr. Philipp Rösler, Federal Minister of Economics and Technology, and Boris Schucht, Chief Executive Officer of the network control unit of 50Hertz

State of Brandenburg Ralf Christoffers visited the 380kVdiagonal in Berlin, for example. Together with the invitation, 50Hertz also made good on a promise to the citizens’ group in relation to the Uckermark Line and next to these representatives also invited leaders from environmental organisations to a guided tour through the cable tunnel. During his summer tour of Mecklenburg-Western Pomerania, Prime Minister Erwin Sellering visited the substation in Bentwisch to learn about the challenges of offshore business and grid extension. 50Hertz also gives guided tours of its installations to various groups from technical colleges and universities as well as foreign delegations regularly.

Federal Environment Minister Peter Altmaier acquires information in 50Hertz’s TCC. (left: Boris Schucht, Chief Executive Officer; Middle: Gunter Scheibner, Senior Manager of System Security at 50Hertz)

26 • Annual Report 2012 Shaping the energy transition

With numerous different types of event, 50Hertz has established itself as a major player within the industry. Against the backdrop of the further proliferation of renewable energy sources, the main items on the agenda of the security conference in 2012 were the exchange of thoughts on such topics as ‘Coordinated System Operation in the National and European Context’, ‘Grid Extension Planning in Germany and Europe’, ‘Market Mechanisms and System Security’, and ‘European Cooperation Models for System Security’. Some 150 representatives from the areas of electricity generation, transmission and distribution as well as representatives of universities, associations, government agencies and consulting companies gathered in Hamburg for two days to discuss the issues associated with the above. With presentations by representatives of the TSC security initiative (TSO Security Cooperation) and the security centre, Coreso, this is the first time the conference has been conducted in a European context. The fourth EEG conference hosted by 50Hertz was dominated by the political debate on Germany’s Renewable Energy Sources Act. Some 250 people met in October to

discuss the latest trends and challenges against the background of the political debate on the legislative changes in the EEG support scheme. The conference centred on such topics as market integra­ The direct way to the 50Hertz-EEG-App tion of renewable energy sources, direct marketing and the EEG surcharge, as well as issues relating to the payment of damages in the event of feed-in management measures and implementation of the regulation on system stability. The purpose of the event was to inform participants about the latest developments and forthcoming changes, and to discuss the prac­ tical implications for the conclusion of the EEG procedure for all market players. The conference in Berlin was attended by representatives of transmission and distribution system operators, electricity traders and distributors, stock market experts, installation operators, IT experts, and auditors from Germany, Austria and Switzerland as well as the Federal Network Agency. A highlight of the conference was the release of 50Hertz’s new ‘EEG app’, which provides key information and the latest facts and figures on electricity from renewable energy sources

The mobile public office of 50Hertz

Shaping the energy transition Annual Report 2012 • 27

Cooperation with science and research Vibrant cooperation with universities is important to dealing with the challenges faced in the course of putting the energy transition into effect. On one hand, 50Hertz urgently needs well educated young talents, but on the other hand, also scientific results to solve the issues of the future. It was with that in mind that we began to establish a scientific network many years ago. Our partners include the University of Rostock, the Dresden University of Technology, the Ilmenau University of Technology, the Otto-von-Guericke University Magdeburg, the Friedrich Schiller University Jena and the Brandenburg University of Technology (BTU Cottbus). In 2012, 50Hertz worked on nine studies in cooperation with universities. The goal was always to analyse and evaluate topics relevant to managing the electrical system. The studies dealt with the voltage quality in extra high voltage grids, the determination of measures for critical conditions in the grid of 50Hertz, as well as the ‘Power to Gas’ project, for example. We have cooperated closely with the Institute of Electrical Power Systems and High Voltage Engineering (IEEH) at the Dresden University of Technology, one of the 11 universities of excellence in Germany, since 2003. The subject of one of the research projects is efficient procedures for assessing the voltage quality in extra high voltage grids so as to guarantee permanent monitoring of the quality of the voltage and electric power in the grid. In September 2012, 50Hertz and the Dresden University of Technology signed an outline agreement on intensifying cooperation on research and development projects. Subjects include studying the long-term behaviour of high-temperature conductors. Plans for the future include looking closely at direct current technology, storage solutions and the conversion of electricity to gas. 50Hertz hopes the contract will

result in a more flexible approach to research contracts as well as the recruitment and retention of future professionals. We have cooperated successfully with the Chair of Electric Power Networks and Renewable Energy Sources (LENA) at the Otto-von-Guericke University Magdeburg for more than ten years. This partnership has resulted in numerous joint projects and publications. Education and research at LENA has centred on sustainable energy systems of tomorrow for many years. The scientific work at LENA focuses on the security of energy supply, thus making this academic department an appropriate partner of 50Hertz. Cooperation was initially based on bilateral contacts. It was placed on a solid footing in 2006 by means of an agreement to cooperate, which paved the way for long-term cooperation. Together with former power plant employee Rüdiger Gudat of Vattenfall Europe Generation and Manfred Krüger of the University of Rostock, Johannes Göbel of System Management at 50Hertz developed scenarios for the grid restoration instruction sessions and directed training. » There ha s b een a b l a ckout i n t he 50Her tz cont rol a rea f or one hour f ol l owi ng a major f a i l ure. N ot hi ng works. The shi f t sup er v isor a nd hi s col l ea gues i n t he TC C ha v e 60 mi nut es t o a na l yse t he si t ua t i on a nd decide on t he sol ut i on t hey wi l l use t o sup p l y 18 mi l l i on p eop l e wi t h el ect ri ci t y a ga i n – and d o so a s q ui ckl y a s p ossi b l e. They now need t o a ct swi f t l y, p rud ent l y, a nd i n coordination wi t h t he ot her p a rt ners a t t he sa me t i m e. In a l most l i ve cond i t i ons, every shi f t work er at t he 50H ert z TC C rehea rses rest ora t i on of t he gri d i n such scena ri os regul a rl y.«

28 • Annual Report 2012 Shaping the energy transition

For example, recommendations on a policy for reviewing harmonic benchmarks when connecting wind turbines to the extra high voltage grid were prepared in one project. Simulation-based studies on the utilisation of high voltage lines in the control area, also with regard to the introduction of load flow-based capacity allocation for cross-border congestion management, were carried out within the scope of another project. The findings of the projects help 50Hertz to make improvements in practical implementation and enable the academic staff of the chair to gain insight into the daily tasks and internal procedures in the handling of projects within the company. Next to the direct projects, 50Hertz also cooperates closely with universities in a number of publicly funded projects within the scope of consortia. 50Hertz is a member of the ‘Harz, a Model Region for Renewable Energy’ (RegModHarz) project consortium, in

which public utilities, distribution and transmission system operators, ICT and component manufacturers, research institutes, universities, engineering offices and renewable energy suppliers have joined forces. RegModHarz is one of six pilot projects funded under the ‘E-Energy – ICT-based Energy System of the Future’ initiative of the Federal Ministry of Economics and Technology in partnership with the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety. By coordinating generation, storage and consumption, the region aims to demonstrate that a consumer-oriented, stable and reliable supply of electrical energy is possible with the highest possible proportion of renewable energy sources. 50Hertz regularly invites students to the company to introduce itself as a potential employer. For example, about 30 students of the master programme for industrial engineering (focusing on energy management) visited the TCC in Neuenhagen bei Berlin. In various lectures 50Hertz introduced itself

Representatives of colleges and universities at the distribution station Bentwisch, close to Rostock

Shaping the energy transition Annual Report 2012 • 29

as a company with its manifold tasks and fields of activity. Moreover, it familiarised the students with the work it carries out in relation to system responsibility during a visit. The series of events was initiated by 50Hertz in cooperation with Professor Christian von Hirschhausen from the Workgroup for Economic and Infrastructure Policy at the Berlin Institute of Technology. To reinforce our contact with universities, we also maintain a scientific advisory board for energy infrastructure, which we established several years ago. The members are professors distinguished by their exceptional knowledge in such areas as electricity grids, high voltage engineering, as well as energy and regulatory law. Established by 50Hertz and the BTU Cottbus, the European training and research centre GridLab enables us to make an important contribution to strengthening the capacity of the operational staff of producers and system operators, and to the standardisation and certification of system and grid management processes. Together with system and power plant operators, 50Hertz trains on how the supply of electricity would be re-established after a major failure, such as a blackout, at GridLab. In this respect, cooperation with the other system and power plant operators in the control area is crucial. All nine major power plants and all eight distribution system operators from the control area of 50Hertz attended at least one training session in 2012. In September, there were participants from Vattenfall Europe Wärme AG, too. The group of participants will be expanded in the future. Colleagues from the Czech transmission system operator ČEPS have already made enquiries about training on site. As part of the international Elia Group, 50Hertz is a member of the ‘European Network of Transmission System Operators for Electricity’ (ENTSO-E) and together with other ENTSO-E members, as well as within the ‘European Electricity Grid Initiative’, engaged in various research and development projects. These areas are coordinated by means of an Elia Group function; for in this respect the use of new findings throughout the Group and adoption of a European perspective are of particular importance.

Prof. Dr. Zbigniew A. Styczynski (left) from the Otto-von-Guericke-University Magdeburg and Prof. Dr.-Ing. Peter Schegner (right) from the Dresden University of Technology at an academic meeting of the Advisory Board of Energy Infrastructures

30 • Annual Report 2012 Shaping the energy transition

Planning for the grid of the future

integration of the rapidly growing renewable energy sources and maintenance of the high standards of supply and thus constitutes an integral component in terms of the success of the energy transition.

Departure from nuclear energy coupled with the rapidly growing proportion of renewable energy sources necessitates modernization of the energy infrastructure and places entirely new demands on the electricity grid. The development of this is a process spanning several decades. A resolution passed by the German Bundestag in August 2011 urges transmission system operators to formulate a yearly plan for the extension of transmission systems to account for the changing conditions in energy management. Germany’s amended Energy Act provides the legal foundation for that. As a result of this work, the Grid Development Plan has been established. The Grid Development Plan sets out the action necessary onshore to ensure secure and reliable operation over the next ten years with extension and reorganisation of Germany’s extra high voltage grid in line with demand. This action makes a significant contribution to

scenario framework

The Grid Development Plan is drawn up by 50Hertz and the other three German transmission system operators jointly. Preparation of a grid development plan involves the implementation of a multi-tier process so as to ensure that in addition to the transmission system operators, the general public and the competent regulatory authority (Federal Network Agency) are actively involved in the formulation of each grid development plan. After consultations, each process starts with a scenario framework laid down by the Federal Network Agency. Based on that, the first draft of the Grid Development Plan is prepared with the following steps: market simulation, grid planning, deduction of action. The process involves a number of consultations via which the public is included in the preparation. The process concludes with the federal requirement plan. This covers the legally enshrined need for extension in the extra high voltage grid. Enactment of the law lays down the energy management requirement and prioritises the action to be taken.

grid development plan

gdp PROcess phases

Compilation of scenario framework

TSO

consulted interested parties

BNetzA (Federal Network Agency)

Consultation and revision of 1st draft

Compilation of 1st draft*

Consultation and revision of 1st draft

TSOs

Public & network operators

20.07.2012

Compilation of 1st draft

Consultation re 2nd draft, com­pilation of envi­ ronmental report, confirmation of GDP

Checking of 2nd draft

Consultation re scenario framework

O-gdp

process responsibility

Consultation

Expert reviewer

30.11.2012

Dec. 2012 – Feb. 2013

* Taking into account the Federal offshore plan compiled by the BSH, BNetzA, BfN and the coastal regions

Consultation re 2nd draft, com­pilation of environmental report, confirmation of O-GDP

Checking of 2nd draft

BNetzA

Public, Transmission System Operators & BNetzA

TSOs

Public & network operators

03.03.2013

July 2013

Publication of 1st GDP and O-GDP draft and start of consultation

Publication of 2nd GDP and O-GDP draft by the TSOs and handover to the BNetzA

GDP 2013

O-GDP 2013

Shaping the energy transition Annual Report 2012 • 31

»We have communicated the entire preparation process trans­p arently and actively via consultations and other means. In the course of numerous briefings and discussions with representatives from politics, business, science and civil society, we have exchanged knowledge, opinions and viewpoints on grid planning. The general public is informed con-

public show the significant level of interest there is in actively engaging in the process. These have been incorporated into the revised draft of the plan, but did not necessitate any changes to the grid extension needs set out. The second draft of Grid Development Plan 2012 was delivered to the Federal Network Agency and published by the transmission system operators on 15 August. Of the 74 different actions to be taken nationwide submitted by the transmission system operators, 12 concern the control area of 50Hertz. 51 different actions, including ten in the control area of 50Hertz, were classified as urgent by the Federal Network Agency and approved.

tinuously about the grid planning in general, the consultations and the progress of the Grid Development Plan on the website.« Dr. Roland Bauer, Strategic Grid Planning at 50Hertz

On 29 May 2012, 50Hertz, Amprion, TenneT TSO and TransnetBW submitted Grid Development Plan 2012 for the first time to the competent regulatory authority, the Federal Network Agency, in the presence of German Chancellor Dr. Angela Merkel, Federal Minister of Economics and Technology Dr. Philipp Rösler and Federal Environment Minister Peter Altmaier. Together with the other transmission system operators, 50Hertz presented the draft of the Grid Development Plan and explained its content to interested members of the general public in the course of several briefings and discussions. More than 2,000 comments from the general

» Full

The results of the Grid Development Plan approved by the Federal Network Agency were submitted to the Federal Government as a basis for the first federal requirement plan, which is to be adopted in 2013. The Grid Development Plan is updated on an annual basis. Consequently, the new generation and consumption scenarios for Grid Development Plan 2013 were prepared and submitted to the Federal Network Agency in 2012. The Grid Development Plan reflects the principles of 50Hertz: maximum transparency and candour in the planning process, continuous, fast and proper information to the general public and participation of all relevant sections of society by means of consultation procedures. www.netzentwicklungsplan.de

integration of renewable energy sources can succeed only through rapid extension of the transmission systems. The Grid Development Plan is a crucial step towards making it possible to coordinate grid extension with the reorganisation of energy generation and guaranteeing the secure and stable supply of electricity in the future. The rapid cooperation of all stakeholders – transmission system operators, Federal Network Agency, associations and the general public – is exemplary.« Federal Environment Minister Peter Altmaier

32 • Annual Report 2012 Shaping the energy transition

New technologies Reorganisation of the energy system is possible only if there are major advances in the area of grid optimisation and reinforcement so that system stability and security of supply continue to be ensured in the future. Conversion to innovative transmission technology is a key aspect of the successful implementation of the energy transition. 50Hertz has opted for high-temperature conductors. Until now, these have been regarded as new territory in Germany. They represent one approach for increasing the transmission capacity of existing overhead lines. With the launch of the pilot installation in the substation at Güstrow for field testing the latest generation of high-temperature conductors, 2011 saw 50Hertz recording its first activities in the areas of grid reinforcement and optimisation. 50Hertz is using the installation to test the new technology during normal operation in a secured installation. Insights for the wider use of this technology are being obtained from the test results in Güstrow

Federal Minister of Economics and Technology Dr. Philipp Rösler answers questions from the media in Remptendorf

Moreover, 50Hertz put the first ACSS high-temperature conductor into live operation in Germany’s extra high voltage grid in the presence of Federal Minister of Economics and Technology Dr. Philipp Rösler on 4 December 2012 in Thuringia. The ACSS high-temperature conductor was installed according to a strict time schedule thanks to timely decommissioning of the conventional, heavily used connection between Remptendorf (Thuringia) and Redwitz (Bavaria). Commissioning enables us to create more capacity at a sensitive point in our transmission system, in particular, to transport green electricity from northeast Germany to the heavily consuming regions in the Southwest. By converting to high-temperature conductors – the first line-related measure of the national Grid Development Plan – the capacity of this important northeast-southwest connection can now be increased by some 300 megawatts from a previous 1,800 megawatts to an initial 2,100 megawatts. The total investment for the approximately 18 kilometre section stood at about seven million euro.

A member of staff of the regional centre ‘Südwest’ in the distribution centre Remptendorf and Federal Minister of Economics and Technology, Dr. Philipp Rösler, at the switching operation on the 4th of December

so as to increase the transmission capacity on existing lines. For the future use of this technology, the behaviour of the entire installation, the combination of fittings and lines, the sag behaviour and long-term stability need to be analysed based on the development of higher temperatures.

50Hertz also relies on new methods during aerial inspections of overhead lines. In addition to inspecting lines visually by helicopter, 50Hertz now uses a thermal imaging camera – or a camera that makes it possible to see corona discharges in daylight – to examine lines for vulnerabilities from the air.

Shaping the energy transition Annual Report 2012 • 33

»Our system operators are central pillars of the energy transition. They work with a huge degree of professionalism to achieve secure system operation, with extreme commitment on the integration of an ever-increasing volume of electricity from renewable energy sources, and innovatively use new technologies to develop the transmission system. I was able to see that first-hand during my visit to 50Hertz.« Federal Minister of Economics and Technology Dr. Philipp Rösler

High-temperature conductor assembling

34 • Annual Report 2012 Shaping the energy transition

Grid extension onshore Electricity grids play a key role in the reshaping of the energy landscape. They are the backbone of the energy infrastructure. To strengthen this further, demand-based extension of the German electricity grid is a prerequisite for the success of the energy transition, next to modernization. As the biggest projects, implementation of the Southwest Interconnector, the Uckermark Line and the Northern Ring Berlin is the focus of 50Hertz’s attention. The Southwest Interconnector, also known as ‘Thuringian Electricity Bridge’, plays a key role in transporting the renewable electricity produced in the northeast of Germany to the centres of consumption in the southwest of Germany, in particular. It will run from Halle an der Saale (Saxony-Anhalt) to Schweinfurt (Bavaria). »We were very pleased that the Thuringia State Administration Office decided to grant planning approval after a very extensive

50Hertz put the first section between Lauchstädt and Vieselbach into operation in December 2008. The planning authority approved the second section between Vieselbach and Altenfeld on 31 January 2012. Works commenced at the start of construction but were then initially interrupted due to an expedited procedure filed in conjunction with the suit opposing the planning decision. However, works were continued in the area of the substation at Vieselbach near Erfurt in April and May 2012 to prevent extension of the ICE section from being obstructed subsequently. It was possible to continue construction works apace after the Court’s decision on the expedited procedure in favour of 50Hertz. Foundation works, including for the transmission towers, started in September 2012 along with the necessary site clearance in the area of the City of Erfurt and the municipalities of Mönchenholzhausen, Klettbach, Elleben, Elxleben, Kirchheim, Stadtilm and Ilmtal. 50Hertz is working hard on completing the Southwest Interconnector. This is of particular importance to transporting green electricity to the consumption centres in the southwest of Germany and the secure supply of electricity to Bavaria against the backdrop of the decommissioning of the Grafenrheinfeld nuclear power station in 2015.

and comprehensive procedure. After many suggestions from the general public, citizens’ groups and local mayors, a solution has been found that satisfies local needs and interests, as well as the extension of transport capacity necessary from the viewpoint of society as a whole.« Dr. Yvonne Saßnick, Head of Authorisations

The long path to switching on the 380-kilovolt Northern Line

In putting the 380-kilovolt Northern Line into operation on 18 December 2012 in the presence of German Chancellor Dr. Angela Merkel and Mecklenburg-Western Pomerania’s Prime Minister Erwin Sellering, 50Hertz has made another contribution to implementation of the energy transition. The German Chancellor emphasised in her formal address that commissioning of the Northern Line is a milestone for the future supply of electricity with more wind power and at the same time underpins the security of supply throughout Germany.

December 2005:

2007 to 2009:

Completion of the regional planning

Planning approval procedure in

procedure in Mecklenburg-Western

Mecklenburg-Western Pomerania.

Pomerania and Schleswig-Holstein.

1990:

2006:

Preparations are made for electrical reunification.

Planning the final transmission route for

Grid planners believe that four interconnectors

the electricity link totalling 88 kilometres,

are necessary. One of these runs in the North

65 kilometres of which are new.

from Schwerin to Lübeck.

Shaping the energy transition Annual Report 2012 • 35

Prime Minister of Mecklenburg-Vorpommern Erwin Sellering, German Chancellor Dr. Angela Merkel and Boris Schucht at the symbolic activation of the Northern Line

»If you are in agreement with renewable energy sources, then you must also be in agreement with extending the grid.« German Chancellor Dr. Angela Merkel

Summer 2010:

May 2012:

The line is completed up to the Mecklenburg-

Construction of the section in

Western Pomerania state border. The associated

Schleswig-Holstein begins.

110-kilovolt line is put into operation.

September 2009:

April 2012:

December 2012:

Planning approval granted for the section

Planning approval decision for the

The 380-kilovolt Northern Line is put

in Mecklenburg-Western Pomerania.

section in Mecklenburg-Western

into operation in the presence of

Construction begins.

Pomerania is available.

German Chancellor Dr. Angela Merkel.

Cable artists at work. The crew of a helicopter uses its aircraft to carry a leader cable from transmission tower to transmission tower on the final section of the ‘Wind Busbar’, which is currently under construction

Shaping the energy transition Annual Report 2012 • 37

Also known as the ‘Wind Busbar’, the Northern Line now connects the substations at Görries in Schwerin and Krümmel near Hamburg, bridging a distance of 88 kilometres in all. Commissioning the new line significantly improves security of supply for the greater Hamburg area as compared to last year, which, after the moratorium on nuclear power, now reaches its former level. Moreover, the wind-generated electricity in northern Germany can be balanced out more efficiently, allowing better use of German’s existing north-south transmission routes. To minimise the exploitation of land and the landscape, certain sections of this extra high voltage

Skill, strength and endurance are needed during the raising procedure

line include regional supplier WEMAG’s 110-kilovolt line in accordance with the bundling principle for infrastructure projects. The 380-kilovolt Northern Line is the fourth east-west connection within Germany since the so-called electrical reunification of 1995. Construction work in MecklenburgWestern Pomerania started after the official approval procedure was concluded in September 2009 (completion in June 2010). For the Schleswig-Holstein section, line construction started in May 2012 and was completed in December 2012. The total investment amounted to some EUR 93 million.

38 • Annual Report 2012 Shaping the energy transition

Catching wind at sea In the future, electricity from offshore wind turbines will make an increasingly important contribution to the energy transition. 50Hertz’s mission is to connect all offshore wind turbines off the German Baltic Sea coast to its own grid – bringing electricity offshore onshore and feeding it from the generating plants to the transmission system. EnBW Baltic 1, Germany’s first commercial offshore wind farm in the Baltic Sea, was officially put into operation on 2 May 2011. Following the successful connection, another offshore wind farm is being developed off the island of Rügen in the Baltic Sea in the form of the Baltic 2. The Baltic 2 is expected to produce six times as much electricity as the Baltic 1. It is anticipated that the output generated by the 80 wind turbines will be 288 megawatts. That represents 1,200 gigawatt hours of electricity each year for approximately 340,000 households and a saving of about 900,000 tonnes of carbon dioxide. As with the Baltic 1, the onshore connection point for the Baltic 2 is the substation at Bent­ wisch near Rostock. Due to its geographic position and for reasons of efficiency, the grid connection for the Baltic 2 is being bundled with that of the Baltic 1. Two parallel sub­ marine cables up to the Baltic 1 substation platform and

from there two submarine cables to the Baltic 2 substation platform are available for connecting the two wind farms in the future. Additional offshore projects are currently in planning. Consequently, we have started extensive preparations for the next grid connections. The German Federal Government adopted an amendment to the legal framework for the development of offshore wind energy at the end of 2012. Key elements

Offshore team leader Eric-Denis Dräger from 50Hertz examines one of the cutter’s bits

Shaping the energy transition Annual Report 2012 • 39

Preparations for laying the Baltic 2 submarine cable are well under way. The so-called trencher on board the cable vessel. The descending cutter can be seen in the middle

include an amendment to the grid connection policy towards long-term extension planning by means of an offshore grid development plan and the introduction of a liability regime by

which a share of the risks arising from delays or interruptions of offshore grid connections will be borne by final consumers, so as to enhance the basic conditions for offshore investors.

»As a multi-international energy supply company and the world leader in renewable energy sources, Iberdrola sees massive potential for offshore wind power in the Baltic Sea because reliability and predictability are important to us. Constructively supporting the offshore extension and providing for the scheduled connection of the wind farms to the transmission system, 50Hertz is the right partner for this.« Jürgen Blume, Managing Director at Iberdrola Renovables Deutschland

40 • Annual Report 2012 Shaping the energy transition

Corridors of ecological value Encroaching on the particular region is an unavoidable part of reorganising the grid infrastructure. Optimising transmission routes in consideration of every protected interest and minimising the impact on humans, flora and fauna – that is what we strive for in everything we do. This involves 50Hertz working closely with local environmental and forestry authorities. We avoid densely populated areas whenever possible and give high priority to protecting the terrain when planning corridors. Consequently, transmission routes are bundled with existing overhead line routes where possible. Similarly, we endeavour to bundle transmission routes with other items of infrastructure like railway lines or motorways during the planning process. To avoid unnecessary impact on the landscape, the routes are planned to blend as closely as possible with the given terrain. 50Hertz supports a range of measures to facilitate improved bird protection. Greater insulation clearance on the planned 380-kilovolt overhead lines will preclude instances of birds being electrocuted. Furthermore, we use bundle conductors, which consist of several conductors. These are more visible to birds than single conductors. In addition, signs are placed on ground conductors at ecologically sensitive positions like water crossings or river valleys. The visibility

of these cables is thus significantly improved. Moreover, transmission towers provide birds with additional nesting sites. In the northeast of Germany, ospreys now breed on transmission towers more frequently than in trees. Falcons and corvids like to use these transmission towers. 50Hertz has supported the protection of these birds, which were threatened with extinction a few decades ago, very actively for many years. Our activities range from constructing nesting aids to ringing young birds. For example, 50Hertz sponsors some 800 identification rings every year. We continue to provide compensation areas to make good for the considerable intrusion on nature and the landscape caused by the construction of new overhead lines. We safeguard the high standards of environmental protection by continuously providing our employees with education and further training. The management of overhead line corridors in harmony with nature is a special challenge when safe operation of the lines must be ensured at the same time. New approaches for the management and maintenance of transmission routes are necessary to meet this requirement. Supported by the European Community and in cooperation with other partners, 50Hertz published the comprehensive ‘Ecological Management of Overhead Lines’ study in 2010. This involved the formulation of an interdisciplinary approach for an ecological management strategy for high voltage overhead line corridors, which can be adapted and applied to the conditions of various European regions. The strategy’s

The pilot corridor at Oberweißbach in Thuringia after completion of the works

Shaping the energy transition Annual Report 2012 • 41

aim is to minimise intrusions on the landscape. Moreover, it illustrates various aspects of the prevention and minimisation of intrusion as well as ecological compatibility within the scope of the development and maintenance of corridors. This study was conducted due to the planned construction of the Southwest Interconnector between Halle and Schweinfurt. In the spring of 2012, 50Hertz directed its focus towards two pilot sections in Thuringia and together with environmen­tal planners and forestry workers practiced ecological corridor management in line with the new approach for the first time. We have also set ourselves the goal of continuously reducing greenhouse gas emissions that arise in the course of grid operation during maintenance and repair. By constructing modern buildings in the plants, 50Hertz continually lowers heating and operating costs. Due to a conscious approach and internal self-monitoring, 50Hertz has complied with the voluntary commitment of German industry to minimise the emission of sulphur hexafluoride (SF6).

Thomas Dockhorn from 50Hertz and all participants are very satisfied with the result of the first ecologically maintained corridors: »Ecological corridor management supports nature and thanks to improved environmental compatibility fosters the acceptance of overhead lines. And although real success will only transpire completely in the coming years in relation to nature, the two pilots in Thuringia most definitely represent the starting point.«

Waste is recycled and proper disposal monitored. 50Hertz also took the precaution of overhauling additional oil collection equipment at transformer stations, put noise abatement measures into effect and removed residual pollution when developing new sites in 2012.

Project manager Thomas Dockhorn and landscape planner Rocco Hauschild make their way along the transmission route

42 • Annual Report 2012 Shaping the energy transition

Commitment out of conviction As a transmission system operator social responsibility is our core business. Moreover, we provide additional impetus – for a life worth living today and a secure tomorrow. 50Hertz’s commitment goes beyond the measures required by law. We focus on activities in our region – for people and for social cohesion. We support outstanding and distinctive projects in our control area that promote a diverse cultural landscape or serve the protection of nature and social concerns. The well-being and the encouragement of children and adolescents are especially dear to us. Youth and social matters As a transmission system operator social responsibility is our core business. Moreover, we provide additional impetus – for a life worth living today and a secure tomorrow. 50Hertz’s commitment goes beyond the measures required by law. We focus on activities in our region – for people and for social cohesion. We support outstanding and distinctive projects in our control area that promote a diverse cultural landscape or serve the protection of nature and social concerns. The well-being and the encouragement of children and adolescents are especially dear to us. Environment and education Inspiring young people to discover the natural sciences and technology is one of our main objectives. As main sponsor of the special ‘Windstärken’ (wind forces) exhibition at the German Museum of Technology in Berlin, we make the subject of wind and its energy tangible – especially for children and adolescents. 50Hertz vigorously drives forward new solutions in the interest of climate-friendly, secure and economic energy supply. As a gold partner of Germany’s ‘Clean Tech Media Award 2012’, we have helped to encourage the use of sustainable environmental technologies and to create a platform for exchanging ideas. CEO of 50Hertz Boris Schucht sat on the jury panel and made the presentation for the ‘Energy’ category. Initiated by 50Hertz and implemented in conjunction with the Independent Institute for Environmental Issues (UfU e. V.), the interactive exhibition ‘Energie gemeinsam wenden’

(transform energy together) illustrates the energy transition process to pupils from years 5 and 6. The exhibition spells out what switching a country’s supply of electricity from fossil to renewable energy sources means in practice. It shows that this is a process in which many players are involved and that is associated with changes that affect every one of us. In the course of the exhibition, pupils symbolically alter

the energy landscape on an ‘energy transition carpet’. The ‘Wendepunkte’ (points of transition) exhibit conveys different aspects of the energy transition in word and picture and leads into learning stations. In the eight ‘Es wird gewendet’ (in transition) learning stations, pupils carry out activities, games and experiments on different topics relating to the energy transition. The interactive exhibition was commenced in the State of Mecklenburg-Western Pomerania in the presence of its Prime Minister, Erwin Sellering, and children from the grammar school Goethe-Gymnasium Schwerin during the formal commissioning of the 380-kilovolt Northern Line (‘Wind Busbar’). Culture We support outstanding and distinctive projects in our control area that promote a diverse cultural landscape. 50Hertz participates in the ‘Artist in Residence’ series at the concert hall Konzerthaus Berlin, which is dedicated to an artist each season. In the 2012/13 season, 50Hertz is supporting violinist Julia Fischer. In the Federal State of Mecklenburg-Western Pomerania, numerous events take place in the summer months during the Festival of Mecklenburg-Western

Shaping the energy transition Annual Report 2012 • 43

Pomerania. 50Hertz supported the Festival in 2012, too. By fostering art at its best and nurturing young artists, 50Hertz helps to enrich cultural life in Mecklenburg-Western Pomerania and increase its attraction as a tourist destination. Funding activities in the form of focused donations also occupy a permanent place at 50Hertz. For example, 2012 saw us supporting the ‘Aktion Rückenwirbel e. V. – Gesellschaft zur Förderung der Rückenprävention’ (campaign for the prevention of back injury) and in so doing imparting associated daily prevention measures to 1,365 pupils. We also sponsored the swimming lessons for preschool children of the Güstrow district association of the German Red Cross, the ‘Kunterbunt’ day nursery in the district of Preilack, the junior fire brigades in Anklamer Land and the Bad Sulza Fire Brigade. In addition, paintings by Berlin artist Houda Tautenhahn have been loaned to 50Hertz and can be viewed in its headquarters. Connecting lines and energetic colours reflect the core business of 50Hertz.

Congratulations: Host Jan Hahn (left), award-winner Karl Kolmsee (Smart Hydro Power) and the presenters Sabine Christiansen, media entrepreneur, and Boris Schucht from 50Hertz (right)

Students of the Goethe Secondary School show the Prime Minister of Mecklenburg-Vorpommern, Erwin Sellering (left) and Boris Schucht, Chief Executive Officer (right), the “Participative Exhibition”

44 • Annual Report 2012 Shaping the energy transition

Our employees – well equipped More than 750 people at a total of seven sites shape the course of 50Hertz. As a responsible, open and forward looking company, 50Hertz is developing its transmission system by means of an extensive investment programme in the coming decade so as to lay the foundation for the success of the energy transition. 50Hertz creates optimum working conditions: a motivating work environment that attracts highly skilled and dedicated people and shows appropriate development opportunities for. Our growth trajectory continued in 2012. In the face of the growing investment portfolio and increased demands on the company, 50Hertz has recruited more than 70 new employees and significantly expanded staff development – to meet the challenges associated with the necessary extension of the electricity grids onshore and offshore. Given its well-trained and highly specialised employees, 50Hertz actively strives to retain, develop and motivate its workforce. We enable our employees to continuously develop their skills and knowledge and thus exploit potential for development to the full. The ‘4×4 Proficiency Model’ developed by 50Hertz defines the key requirements for the skill sets employees and executives should have and forms the foundation for focused personnel development. All the senior executives have already participated in the newly launched development appraisal meetings and an adapted performance management system. The performance of all employees covered by collective wage agreements was also appraised and they were remunerated accordingly for the first time.

50Hertz maintains a long-standing and close partnership with various universities and is strongly committed to fostering young talent. 50Hertz enables university graduates to start work in all relevant functions of the company at the different sites with its trainee programme. Candidates work in different positions over a period of 18 months and are introduced to related disciplines closely linked with their specialist field, amongst other things. 50Hertz also offers an internship of at least three months to students of universities or universities of applied sciences whose grades in intermediate exams were above average. Aspiring professionals also have the opportunity to write their bachelor’s or master’s thesis at 50Hertz. Working students can work at 50Hertz during the term and the semester breaks so as to gain practical experience alongside their studies. 50Hertz provides law students who have passed their first state examination with the opportunity to apply their knowledge of energy law in real-life cases. In 2012, 130 students are grasping the opportunity to become familiar with day-to-day business at 50Hertz during their studies. 50Hertz has successfully acquired LTB Leitungsbau GmbH as a new partner for the dual training of a larger number of industrial trainees. These trainees will work in 50Hertz installations during their training and two years afterwards as part of a detailed succession plan. This means that in five to six years they will be able to replace those employees who then go into retirement.

Jenny Wegmann completed her internship at the Central Regional Centre in 2010. This was her first encounter with 50Hertz. Two years later, she was given a permanent position at 50Hertz as a fledgling electrical engi-

Strategic personnel planning, a higher number of trainees and long-term succession planning enable us to face the challenges of demographic and social change with optimism. Moreover, a collective agreement will set standards in terms of safeguarding and fostering the working capacity of employees up to an advanced age. Together with Elia, 50Hertz has also set up four new international development programmes, each of which is directed at core groups of the workforce with strategies tailored to specific development needs. The first half of 2013 will see the start of ‘Tesla’ for young professionals and the ‘Faraday’ programme, which is directed at tomorrow’s managers. In 2012, 13 participants from 50Hertz were nominated for these programmes in an internal selection process.

neer. Since May 2012, the 30-year-old female from Berlin has worked in system management strategies at 50Hertz’s TCC, thus far a maledominated environment. »This job is just right for me.«

Shaping the energy transition Annual Report 2012 • 45

In accordance with the existing agreement on codetermination, 50Hertz cooperates closely and constructively with those bodies that deal with matters of codetermination within the company. The Works Council at 50Hertz is responsible for codetermination within the company. Employee representation is incumbent on the parity-based Supervisory Board. At inter-establishment level, the interests of workers

are represented by the trade union; for example, within the framework of collective bargaining. This task is carried out on behalf of 50Hertz by the German Mining, Chemical and Energy Industrial Union (IG BCE). In 2012, preparations for the European Works Council of the Elia Group and the jointly developed criteria for job evaluation were the main focus of cooperation. 50Hertz acquired the plot at Heidestrasse 6, 10557 Berlin, for its new headquarters on 9 July 2012. The building should be completed at the end of 2015 and reflect the autonomy and social role of 50Hertz in terms of security of supply and climate protection while being a workplace for employees and centre of information for the company vis-à-vis the poli­tical and business communities as well as customers and suppliers. The building will promote interdepartmental inter­ action and communication, as well as provide modern, ver­satile workplaces for employees. Additional requirements for the building include energy efficiency and the use of renewable energy sources. Employees will participate in the formulation of requirements for the building and working environment via the Works Council, which is involved in organising the project, as well as a focus group composed of employees of the company. Professional change management will support the project over the entire period as well as promote and control the cultural change at 50Hertz, which is marked by four core values: performance, dependability, trust, commitment.

Photo: IHK Berlin

A trainee from 50Hertz is Berlin’s ‘State Best’! In mid-November, 50Hertz-trainee Rainer Kunze was named Berlin’s ‘State Best’ in the skilled trade category ‘Industrial Clerk’. After completing his A-levels and alternative civilian service, Rainer Kunze began his vocational training in September 2009 and finished this after only two years with an A grade in June last year. He now works in the Accounting/Tax department. »I’m exactly where I want to be,« said the 22-year-old. His next step is to complete evening studies alongside work.

46 • Annual Report 2012 Shaping the energy transition

An expert panel consisting of pro­fessionals as well as representatives of the City of Berlin and 50Hertz will evaluate the architectural designs within the scope of an architectural competition. The process will end in early 2013. Preserving and actively promoting the health of employees is an integral part of the 50Hertz corporate culture. A key element of the occupational medicine provided is to assist employees in all aspects of industrial safety, accident prevention and, in particular, health protection. This includes advising employees on health issues, for example, during preventive checkups. Existing policies for security and safety are continuously improved and adapted in line with new requirements. Four notifiable occupational accidents, nine accidents during business travel and 16 commuting accidents occurred during the 2012 fiscal year. None

Doing sports collectively, is part of an established tradition at 50Hertz.

of these accidents resulted in serious injury. The fall arrest system jointly developed for works on transmission towers by 50Hertz and external experts was certified in May 2012 and has been used, for example, during works carried out on the Northern Line and on the Southwest Interconnec­ tor. 50Hertz also carried out an accident prevention day at all the company’s sites, which was met with an excellent response. The health fund has enabled various programmes and schemes, such as massages, yoga classes, Feldenkrais exercises to en­hance suppleness and the optical health seminars for employees. The well established ‘Health and Safety Day’, which focuses on improving health care and ergonomics, was held again at every site in 2012. Exercising together has a long tradition at 50Hertz. We continued this in early September with a broad offering at

Shaping the energy transition Annual Report 2012 • 47

the ‘Sports and Fitness Day’. The same applies to every discipline: athletic performance, team commitment, reliability within the team and confidence in one’s own athletic abilities are encouraged. September also saw the most courageous and best trained cyclists at 50Hertz overcoming the high altitude challenges and 2,645-metre Col du Galibier in the French Alps once again. Elia was one of the main sponsors of the cycling event this year, too.

Riding a BMX bike demands concentration and coordination, as well as endurance.

02

Report on the fiscal year 2012 of 50Hertz Transmission GmbH

Business and general background conditions



50

Fiscal year Statement of financial position Income statement Cash flow statement Statement of changes in fixed assets

64 64 66 67 68

Notes to the financial statements Company boards Audit opinion

70 84 85

50 • Annual Report 2012 Report 50Hertz Transmission GmbH

Business and general background conditions 50Hertz is the term used jointly for 50Hertz Transmission GmbH (50Hertz Transmission) and 50Hertz Offshore GmbH (50Hertz Offshore); both companies are affiliates of Eurogrid GmbH (Eurogrid), Berlin. Transmission system operator Elia System Operator NV/SA (Elia), Brussels, Belgium, and infra­ structure fund Industry Funds Management Luxembourg No. 2 S.à.r.l., Luxembourg, Luxembourg, indirectly hold a shareholding in Eurogrid via Eurogrid International CVBA/ SCRL, Brussels, Belgium. 50Hertz is one of four transmission system operators for electrical energy operating in Germany responsible for the extra-high-voltage grid.

From the viewpoint of the transmission system operators, discussions on energy policy in Germany in 2012 will be shaped by four main issues: –

Considerable delays in connecting offshore wind farms to the grid in the North Sea, resulting in legislation limiting liability risks for transmission system operators



Design of future electricity grid infrastructure resulting in the first grid development plan (“Netzentwicklungsplan”: NEP 2012) for the whole of Germany



Discussions on the rising costs of the new energy concept in Germany and the foreseeable adjustments that will have to be made to the EEG (“Erneuerbare-Energien-Gesetz”: German Renewable Energies Act) as a result



Measures to improve supply reliability, especially during the winter

Economic and political environment Despite the uncertainties both within and outside of Europe, general economic development in Germany was fairly resilient in the first three quarters of 2012, reporting slight growth for the year as a whole. However, economic output started to decline in the last quarter of the year. Domestic demand for capital goods and external economic forces, i.e., the main economic growth drivers in Germany, became progressively weaker over the last few months of the year. In light of the persistent difficulties in the euro zone, a slowdown in the economy cannot be ruled out for 2013, even if preliminary indications at the end of 2012/beginning of 2013 suggest a slight improvement. According to estimates published by Arbeitsgemeinschaft Energiebilanzen e. V. (working group on energy balances) on 14 December 2012, electricity consumption in Germany reached 594 terawatt-hours (TWh) in 2012, down around 1 % on the prior-year level. The performance of the economy as a whole as well as electricity consumption did not have a significant impact on the business performance of 50Hertz. With regard to the grid business, there were several political uncertainties that developed in 2012 – primarily those in connection with the discussion surrounding the situation of offshore connections in the North Sea and the introduction of offshore liability regulations. Following the announcement of an amendment to the law at the end of the year, the fede­ ral government intends to accelerate the development of offshore wind energy as of the coming year.

Overview of 50Hertz As transmission system operator, 50Hertz operates the transmission grid which, at voltage levels of 150 kilovolts (kV), 220 kV and 380 kV (three-phase alternating current) as well as 400 kV (direct current) and a network grid length of around 10,000 km, spans the federal states of Berlin, Brandenburg, Hamburg, Mecklenburg-Western Pomerania, Saxony, Saxony-Anhalt and Thuringia, and runs through parts of the states of Schleswig-Holstein and Lower Saxony. 50Hertz’s customers and partners are distribution grid opera­tors based in the control area whose plants are directly connected to the transmission grid, operators of power plants connected to the transmission grid, pumped storage plants, wind farms, major industrial consumers, transit and balancing group customers as well as business partners governed by the laws EEG and KWKG (“Kraft-Wärme-Kopplungsgesetz”: German Combined Heat and Power Act). As transmission system operator responsible for the control area, 50Hertz is responsible for ensuring that the transmission grid remains secure, affordable, user-friendly, effi­cient and environmentally friendly within the full scope of operation, maintenance and need-based expansion as well as for maintaining the balance of generation and consumption within the control area’s whole electricity generation system.

Report 50Hertz Transmission GmbH Annual Report 2012 • 51

In accordance with the provisions under European and national law, the Company ensures free and nondiscriminatory access to its transmission grid. In the course of its business activities, 50Hertz focuses on creating value for its customers, partners and the general public as well as developing a sustainable and environmentally conscious business in a European single electricity market. The vision of the Elia Group and 50Hertz is as follows: “We lead the way in the energy revolution by developing the diversified, sustainable and reliable power systems, spanning land and sea, with new possibilities”.

Certification as an ownership unbundled transmission system operator On 9 November 2012, 50Hertz received certification as an ownership unbundled transmission system operator. This certification in the form of the strictest unbundling option confirms that 50Hertz complies with unbundling requirements and is the only German transmission system operator to do so to date. The certification also confirms that 50Hertz has the financial, material, human and technical resources to perform its tasks as a transmission system operator. The BNetzA (“Bundesnetzagentur”: Federal Network Agency) issued the certification on two conditions: Firstly, 50Hertz must allow grid connection petitioners immediate connection to its grid upon application regardless of ownership, also by means of 110 kV busbars. Secondly, 50Hertz Trans­ mission was required to put together its supervisory board in compliance with unbundling requirements, a task it completed in December 2012.

Regulatory framework for the energy industry European law On a European level, several legal measures came into force in 2012 or are still at the implementation stage, which are intended to aid the creation of a uniform single market by increasing market transparency and further expanding the infrastructure. The European Regulation on Wholesale Energy Market Integrity and Transparency (REMIT) already came into force in December 2011. The regulation was transposed into national law by adopting a law on the market transparency agency. The idea of establishing the market transparency

agency is to create a monitoring center which meets the obligations contained in this regulations and is integrated as a national market monitoring authority in the European oversight regime. Regardless of the above, the transmission system operators have had to comply with the particular requirements under the REMIT since December 2011, in particular the transparency and publication duties as well as the duties relating to insider information. This applies in particular with regard to business divisions or organizational business units that have access to the market or are recipients of such insider information. National law In 2012, national law continued to be shaped by the implementation of the new energy concept in Germany commenced in 2011. Several pieces of legislation served to further expand renewable energies, continue development of the regulatory framework as well as to transpose European legislation into national law. In this regard, amendments to the third Energy Industry Act are of particular importance. In addition to amendments to the regulations governing accounting unbund­ling, 50Hertz is primarily affected by the plans to implement fundamental changes regarding the connection of offshore wind farms to the grid. This concerns new regulations governing the offshore grid plan of the Federal Maritime and Hydrographic Agency (“Bundesamt für See­schifffahrt und Hydrografie”), the introduction of a new offshore grid development plan for transmission grid operations, comprehensive regulations governing liability for pecuniary damage in the event of malfunctions, delayed commissioning and operating maintenance work, the introduction of an equalization of burdens for compensation payments between transmission system operators, the regulatory recognition of compensation payments, further access rights to power plant operators and the expansion of the scope of the German act to accelerate grid expansion for transmission grids to include offshore connection lines. The liability amount the transmission system operator must bear in the event of delays or interruptions to the grid connection is limited to between 5 % and 20 % relative to the financial damage incurred by the wind farm operator. However, in the event of gross negligence, this can reach a maximum amount of EUR 110 m per case and calendar year. In the event of gross negligence – this also applies for agents engaged by the transmission system operator – the transmission system operator is presumed to be at fault (reversal of the burden of proof). In the event of simple neg­ ligence, the maximum liability amount the transmission system operator must bear is limited to EUR 17.5 m, depending on the case at hand.

52 • Annual Report 2012 Report 50Hertz Transmission GmbH

The federal government has granted additional rights to transmission system operators in the form of Sec. 13 EnWG (“Energiewirtschaftsgesetz”: German Energy Industry Act), stipulating that power plant operators must inform the transmission system operators about any planned de­ commissioning in future. Should the power station due for decommissioning be one that is of systemic relevance, the transmission system operators can refuse the decommissioning proposed by the power plant operator. Accordingly, all four transmission system operators must prepare a list of power plants they declare to be of systemic relevance for the first time in March 2013. The amendment therefore also means legislators must give priority to electricity supplies over gas supplies, i.e., should it become apparent that there will be supply bottlenecks at a gas power plant, the gas long-distance network operators must inform the transmission system operator responsible for the control area and comply with the latter’s decision. An additional element is an authorization to issue decrees serving the expansion of a strategic grid reserve by means of new constructions. In order to promote offshore wind power, an amendment to the SeeAnlV (“Seeanlagenverordnung”: German Maritime Structure Ordinance) was adopted at the beginning of the year, coming into force as of 30 January 2012. The amendments are designed to accelerate approval proceedings for offshore wind farms. With regard to regulatory legislation, important amendments to the ARegV (“Anreizregulierungsverordnung”: Incentive Re­-gulation Ordinance) came into force as of 22 March 2012. The amendment to the ARegV eliminated the time delay of two years it took for revenue from investments to take effect (t minus 2), with an adjustment to the revenue cap for investment measures already having been made in the year it was commissioned on the basis of budgeted costs. This had a positive effect on 50Hertz Transmission’s net income for the year 2012. The legal framework for renewable energies was devel­oped further in 2012 by means of several legislative amendments. With retroactive effect as of 1 April 2012, the amendment pertaining to photovoltaics in the EEG was announced in the Federal Legal Gazette on 23 August 2012. The primary aim of this amendment is to increase restrictions on the promotion of electricity generated by means of photovoltaics and to constantly make adjustments as necessary. Remuneration and degression rates were also redesigned. Furthermore, the market premium model introduced as of 1 January 2012 was modified. The market premium is to encourage plant operators to become active market players. Rather than receiving fixed feed-in compensation, they are to feed in electricity as and when it is needed and to assume

economic responsibility for forecast variances, thereby allowing them to command higher prices on the market. To avoid any threats to the system stemming from an uncontrolled shutdown of EEG plants in the event that a critical frequency is exceeded (“50.2 Hertz problem”), the federal government adopted the system stability ordinance effective as of 26 July 2012. The ordinance stipulates that electricity distribution grid operators upgrade the inverters installed in photovoltaic systems, with the costs being borne by the grid operators. Half of these costs may be allocated through network user charges, the other half through the EEG cost allocation.

Grid development plan 2012 In 2012, 50Hertz and the three other transmission system operators prepared the first national grid development plan 2012 based on input parameters for 2022 (looking towards 2032) fixed by the Federal Network Agency after a broadbased consultation process. This package of measures was submitted for approval as a coherent concept for ensuring stable electricity supply in 2022 (looking towards 2032), again following a broad-based consultation process. On this basis, the Federal Network Agency confirmed the grid development plan 2012 on 26 November 2012. In a first step, the confirmation comprises the priority measures already deemed necessary by the Federal Network Authority in light of the changing conditions in the energy industry. This phase involved the Federal Network Agency going beyond the planning approach taken by the transmission system operators and introducing more far-reaching criteria to assess the necessity and robustness of the measures. The aim of this procedure is to create a time-based prioritization approach and to grant the necessary flexibility in expanding the grid in light of a changing energy policy and energy industry environment. Of the 74 measures submitted by the transmission system operators across Germany, 12 relate to 50Hertz’s control area. Nationwide, 51 measures – of which 10 relating to 50Hertz’s control area – were classed as top priority and approved by the Federal Network Agency. The grid development plan will be updated annually, allowing the planning to be continually developed. The confirmed grid development plan 2012 was then used by the German Federal Ministry of Economics and Technology to draft the German Federal Requirements Plan Act, which the federal cabinet enacted on 19 December 2012. The parliamentary legislative procedure is yet to be concluded. The German Federal Requirements Plan Act is binding in setting Germany’s need to expand the extra-high-voltage grid for the next ten years.

Report 50Hertz Transmission GmbH Annual Report 2012 • 53

Grid usage and grid connection

Regulatory issues

50Hertz is currently processing eight applications in accordance with the KraftNAV (“Kraftwerks-Netzanschlussverordnung”: Ordinance for Regulating Grid Connections) for connecting conventional power stations and storage facilities to the transmission grid as well as a planned compressed air storage plant at Förderstedt (outside of the scope of application of the KraftNAV). The projects are spread across nine locations and together have a gross nominal capacity of around 6,900 megawatts (MW), of which 50Hertz has granted grid connection permits for approximately 5,000 MW.

The revenue caps for 2012 were set as of 1 January 2012 in accordance with the provisions of the ARegV. An increase of around 15 % was recorded on the prior year. The revenue caps for 2013 are in turn around 26 % higher compared to 2012 and form the basis of the price list valid since 1 January 2013. The increase in the revenue caps for 2013 is primarily due to the basic amount doubling for redispatch measures in accordance with the corridor model in comparison to the prior year and also to subsequent amounts charged from prior years. Approvals of onshore and offshore investments also contributed to this increase.

Over the course of 2012, the power plant unit Boxberg R began continuous operation (with an output of approximately 670 MW). Furthermore, the grid connection application was withdrawn for the gas and steam turbine power plant at Wustermark with an output of approximately 1,250 MW. As a result, the gross nominal capacity of conventional power plants and storage facilities for a network connection applied for at 50Hertz fell by around 1,900 MW to 6,900 MW in 2012. With regard to the grid connection applications that fall under the EEG, 50Hertz has received 21 applications for offshore wind farms in the Baltic Sea of up to 6,100 MW when completed (including competing applications). In 2012, four new applications were made with an output of approx. 1,800 MW. There are six applications for onshore wind farms of up to 1,300 MW, bringing the output for applications to connect to 50Hertz’s grid to approximately 7,400 MW for offshore- and onshore wind farms. On top of this there are two applications for solar farms with an output of around 200 MW. As of 15 October 2012, the preliminary network user char­ ges were determined and published on the basis of the revenue caps for 2013. The prices are valid as of 1 January 2013 and apply equally in terms of treatment and amount for all grid users. For customers connected to 50Hertz’s grid, the statutory allocations based on the EEG, KWKG, Sec. 19 (2) StromNEV (“Stromnetzentgeltverordnung”: Ordinance on Electricity Network User Charges) (allocation for individual network user charges and exemptions from network user charges) and as of 2013 on Sec. 17f (5) EnWG (offshore liability cost allocation) were also included and calculated.

By 31 December 2012, of the 80 active applications filed since 2008 for the approval of investment measures, 50Hertz had received a total of 61 approvals. Based on the total application volume of EUR 6.4b, an investment volume of EUR 3.3b had been approved by the Federal Network Authority by the aforementioned date. In February 2012, 50Hertz signed an agreement with the Federal Network Agency settling litigation in connection with the approval of investment measures. This settlement accommodates 50Hertz’s interests in key areas. This re­­lates to the elimination of the reduction of investment measures by an amount to avoid double recognition. This is to be replaced by the introduction of a lump-sum replacement portion for investments, calculating imputed trade tax and recognizing borrowing costs. The costs for investment measures can now be refinanced through network user charges by introducing a planning cost approach (t minus 0) in place of the previous t minus 2 time delay in the ARegV without any time delay. As a member of the ENTSO-E (European Network of Transmission System Operators for Electricity), 50Hertz is actively involved in determining the network codes in accordance with EU law, which will then be directly incorporated in applicable law in the member states after completion of European legislative procedure.

Grid provision and expansion The provision and maintenance of 50Hertz’s 65 substations and switching systems with its 151 transformers in operation, amounting to a total capacity of 43,150 MVA, comprises inspection, servicing and maintenance. While servicing and maintenance is largely performed by external

54 • Annual Report 2012 Report 50Hertz Transmission GmbH

personnel, inspection and monitoring of the quality and safety of the services performed is secured at all times by its own qualified staff. Furthermore, the ability to respond to an event effectively is ensured by means of a contingency system implemented in collaboration with other grid operators and users. Transformer capacity reserves are being increasingly deter­mined by the feed-in volume from the distribution grid level into the transmission grid, which is attributable to the growth in renewable energies. The focus in fiscal year 2012 was again on carrying out construction activities and planned measures for strengthening and expanding the grid. The planning approval decision on the 380 kV overhead line from Schwerin (Görries) to Hamburg (Krümmel) was made for Schleswig-Holstein in the second quarter of 2012; construction work on this section of the line was commenced immediately in order to be able to activate it before the winter period 2012/2013 began. The connection and thus the direct connection of the Hamburg network territory to the 50Hertz grid was commissioned on 18 December 2012. For the European priority project relating to the southwest interconnection line from Halle (Saxony-Anhalt) to Schweinfurt (Bavaria), the planning approval decision for the second section was issued in the first quarter of 2012, which directly led to construction work on that section of the line beginning. Actions filed at the Federal Administrative Court in Leipzig against the planning approval decision resulted in the construction being interrupted. Following rejection of the urgent appeal to halt construction, work was immediately resumed. A final court decision on and confirmation of the planning approval decision is expected in 2013. For the western section of the Nordring Berlin, the public works planning procedure was commenced in November 2012. With regard to the Remp­ tendorf-Redwitz line, work involving refitting with high-tem­ perature conductors was completed as of 4 December 2012 following several weeks of continuous test operations and the line was reactivated. This measure saw 50Hertz make use of high-temperature conductors on a heavy-duty interconnector, with the transmission capacity initially being increased by up to 300 MW. The first grid connection for the new power plant Boxberg (unit R) was made in February 2012 and the voltage setpoint for the first unit of the new power plant in Moorburg in November 2012. Work on connecting the Werder/Kessin onshore wind farm to the 380 kV grid was begun in June 2012. At the Wolmirstedt and Vierraden substations, a new 380/220 kV transformer and an additional 220/110 kV transformer were installed and commissioned.

Environmental protection is an extremely important factor in the use of technical plants. For this reason, such work included regularly controlling and modernizing the environmental equipment in the substations, implementing noise protection measures and performing decontamination as part of new construction measures. The high level of environmental protection is ensured by the constant training of its employees. By way of compensation for the invasion of nature and landscape as a result of constructing the new overhead lines, compensatory and replacement measures are performed to the extent demanded by authorities.

System management As of 31 December 2012, 50Hertz’s control area contained onshore wind turbines with a total installed output of approximately 12,370 MW. This corresponds to 40.2 % of Germany’s installed capacity and an increase of some 7 % in comparison to the end of 2011. The installed output of offshore wind farms continues to stand at around 50 MW. The photovoltaic output installed within 50Hertz’s control area increased by approximately 104 % in comparison to the end of 2011 and now stands at around 7,220 MW. The maximum simultaneous feed-in from wind turbines of 10,208 MW in 50Hertz’s control area in 2012 was achieved on 5 October 2012. The maximum amount fed into 50Hertz’s transmission grid – registered on 6 November 2012 – came to 14,979 MW (instantaneous oneminute value). To avoid the failure-related overloading of grid elements within 50Hertz’s transmission grid, it was necessary at the beginning of 2012 to take measures on 262 days in accordance with Sec. 13 EnWG (thereof on 77 days with a reduction in output generated by renewable energies). This resulted in a redispatch amount of 2.824 TWh and a reduced EEG energy offering of 120 gigawatt-hours (GWh). Since the decision was taken by the federal government in March 2011 to suspend the extension of some nuclear power plants’ working lives, the situation in 50Hertz’s control area continued to be marked by increased load flows from north to south and east to west in 2012. Following evaluation of the winter 2011/2012, 50Hertz together with the other German transmission system operators prepared for the winter 2012/2013 by carrying out an extensive investigation into the effects of the decision taken by the federal government to suspend the extension of

Report 50Hertz Transmission GmbH Annual Report 2012 • 55

some nuclear power plants’ working lives. It was determined that –

The provision of reserve power plants of EUR 2,500 MW is essential to ensure the effectiveness of redispatch measures in southern Germany



A year-on-year increase of up to 4 GW of wind energy fed in is expected as a result of the continued increase in wind turbine construction



The northern line between the Görries and Krümmel substations is having a positive effect on voltage control in the Greater Hamburg region

The system security of the German transmission grids in the previous winter 2012/2013 was ensured at all times.

Energy management Balancing group management 50Hertz settles the control area and therefore all balancing groups on a monthly basis, including its own balancing groups. As of the end of 2012, this involved 1,290 balancing groups for 474 of the traders, electricity sellers and grid operators operating in the control area. Balancing group settlement is constantly becoming more complex as a re­sult of new legal developments and the resulting need to adjust the settlement regulations. EEG/KWKG settlement In the fiscal year 2012, the supply of EEG electricity within the control area increased by 22 % in comparison to the prior year. This is primarily attributable to the renewed increase in the electricity fed in from photovoltaic systems by some 80 % in comparison to 2011. 2012 saw a steady increase in the use of direct selling (in particular in accordance with the market premium model). Overall, just under 50 % of EEG electricity output in the control area was still sold by the transmission system operators. As of year-end, almost 80 % of onshore wind turbines and 100 % of offshore wind turbines were directly sold using the market premium model, also causing electricity volumes exchanged between the transmission system operators in the horizontal equalization of burdens to fall considerably. Over the course of 2012, it was found that the EEG cost allocation for 2012 had not been set high enough. Across the whole of Germany, a deficit of around EUR 3b was recorded in October and November; for 50Hertz, the maximum deficit came to some EUR 566 m in November. This difference

was primarily due to the significant fall in prices on the spot market compared to the future prices required by law to be included in the calculation of the cost allocation for 2012. The low price level on the spot market continued to be reflected in the future prices for 2012. Furthermore, the addition of photovoltaic systems far exceeded the expected values that had been calculated. The unexpectedly heavy use of the market premium model also led to high additional costs. Due in part to the catch-up effects for 2012, the EEG cost allocation has increased considerably to EUR 5.28 ct/ kWh for 2013 which was published punctually by the transmission system operators. Overall, the cost allocation method has a tendency to increase the EEG cost allocation further when electricity market prices are down as a result of catch-up effects. After the volume of subsidies bottomed out as a result of existing subsidies pursuant to the KWKG either expiring or declining in 2011, the regulations of the amended KWKG took effect as of 2012, with the forecast for the nationwide subsidy volume in 2012 up on the 2011 volume by some 34 %. International Grid Control Cooperation The International Grid Control Cooperation (IGCC) was en­ larged considerably in 2012. In February, the Netherlands joined the IGCC, followed by Switzerland in March, the Czech Republic in June and Belgium in October. This will avoid any imbalances in supply and demand in these control areas if there are sufficient transmission grid capacities available, thereby allowing 50Hertz and the other participating transmission system operators to make a significant contribution towards the integration of balancing energy markets in Europe and ultimately lowering balancing costs. Energy to cover grid losses During 2011, 50Hertz established the organizational and technical prerequisites needed to use the forward market of European Energy Exchange AG for the procurement of “long-term components” in order to cover grid losses. Since November 2011, 50 % of the energy volumes to be procured each month have been procured on the forward market. This made it possible to better meet the reference price set by the Federal Network Agency. Due to the positive experiences gathered, long-term components have been procured exclusively via the forward market since July 2012. Cooperation with TenneT TSO The cooperation with TenneT TSO GmbH (TenneT TSO) was intensified further in 2012. Since January 2012, as part of 50Hertz’s services for TenneT TSO, ¼ h intraday trading on the European Power Energy Exchange spot market has been used to sell the expected feed-in volume of renew

56 • Annual Report 2012 Report 50Hertz Transmission GmbH

able energies that meets needs as closely as possible. As over 80 % of the energy from photovoltaic systems continues to be fed into the market by the transmission system operators and these systems exhibit a high power gradient, this makes a significant contribution towards maintaining system security and reducing the needs for balancing ener­ gy when the hour changes. This also made it possible to balance the energy difference via the electricity exchange in the event of redispatch measures by TenneT failing to do so. Unplanned load flows In response to the growing debate in Europe, in particular with transmission system operators in Poland and the Czech Republic, on the increasing volume of unplanned load flows across transnational borders and their influence on ensuring secure system management, 50Hertz commenced negotiations with PSE Operator S.A. (PSE Opera­tor) and CEPS, a.s. in summer 2012. Together with PSE Operator, in a first step a contractual agreement was reached on the implementation of a “virtual phase shifter”, a response mechanism into how power plants are run to be applied under defined conditions and coordinated across borders, for a pilot phase in 2013. In a second step, it was agreed to jointly set up real phase shifters at the two border switching stations. Similar offers were also submitted for the Czech Republic. However, an agreement could not be reached in 2012. In any case, a permanent solution to the problem of unplanned load flows also requires the network to be expanded further between generation regions and consumption centers. Regional initiatives 50Hertz is involved in the development of electricity markets in various European regions. In northwestern Europe, progress was made in 2012 with preparations for the introduction of load flow-based market coupling procedures especially for awarding bottlenecks capacities a day ahead. In central Europe, by contrast, hardly any progress was made. A positive development is only expected here if progress is made in solving unplanned load flows.

Employees The number of workers employed at 50Hertz Transmission increased from 664 to 720 as of 31 December 2012, a rise of more than 8 % compared to 31 December 2011. This increase is due to a rise in the volume of tasks as a result of 50Hertz’s positioning as a fully ownership unbundled transmission system operator. The increase in these tasks is primarily attributable to the expansion of the grid and the integration of renewable energies. The number of trainees stayed constant at 20 as of year-end 2012.

Health and industrial safety The primary aim is to shape conditions at the workplace or in the working environment in such a way that they fulfill the employees’ health and safety requirements at all times. The existing safety guidelines are constantly being improved and adjusted to meet new requirements. In fiscal year 2012, there were 4 reportable work-related accidents, 9 accidents while travelling on business and 16 commuting accidents. None of these accidents resulted in serious injury.

IT security Towards the end of November 2012, 50Hertz was the target of an international DDoS (distributed denial of service) attack, which was fully warded off on 25 November after five days. This attack blocked 50Hertz’s websites and internet portals by overloading the IT data transmission capacities, rendering websites, external IT services and external communication temporarily unavailable. At no point were any system management related IT systems jeopardized. Before this incident, 50Hertz was already working on establishing a comprehensive IT structure that could also combat cyber attacks, and was able to improve the structure as a result of this attack.

Research and development In addition to expanding the grid, 50Hertz is examining and testing technologies and methods to optimize and expand the capacities of existing lines and transmission system. In this regard, two line sections on the Remptendorf-Redwitz line were equipped with innovative hightemperature conductors, for which around EUR 7 m was invested in 2012. In addition to this, around EUR 2 m was spent on research and development projects.

Report 50Hertz Transmission GmbH Annual Report 2012 • 57

Economic situation of 50Hertz Transmission The Company operates exclusively in the field of electricity transmission as defined by Sec. 6b (3) EnWG. For this reason, the separate activity-based financial statements to be prepared correspond to the Company’s financial statements. Results of operations 1 Jan to 31 Dec 2012 in EUR m

1 Jan to 31 Dec 2011 in EUR m

Change in EUR m

7,457.2

6,199.3

1,257.9

253.1

45.6

207.5

7,710.3

6,244.9

1,465.4

894.8

749.2

145.6

58.7

39.6

19.1

Expenses for the grid business

-537.2

-537.9

0.7

Other expenses

-186.1

-180.9

-5.2

1.3

-13.3

14.6

231.5

56.7

174,8

Income statement

Cost-matching revenue Other cost-matching income Non-profit issues Revenue from the grid business Other income

Financial result Result from operating activities

50Hertz Transmission’s absolute income and expenses were largely characterized by the non-profit settlement of the EEG and KWKG. The transmission system operators sell the EEG electricity fed in by upstream grid operators and directly connected producers to an electricity exchange. In addition to this sales revenue, the transmission system operators levy a charge for all trading and distribution companies operating in the control area to cover the difference from the costs for the reimbursement of electricity generated from renewable sources as well as the revenue from selling the electricity generated from renewable sources. The settlement of the EEG and the KWKG generated revenue of EUR 6,343.8 m (prior year: EUR 4,415.7 m). Under revenue and cost of materials, the settlement volume of services rendered to third parties amounts to EUR 1,113.4 m in each case (prior year: EUR 1,783.6 m). Under other income, the settlement of the KWKG generated revenue of EUR 76.2 m (prior year: EUR 45.6 m). In fiscal year 2012, a new allocation mechanism for grid customers in accordance with Sec. 19 (2) StromNEV was created as a

result of changes in legislation; pursuant to this, any reductions in charges granted are subject to a nationwide allocation mechanism and also represent a non-profit transaction for the transmission system operator. In fiscal year 2012, this generated income for the first time of EUR 176.9 m. The income generated from the KWKG as well as from the settlement of Sec. 19 (2) StromNEV is matched by expenses of the same amount. The business volume from the settlement of non-profit issues increased in the fiscal year to EUR 7,710.3 m (prior year: EUR 6,244.9 m). Revenue from the grid business primarily related to increased network user charges (EUR 713.7 m; prior year: EUR 656.7 m), balancing group management (EUR 79.8 m; prior year: EUR 28.7 m) as well as system services (EUR 50.3 m; prior year: EUR 70.6 m). There was also a positive impact in fiscal year 2012 from the effects on income of various catch-up effects of EUR 44.6 m (prior year: EUR –12.8 m), which was recognized under revenue from the grid business.

58 • Annual Report 2012 Report 50Hertz Transmission GmbH

Other expenses include personnel expenses (EUR 62.8 m; prior year: EUR 57.8 m); the increase on 2011 is due to a collectively bargained wage and salary adjustment from 2012 and also reflects the constant growth in the number of employees as a result of the ever-increasing scope of tasks. Amortization, depreciation and write-downs amounted to EUR 65.1 m (prior year: EUR 57.9 m). The year-on-year increase in amortization, depreciation and write-downs is primarily attributable to the rise in property, plant and equipment stemming from comprehensive investments. Necessary depreciation to the fair value was also recognized in the amount of EUR 5.4 m. Other operating expenses amount to EUR 311.3 m (prior year: EUR 110.8 m), mainly comprising expenses in accordance with Sec. 19 (2) StromNEV of EUR 176.9 m (prior year: EUR 0.0 m) and the costs for the equalization of burdens pursuant to the KWKG of EUR 76.2 m (prior year: EUR 45.6 m). The negative interest result as a portion of the financial result amounts to EUR 15.3m (prior year: EUR 21.6m). Under investment result, 50Hertz Transmission generated income from the profit transfer performed by 50Hertz Offshore of EUR 16.9m (prior year: EUR 8.3m); this was countered by write-downs of financial assets of EUR 0.3m. In fiscal year 2012, the internal financing and refinancing measures performed by the Company as well as the somewhat lower interest rate had a positive effect on the interest result.

The result from ordinary activities amounts to EUR 231.5 m (prior year: EUR 56.7 m). This positive result is mainly due to non-recurring effects relating to decisions made for the regulatory framework, which primarily involve catch-up effects for fiscal year 2010. These effects were included in current income. Furthermore, a further improvement in the business operations led to a sustainable improvement in the result, with the “Mehrtz” efficiency program contributing EUR 4.3 m in fiscal year 2012. However, overall the volume of operative improvements cannot be compared with the non-recurring effects from 2012. The weather in 2012 did not affect the Company’s cost and income situation to the same degree as in the prior year. For income tax risks arising from assessment periods before the consolidated tax group was formed with Eurogrid, income taxes amounted to EUR 4.6 m (prior year: EUR 4.6 m). Other taxes amounted to EUR 0.5 m (prior year: EUR 0.5 m). The Company closed fiscal year 2012 with a profit for the period (before profit transfer) of EUR 226.4 m (prior year: EUR 51.6 m). The other revenue reserves of EUR 1.4 m recognized in past years for the purpose of a distribution lock in accordance with Sec. 268 (8) HGB were released to income in the fiscal year. Taking into account this release from the reserves, a net profit for the period of EUR 227.8 m (prior year: EUR 50.3 m taking into account the amount posted to the reserves) was transferred to Eurogrid.

Report 50Hertz Transmission GmbH Annual Report 2012 • 59

Net assets and financial position 31 Dec 2012 in EUR m

31 Dec 2011 in EUR m

Change in EUR m

Fixed assets

1,691.2

1,533.2

158.0

Current assets (including prepaid expenses)

1,056.0

1,141.4

– 85.4

2,747.2

2,674.6

72.6

Equity

855.8

857.2

– 1.4

Non-current liabilities*)

554.9

555.9

– 1.0

1,336.5

1,261.5

75.0

2,747.2

2,674.6

72.6

Statement of financial position

Assets

Equity and liabilities

Medium and current liabilities*)

*) The allocation of the prior year was adjusted by EUR 17.7 m.

In addition to intangible assets of EUR 38.0 m (prior year: EUR 35.7 m), fixed assets primarily comprise 50Hertz Transmission’s technical grid systems of EUR 1,084.2 m (prior year: EUR 1,013.5 m), prepayments and assets under construction of EUR 149.4 m (prior year: EUR 145.3 m) as well as financial assets of EUR 322.9 m (prior year: EUR 243.2 m). The latter primarily relates to the investment in (EUR 146.0 m) as well as a loan (EUR 176.3 m) issued to 50Hertz Offshore. For fiscal year 2012, additions to investments in property, plant and equipment amount to EUR 139.1 m (prior year: EUR 112.5 m) and chiefly comprise the northern line completed at the end of 2012. Under current assets, EUR 446.0 m (prior year: EUR 620.3 m) relates to trade receivables. When considering the results of operations, this highlights the high billing volumes attributable to the largely non-profit business despite the decrease in comparison to the prior year. Other assets of EUR 595.4 m (prior year: EUR 273.1 m) largely comprise compensation claims stemming from the EEG settlement process as well as deductible input tax from the purchase of electricity fed in from EEG plants.

As of the reporting date, the inclusion in Eurogrid’s cash pool system resulted in a liability to affiliates of EUR 258.0 m (prior year: receivable of EUR 230.6 m). The year-on-year decrease in equity is attributable to the use of other revenue reserves of EUR 1.4 m. Non-current liabilities include the shareholder loan granted by Eurogrid of EUR 300.0 m (prior year: EUR 300.0 m). This item also mainly contains various provisions of EUR 85.6 m (prior year: EUR 80.0 m) and deferred income of EUR 122.3 m (prior year: EUR 128.0 m) which both have a long term. Medium and current liabilities mainly contain the remaining provisions of EUR 556.8 m (prior year: EUR 925.1 m), which in turn mainly result from the EEG and KWKG. As a result of its ongoing liquidity needs stemming from the prefinancing of the EEG business, the Company utilized additional funds of EUR 200.0 m from Eurogrid in the fiscal year. Trade payables amounted to EUR 173.3 m (prior year: EUR 184.0 m).

60 • Annual Report 2012 Report 50Hertz Transmission GmbH

Statement of cash flows 1 Jan to 31 Dec 2012 In EUR m

1 Jan to 31 Dec 2011 In EUR m

Change In EUR m

Cash flow from operating activities

– 241.5

458.7

– 700.2

Cash flow from investing activities

– 217.7

– 229.6

11.9

Cash flow from financing activities

–27.8

– 112.2

84.4

Change in cash and cash equivalents

– 487.0

116.9

– 603.9

Cash and cash equivalents at the end of the period

– 256.4

230.6

– 487.0

Consolidated statement of cash flows (condensed)

The development in the cash flow from operating activities reflects the high impact from the settlement of the non-profit business in particular on the Company. This primarily relates to the necessary prefinancing of the EEG business and the compensation applied later via the EEG cost allo­cation charged. As a result of the market price level on the electricity exchange remaining low, this inevitably gives rise to a significant shortfall between the income from EEG-re­lated sales and the income generated from the EEG cost allocation. As well as additions to property, plant and equipment, the cash flow from investing activities also include the issue of a loan of EUR 43.0 m as well as an allocation to the capital reserves of EUR 37.0 m at 50Hertz Offshore. In addition to the net cash flow from the profit transfer for fiscal year 2012 (EUR 227.8 m), the cash flow from financing activities also contains the utilization of current liabilities (EUR 200.0 m) at Eurogrid. The financing of 50Hertz was secured throughout the entire fiscal year 2012. The cash pool with Eurogrid continued throughout the entire fiscal year. In fiscal year 2012, there was a consolidated tax group for income tax in place with Eurogrid. Furthermore, 50Hertz Transmission acts as the interposed parent towards 50Hertz Offshore in terms of income tax and VAT. Overall picture of the economic situation The year-on-year change in the result from operating activities in 2012 reflects significant non-recurring effects from changes to the regulatory framework (introduction of the t minus 0 mechanism for investment measures in place of the t minus 2 time delay) allocable to prior years. Non-recurring effects accounted for more than 38 % of the net profit

for the year. The change in profit for the year is also a direct result of lower energy costs and the revenue from increasing investments taking effect in 2012. The financial obligations due in fiscal year 2012 were covered at all times by the available liquidity and the shareholder loan. Equity investments 50Hertz Transmission has a 100 % shareholding in 50Hertz Offshore. 50Hertz Offshore received the task of constructing and operating the grid connections of offshore wind farms in the Baltic Sea from 50Hertz Transmission. 50Hertz Transmission has a 12.5 % shareholding in Central Allocation Office GmbH (CAO) based in Freising. 50Hertz Transmission holds 20 % of the shares in European Market Coupling Company GmbH (EMCC) based in Hamburg. The two companies were founded in 2008 for the purpose of providing bottleneck management services for transmission grids. CAO’s tasks and shareholder structure are expected to see some changes in connection with the development of European electricity market. The introduction of new load flow-based procedures involving coupling the market in northwestern Europe means a key portion of EMCC’s tasks will not be needed in future, which is why a resolution on the future dissolution of the company was passed in fiscal year 2012. As of 31 December 2012, the carrying amount of EMCC was written down to a notional value of EUR 1.00. 50Hertz Transmission has a 10.1 % shareholding in CORESO SA (CORESO) based in Brussels, Belgium. CORESO is the coordination and service center for load forecasts and load flows in the CWE region.

Report 50Hertz Transmission GmbH Annual Report 2012 • 61

Opportunity and risk report Risk management system The aim of the risk management system is to avoid any risks jeopardizing 50Hertz’s ability to continue as a going concern, reduce existing risk items and optimize the risk/ opportunity profile. Risks are recognized, recorded, evaluated and monitored in a standardized manner applying the risk guidelines in place. The assessment of potential losses and the likelihood of their occurrence is based on scenarios. This ensures that the risk situation is continually monitored, especially the early recognition of risks to the Group’s ability to continue as a going concern, and supports the selection and implementation of measures to overcome such risks. Enhancement of the risk management system hinges on the systematic preparation and central pursuit of plans of action for combating key corporate risks. Relevant individual risks and the entire risk situation are reported regularly to management, the supervisory board and the shareholders. The responsible decision makers are informed ad hoc in the event of any significant changes. The functionality and effectiveness of the risk management system are subject to regular review. Opportunities and risks By maintaining its efficiency and ensuring it invests in the transmission and grid connections as and when it is needed, 50Hertz has the opportunity to improve its regulated asset base and to achieve organic growth. Further opportunities involve it achieving a solid position as an independent transmission system operator, actively implementing the changes and new regulations relating to the new energy concept in Germany as well as being a reliable and high-performing partner for the customers served in the control area. Risks from political, regulatory and legislative matters 50Hertz’s network user charges are subject to regulations issued by the Federal Network Authority. Any decisions made by the Federal Network Authority in the current regulatory framework could have a significant impact on 50Hertz, be it positive or negative. Furthermore, the regulatory framework is subject to extensive European, national and regional legislation. 50Hertz pro­actively monitors and anticipates European legislative pro­ceedings. Nevertheless, the preparation of new guidelines and regulations at a European level as well as existing guidelines and regulations due to be transposed soon into natio­nal law (e.g., provisions contained in the third energy libera­lization package) can lead to burdens for the Company.

Laws and guidelines on renewable energies also have a strong influence on 50Hertz’s risk situation and liquidity. Changes to such legislation or the interpretation of this legislation, can either significantly improve or worsen the Company’s risk or liquidity situation. Uncertainty regarding approval of an adequate level of in­come to cover the costs of the operating phase and the con­ditional ex-post review of investing activities by the regulatory authorities in terms of appropriateness, scope and extent pose a risk for 50Hertz. This is being confronted by constantly monitoring the costs and reasonably weighing up the costs and benefits. Non-capitalized investments also lead to lower imputed costs and therefore to a decrease in network user charges. 50Hertz was certified as the only ownership unbundled transmission system operator in Germany to date and has a permit to operate the grid in Germany. This permit does not expire but can be revoked if 50Hertz does not, for instance, have the human, technical and economic capacity and reliability to ensure that grid operations are constantly in compliance with legal requirements. Furthermore, negative consequences for the value of the company as a result of losing this permit cannot be ruled out. Technology/infrastructure 50Hertz’s non-current assets are geographically widespread and can be the potential target for acts of terrorism and sabotage as well as theft. In the event of voltage fluctuations or interruptions, power outages or a failure to implement legally prescribed emer­gency measures, 50Hertz can be held liable for any customer and/ or third-party damage; this can also incur additional costs. The connection of offshore wind farms is a relatively new business field. There are many technical problems that remain unresolved and delays during the planning and construction phase are likely to occur. Should 50Hertz be deemed responsible for the delay (normally the case if the fault lies with one of 50Hertz’s contractual partners), the Company must reimburse the wind farm operator for most of the financial loss incurred. Any expenses in connection with such indemnification payments can partly be offset against compensation amounts by means of recourse to the suppliers. Furthermore, an amendment to the EnWG comes into force as of 1 January 2013 limiting the risks for transmission grid operators stemming from the connection of offshore wind farms. This amendment replaces the previous method of satisfying the criteria of offshore wind farms by approving structured grid expansion based on planning

62 • Annual Report 2012 Report 50Hertz Transmission GmbH

submitted by the transmission grid operators. However, despite this new regulation, significant risks still remain in this business field. With this new regulatory framework, the legislator aims to encourage the continuous expansion of offshore wind energy.

Overall risk situation 50Hertz’s ability to continue as a going concern was not jeopardized by individual risks or its aggregated risk position in fiscal year 2012. Taking into account the measures taken, there are no such risks for fiscal year 2013 either.

The construction of overhead transmission lines constantly meets with protests from locals and involves long-winded proceedings. Line construction delays are therefore likely despite the intense efforts of 50Hertz’s approval and communication experts. This can lead to an increase in critical situations for grid operations as the new lines are urgently needed for transporting the ever-growing volatile feed-in volume of renewable energies in 50Hertz’s control area in high-consumption areas.

Forecast report

Health and industrial safety Work, especially that with and around electrical and parti­ cularly exposed systems requires careful attention and a high degree of conscientiousness, which 50Hertz encourages with procedures, instructions, controls and other measures. Despite this, serious accidents cannot be ruled out entirely, which could result in claims for damages entailing considerable financial obligations, unplanned tying up of resources and loss of reputation. The know-how of our employees is essential for 50Hertz’s business activities. Essential know-how can be lost as a result of employee turnover and insufficient know-how transfer. Measures are in place to minimize this risk. Markets and finances 50Hertz is obligated to purchase the energy generated from renewable energy sources in the control area at a specified price and to sell it on the exchange. Significant liquidity risks (and opportunities) stem from this process, albeit without affecting profit. Extreme fluctuations can also arise in the costs for balancing energy, grid losses and redispatch measures. Effects on earnings and liquidity risks are minimized by means of the corridor model. A case of fraud concerning transmission grids which came to light in 2012 showed that balancing group management can also be susceptible risk as a result of data reports extending over a longer period of time. 50Hertz examined its own reporting process and took suitable measures to minimize this risk. 50Hertz must obtain funding on the capital market together with the parent company Eurogrid. Restrictions on the money and capital markets can therefore lead to financing bottlenecks.

50Hertz will continue to invest in grid expansion. Realizing these investment projects helps to channel the exceedingly high levels of EEG electricity in 50Hertz’s control area into the consumption centers. 50Hertz’s largest onshore projects are the construction of the southwest connecting line, the Nordring Berlin and the Uckermark line, and in the offshore area the connection of the Baltic 2 offshore wind farm. Investing activities will remain high over the next few years and will most likely even increase considerably. Cross-border investments are also planned. In addition to the construction of a third line connecting with Poland, there are also plans to set up phase shifters to improve management of cross-border load flows. In the Baltic Sea, there are also plans to link the grid connection of the Kriegers Flak offshore wind farm with a cross-border line between Germany and Denmark. As a result of the increasing investing activities and the volumes from the EEG that have to be pre-financed, the financing volume will increase, with the liquidity situation becoming tighter for the EEG business due to the influence of persistently low market prices on the electricity exchange, the constant increase in the number of new EEG generating facilities and of market premiums if the positive effect from increasing the liquidity buffer via the EEG cost allocation is not sufficient. This requires the development of the Company’s financial instruments and more intensive cash management. Financing will continue to be secured via the parent company Eurogrid for which Moody’s confirmed a Baa1 rating in July 2012. Cost development for actual grid operations, i.e., mainten­ ance, personnel, administration and operations, will continue to be shaped by grid expansion as well as the energy policy. The amount needed to cover these costs will be determined in a cost review and the Europe-wide efficiency benchmark. 50Hertz already makes a great effort to ensure a high degree of efficiency in its processes and cost structure and thereby minimizing the increased costs that are necessary for the new energy concept in Germany. The Company will already start to benefit from this during fiscal 2013. The costs for system services, redispatch measures as well as grid losses are primarily influenced by the development of electricity prices, weather conditions and grid topology.

Report 50Hertz Transmission GmbH Annual Report 2012 • 63

The result for fiscal year 2013 will again be positively influenced by non-recurring catch-up effects stemming from the changes to the regulatory framework, although the result will fall short of the 2012 level. Once the non-recurring effects no longer apply, 50Hertz expects to achieve the result possible under current regulatory conditions at the beginning of the second regulatory period in 2014. 50Hertz expects a positive outcome of the cost and efficiency review examining the charges for the second regulatory period. Nevertheless, it also anticipates the result for 2014 to be down on the 2012 and 2013 level.

On all accounts, 50Hertz will fulfill the legally assigned tasks regarding the transport of electricity in the control area, the promotion of renewable energies and the European single market to a high standard and contribute to a secure electricity supply system. In this regard, 50Hertz will contribute to climate protection, the new energy concept in Germany and the development of the economy, particularly in northern and eastern Germany.

Subsequent events No events of significant importance occurred from the time of the reporting date to the issue date of 50Hertz Transmission’s financial statements. Berlin, 12 February 2013 The management

Boris Schucht

Dr. Frank Golletz

Udo Giegerich Hans-Jörg Dorny

Dr. Dirk Biermann

64 • Annual Report 2012 Fiscal year 50Hertz Transmission GmbH

Fiscal year Statement of financial position 31 Dec 2012 In EUR m

31 Dec 2011 In EUR m

38.0

35.7

1,330.3

1,254.3

322.9

243.2

1,691.2

1,533.2

3.4

6.8

446.0

620.3

Receivables from affiliates

0.1

230.8

Receivables from other investees and investors

1.5

1.6

595.4

273.1

1,043.0

1,125.8

1.6

0.0

1,048.0

1,132.6

2.8

3.3

Note

ASSETS Fixed assets

(1)

Intangible assets Property, plant and equipment Financial assets

Current assets Inventories

(2)

Receivables and other assets

(3)

Trade receivables

Other assets

Cash and cash equivalents

(4)

Prepaid expenses Special loss account from the recognition of provisions

(5)

4.1

4.1

Excess of covering assets over pension and similar obligations

(6)

1.1

1.4

2,747.2

2,674.6

Fiscal year 50Hertz Transmission GmbH Annual Report 2012 • 65

31 Dec 2012 In EUR m

31 Dec 2011 In EUR m

Issued capital

200.0

200.0

Capital reserves

655.8

655.8



1.4

855.8

857.2

8.0

7.9

Pensions and similar obligations

9.6

8.1

Tax provisions

5.3

5.0

627.5

992.0

642.4

1,005.1

39.4

50.8

Trade payables

173.3

184.0

Liabilities to affiliates

763.8

300.7

56.4

48.3

1,032.9

583.8

208.1

220.6

2,747.2

2,674.6

Note

EQUITY AND LIABILITIES Equity

(7)

Other revenue reserves

Special items

(8)

Provisions

(9)

Other provisions

Liabilities

(10)

Prepayments received on account of orders

Other liabilities

Deferred income

(11)

66 • Annual Report 2012 Fiscal year 50Hertz Transmission GmbH

Income statement

Revenue

Note

1 Jan to 31 Dec 2012 In EUR m

1 Jan to 31 Dec 2011 In EUR m

(12)

8,352.0

6,948.5

– 3.7

2.5

Decrease in work in process (prior year: increase) Own work capitalized

(13)

18.6

2.2

Other operating income

(14)

296.9

80.5

Cost of materials

(15)

– 7,994.4

– 6,737.2

Personnel expenses

(16)

– 62.8

– 57.8

Amortization, depreciation and write-downs

(17)

– 65.1

– 57.9

Other operating expenses

(18)

– 311.3

– 110.8

Investment result

(19)

16.6

8.3

Interest result

(20)

– 15.3

– 21.6

231.5

56.7

Result from operating activities Income taxes

(21)

– 4.6

– 4.6

Other taxes

(22)

– 0.5

– 0.5

Expense from profit transfer

(23)

– 227.8

– 50.3

– 1.4

1.3

– 1.4

1.3

– 

1.3

1.4

– 

0.0

0.0

Net loss for the year (prior year: net income for the year)

Profit appropriation Net loss for the year (prior year: net profit for the year) Transfer to other revenue reserves Withdrawal from other revenue reserves Retained earnings

(24)

Fiscal year 50Hertz Transmission GmbH Annual Report 2012 • 67

Cash flow statement 1 Jan to 31 Dec 2012 In EUR m

1 Jan to 31 Dec 2011 In EUR m

226.4

51.6

65.4

57.9

– 362.7

371.4

– 0.6

– 0.6

Loss from the disposal of fixed assets (prior year: gain)

0.8

– 0.2

Decrease in inventories (prior year: increase)

3.4

– 2.5

– 147.0

45.6

– 27.2

– 64.5

Cash flow from other operating activities

– 241.5

458.7

Cash paid for investments in property, plant and equipment and intangible assets

– 144.4

– 100.5

Cash received from construction cost subsidies

6.5

11.0

Cash received from disposals of fixed assets

0.2

– 

– 80.0

– 140.1

– 217.7

– 229.6

200.0

0

– 1.4

– 61.9

Cash paid from the profit/loss transfer

– 226.4

– 50.3

Cash flow from financing activities

– 27.8

– 112.2

Change in cash and cash equivalents

– 487.0

116.9

230.6

113.7

– 256.4

230.6

Net income for the year before profit/loss transfer Write-downs of fixed assets Decrease in provisions (prior year: increase) Other non-cash income

Increase in receivables and other assets (prior year: decrease) Decrease in liabilities and other equity and liabilities

Cash paid for investments in fixed financial assets Cash flow from investing activities Cash received from shareholder loans Cash paid to owners (distribution from the reserves)

Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period

68 • Annual Report 2012 Fiscal year 50Hertz Transmission GmbH

Statement of changes in fixed assets Cost in EUR m 1 Jan 2012

Additions

Reclassifications

Disposals

31 Dec 2012

50.9

5.3

– 0.1

– 

56.1

– 

– 

– 

– 

– 

50.9

5.3

– 0.1

– 

56.1

118.8

1.1

1.1

0.3

120.7

2,543.9

45.7

81.5

3.2

2,667.9

62.9

4.0

1.7

2.7

65.9

145.3

88.3

– 84.2

– 

149.4

2,870.9

139.1

0.1

6.2

3,003.9

Shares in affiliates

109.0

37.0

– 

– 

146.0

Loans to affiliates

133.3

43.0

– 

– 

176.3

Investments

0.5

– 

– 

– 

0.5

Other loans

0.4

– 

– 

0.0

0.4

243.2

80.0

– 

0.0

323.2

3,165.0

224.4

– 

6.2

3,383.2

Intangible assets Purchased software, licenses and other plant rights Prepayments

Property, plant and equipment Land, land rights and buildings including buildings on third-party land Technical equipment and machinery Other equipment, furniture and fixtures Prepayments and assets under construction

Financial assets

Fixed assets

Fiscal year 50Hertz Transmission GmbH Annual Report 2012 • 69

Amortization, depreciation and write-downs in EUR m

Carrying amount in EUR m

1 Jan 2012

Additions

Reclassifications

Disposals

31 Dec 2012

31 Dec 2012

31 Dec 2011

15.2

2.9

– 

– 

18.1

38.0

35.7

– 

– 

– 

– 

– 

–  15.2

2.9

– 

– 

18.1

38.0

35.7

40.9

1.6

– 

0.3

42.2

78.5

77,9

1,530.4

55.6

– 

2.3

1,583.7

1,084.2

1.013,5

45.3

5.0

– 

2.6

47.7

18.2

17,6

– 

– 

– 

– 

– 

149.4

145,3

1,616.6

62.2

– 

5.2

1,673.6

1,330.3

1.254,3

– 

– 

– 

– 

– 

146.0

109,0

– 

– 

– 

– 

– 

176.3

133,3

– 

0.3

– 

– 

0.3

0.2

0,5

– 

– 

– 

– 

– 

0.4

0,4

– 

0.3

– 

– 

0.3

322.9

243,2

1,631.8

65.4

– 

5.2

1,692.0

1,691.2

1.533,2

70 • Annual Report 2012 Notes to the financial statements 50Hertz Transmission GmbH

Notes to the financial statements General 50Hertz Transmission GmbH (50Hertz Transmission) is re­ gistered in the commercial register of Charlottenburg district court under HRB no. 84446. The financial statements of 50Hertz Transmission were prepared in accordance with the provisions of the HGB (“Handelsgesetzbuch”: German Commercial Code) and the supplementary provisions of the GmbHG (“Gesetz betreffend die Gesellschaften mit beschränkter Haftung”: German Limited Liability Companies Act) as well as in observation of the EnWG (“Energiewirtschaftsgesetz”: German Energy Industry Act). All amounts are in millions of euros (EUR m). In the interest of clarity, items have been combined in the consolidated income statement and in the statement of financial position and disclosed separately and explained in the notes. The income statement has been prepared using the nature of expense method. The presentation of individual items in the statement of financial position and income statement was adjusted; the prior-year figures were also structured accordingly to improve comparability. 50Hertz Transmission qualifies as a large corporation in accordance with the size criteria under Sec. 267 (3) Sentence 3 HGB and has prepared the financial statements in line with the requirements for this legal form. 50Hertz Transmission is included in the consolidated financial statements of Eurogrid GmbH (Eurogrid), with its registered office in Berlin, and in the consolidated financial statements of Elia System Operator NV/SA, with its regis­tered office in Brussels, Belgium. The consolidated financial statements of Elia System Operator NV/SA with the largest group of companies can be obtained from Elia System Ope­ rator NV/SA, Boulevard de l´Empereur 20, 1000 Brussels, Belgium. The consolidated financial statements prepared by Eurogrid cover the smallest group of compa­nies and can be obtained from the Bundesanzeiger (German Federal Gazette) (www.ebundesanzeiger.de). The Company is registered in the commercial register of Berlin-Charlotten­burg district court under HRB no. 130427 B. As a result of being included in the consolidated financial statements of Eurogrid, there is no separate obligation to prepare con­soli­dated subgroup financial statements comprising 50Hertz Transmission and 50Hertz Offshore GmbH (50Hertz Offshore).

A profit and loss transfer agreement was concluded bet­ween Eurogrid and 50Hertz Transmission effective 1 June 2010. At the same time, a consolidated tax group for in­come tax was formed with Eurogrid as the parent of the tax group. As a result of the domination and profit and loss transfer agreement in place between 50Hertz Transmission and 50Hertz Offshore, 50Hertz Transmission acts as the inter­ posed parent towards 50Hertz Offshore. There is a consolidated tax group for income tax and VAT purposes in place between these two companies.

Accounting and valuation methods ASSETS Fixed assets Purchased intangible assets are recognized at acquisition cost and amortized on a straight-line basis over their estimated useful lives. Property, plant and equipment are stated at cost less de­ pre­ciation. Production costs for internally produced assets include appropriate pro rata overheads in addition to the directly attributable costs. Borrowing costs are not included. Items of property, plant and equipment acquired or produced before 1 January 2008 are depreciated using the declining balance method. A transition to the straight-line method is used as soon as this results in higher depreciation amounts. The straight-line method is used for items of property, plant and equipment acquired or produced as of 1 January 2008. The useful lives are based on the useful lives accepted by the Federal Network Agency in order to better take into account the increasing regulatory accounting needs and to increase the informative value of the financial statements with regard to the applicable regulatory framework. The use of accepted useful lives appropriately reflects the actual depletion of the fixed assets. Amounts in the statement of financial position resulting from the opening statement of financial position in DEM were not included in this valuation change, but instead rolled forward based on the “1990 revaluation”. Impairments are only recorded when the asset needs to be written down to a lower net realizable value. Financial assets are recorded at the lower of cost or market and in accordance with the requirement to reinstate original

Notes to the financial statements 50Hertz Transmission GmbH Annual Report 2012 • 71

value. Extraordinary write-downs are not recorded for temporary impairment. Loans are recognized at their nominal value and, where appropriate, discounted to the reporting date. Separately usable moveable fixed assets costing less than EUR 150 that have a limited life are recognized immediately in profit or loss. Assets costing between EUR 150 and EUR 1,000 are posted to a collective item pursuant to Sec. 6 (2a) EStG (“Einkommensteuergesetz”: German Income Tax Act) in the year of acquisition, also for the statutory accounts. The collective item is written off in installments of one fifth in the year in which it is recognized and each of the following four years. Current assets Inventories are measured at acquisition and production cost using generally accepted simplified valuation methods and applying the lower of cost or market principle. Inventory risks arising from decreased salability are covered by adequate allowances. Receivables, other assets and cash and cash equivalents are stated at their nominal value or net realizable value, whichever is lower. All recognizable individual risks and the general credit risk are accounted for by appropriate allowances. Special loss account from the recognition of provisions A special loss account from the recognition of provisions pursuant to Sec. 17 (4) DMBilG (“DM-Bilanzgesetz”: German Act on Opening Balance Sheets in German Marks) is recognized on the assets side for provisions that had to be recognized in the opening statement of financial position in DEM in connection with the first-time application of Sec. 249 (1) Sentence 1 HGB on 1 July 1990. The special loss account changes according to the utilization and reversal of the underlying provisions recognized in the opening statement of financial position in DEM, which only include provisions for eliminating ecological burdens. This account is continued up until the complete utilization or reversal of the provisions recognized in the opening statement of finan­ cial position in DEM in the amount originally recognized at nominal value as a result of the DMBilG. Excess of covering assets over pension and similar obligations In accordance with Sec. 246 (2) Sentence 2 and Sentence 3 HGB, a positive difference between the fair value of the covering assets and the Company’s existing pension obligations or comparable long-term obligations existing on the

reporting date is disclosed as an asset. This amount arises from the complete insolvency hedging of the provision for employee entitlements from working lifetime accounts. Prepaid expenses Prepaid expenses refer to expenses of the reporting date, insofar as they concern future periods.

EQUITY AND LIABILITIES Equity The issued capital is measured at nominal value. Special item Investment subsidies and grants received are recorded in the special item. The items are released to income in accordance with depreciation of the assets concerned. Provisions In the calculation of provisions, all recognizable risks and uncertain liabilities were taken into account as required according to prudent business judgment and recorded at the settlement value necessary. The projected unit credit method was selected for the measurement of pension obligations and long-service bonuses. Discounting was calculated using the mean market interest rate of 5.06 % (prior year: 5.13 %) for a remaining term of 15 years in accordance with the Rück­AbzinsV (“Rückstellungs­ abzinsungsverordnung”: German Ordinance on the Discounting of Provisions). The interest rate of 5.06 % p. a. (prior year: 5.13 %) was also used for the measurement of obligations from working lifetime accounts. The calculations are based on the 2005 G mortality tables of Prof. Dr. Klaus Heubeck. Future salary increases were set at 3.0 % p. a. (prior year: 3.5 % p. a.). Expected pension increases were taken into account at rates between 1.00 and 3.00 % p. a. Provisions for the company pension plan recorded under the Company’s congruent pension obligations are covered to a large extent by employer’s pension liability insurance. The amount of the provisions corresponds to the amount of the covering assets. The fair value of the covering assets corresponds to the cash surrender value on the reporting date of the employer’s pension liability insurance. Provisions for employee entitlements from working lifetime accounts are fully protected against insolvency; as a rule, the provisions for the German phased retirement scheme are only partially protected against insolvency. In accordance with Sec. 246 (2) Sentence 2 HGB, the respective covering assets are netted against the provisions for the company

72 • Annual Report 2012 Notes to the financial statements 50Hertz Transmission GmbH

pension plan, working lifetime accounts and the German phased retirement scheme; interest expenses from unwinding the discount on provisions are netted against interest income from increasing the covering assets. Obligations from phased and early retirement arrangements (the latter only until 31 December 2011) are recognized under other provisions on the basis of actuarial reports and using an interest rate of 3.98 % p. a. (prior year: 4.09 % p. a.) in accordance with the RückAbzinsV over an average term of three years. This involved determining and measuring the actuarial present value of future payment obligations. These calculations are also based on the 2005 G mortality tables of Prof. Dr. Klaus Heubeck. Future salary increases were set at 2.5 % p. a. (prior year: 3.5 % p. a.). Other non-current provisions were discounted pursuant to the RückAbzinsV. The interest portion from the increase in personnel-related provisions is recorded in the interest result. The provisions for potential losses from pending transactions were measured at fair value as of the reporting date. In the measurement as of the reporting date, the expected income from determining the zero point as part of the corri­dor model (voluntary commitment system services) was taken into account by the BNetzA. Liabilities Liabilities are recognized at the settlement value deemed necessary. Payments from customers collected in connection with the examination and preparation of grid connections (connection authorizations) in accordance with Sec. 4 KraftNAV (“Kraftwerks-Netzanschlussverordnung”: Ordinance for Regulating Grid Connections) are disclosed as prepayments. Customer payments are also recorded in connection with the installation of jointly used facilities. Subsidies received are recorded as prepayments for as long as the underlying project remains unconcluded. Deferred income Construction cost subsidies received are recognized as deferred income and released on a straight-line basis. Until 31 December 2002, construction cost subsidies received were released to income over 20 years unless a shorter term has been agreed. Since 1 January 2003, construction cost subsidies received have been released to income in line with the useful life of the asset.

Since 2007, amounts paid to 50Hertz Transmission in prior years from cross-border bottleneck management are recor­ ded as deferred income. These are used for investments for maintaining or expanding connection capacities. In return, 50Hertz Transmission must pay a consideration for the amounts received, which it recognizes as a subsidized construction loan under equity and liabilities. The horizontal grid income deferred in 2007 is recognized over 30 years as determined by the Federal Network Agency. Income from the auctioning of bottlenecks for subsequent years was also recorded as deferred income. The income is deducted from revenue; it is recognized in profit or loss in the year in which the regulatory authorities deduct the network user charges. In addition to the income from bottleneck management, other income generated in connection with additional voluntary commitments was also recognized as deferred income. Here too, the deduction is also performed by making a correction to the network user charges in subsequent years. Other amounts also primarily relate to deferred income from long-term contractual relationships which are only recognized in profit or loss in subsequent periods. Deferred taxes 50Hertz Transmission is included in the consolidated tax group for income tax purposes of Eurogrid. Deferred taxes arising due to temporary or quasi-permanent differences between the carrying amounts of assets, liabilities, prepaid expenses and deferred income in the statutory accounts and their tax carrying amounts or due to tax loss carryforwards are determined at the level of the controlling entity. EEG and balancing group settlement When preparing the financial statements, expenses and income and the corresponding receivables and liabilities for the settlement of the EEG process as well as for the accounting of the balancing group were determined based on preliminary data provided by third parties and partly based on forecasts. A final statement on the actual expenses and income incurred in the EEG process can only be made when the audit certificates for the electricity volumes fed in from EEG plants become available. With regard to the accounting of the balancing group, 50Hertz Transmission is reliant on the complete data from all balancing groups. Due to the very nature of the activity, these data are not available in their entirety as of the time of preparing the financial statements, resulting in uncertainties surrounding the amount of expenses and income in these areas.

Notes to the financial statements 50Hertz Transmission GmbH Annual Report 2012 • 73

The related items of the financial statements were determined using the data available as well as relying on estimates and taking into account the information available at the time of preparing the financial statements.

FOREIGN CURRENCY TRANSLATION Foreign currency assets and liabilities are translated using the average spot rate on the reporting date.

Notes to the statement of financial position (1) Fixed assets A breakdown of the fixed asset items combined in the statement of financial position and their development is shown in the statement of changes in fixed assets. List of shareholdings The shareholdings of 50Hertz Transmission break down as follows:

Shareholding %

Equity in EUR m

Earnings in EUR m

100. 0

146.0

– 1)

European Market Coupling CompanyGmbH, Hamburg

20.0

0.0

0.1 2)

Central Allocation Office GmbH, Freising

12.5

1.6

0.1 2)

CORESO SA., Brüssel, Belgien

10.1

1.4

0.1 3)

31 Dec 2012 In EUR m

31 Dec 2011 In EUR m

Change In EUR m

Raw materials, consumables and supplies

2.4

2.1

0.3

Work in process

1.0

4.7

– 3.7

3.4

6.8

– 3.4

1. Affiliates 50Hertz Offshore GmbH, Berlin1) 2. Investments

1)

Profit and loss transfer agreement

2)

Financial statements as of 31 December 2011

3)

Financial statements as of 31 December 2012

(2) Inventories

74 • Annual Report 2012 Notes to the financial statements 50Hertz Transmission GmbH

(3) Receivables and other assets

Trade receivables Receivables from affiliates thereof from shareholder Receivables from other investees and investors Other assets

31 Dec 2012 In EUR m

thereof due > one year

31 Dec 2011 In EUR m

thereof due > one year

446.0

– 

620.3

– 

0.1

– 

230.8

0.0

– 

230.6

– 

1.5

– 

1.6

– 

595.4

10.1

273.1

10.1

1,043.0

10.1

1,125.8

10.1

Receivables from affiliates and from other investees and investors relate to trade receivables. As of the reporting date, there was no receivable from the shareholder from the cash pool with Eurogrid (prior year: EUR 230.6 m).

(7) Equity The Company’s issued capital of EUR 200 m is fully paid in and is held in full by Eurogrid. The capital reserves remain unchanged on the prior year at EUR 655.8 m.

Other assets contain receivables from the tax office from deductible input tax of EUR 94.3 m (prior year: EUR 162.6 m), for which returns had not been filed as of 31 December 2012. As of the reporting date, compensation claims of EUR 430.0 m remained from the EEG process (prior year: EUR 55.1 m). Furthermore, earmarked subsidies with a term of more than one year were disclosed at EUR 10.1 m (prior year: EUR 10.1 m), which are to be used by the syndicate over the next few years.

Other revenue reserves of EUR 1.4 m were released in the fiscal year and, together with the net profit for the year of EUR 226.4 m, transferred to Eurogrid.

(4) Cash and cash equivalents Cash and cash equivalents comprised cash on hand as well as bank balances on the reporting date. (5) Special loss account from the recognition of provisions The development of the special loss account from the recognition of provisions occurs in line with the development of the nominal obligation of the provision for ecological burdens. This nominal obligation amounted to EUR 4.1 m (prior year: EUR 4.1 m) as of the reporting date. (6) Excess of covering assets over pension and similar obligations Offsetting the recognized provision against the cash sur­render value from the employer’s liability insurance (covering assets) produces an excess of covering assets over pension and similar obligations of EUR 1.1 m as of the reporting date (prior year: EUR 1.4 m). The item results from netting the provisions for working lifetime accounts of EUR 2.4 m (prior year: EUR 2.0 m) with the respective asset values of EUR 3.5 m (prior year: EUR 3.4 m).

(8) Special item The special item for investment subsidies and grants amounts to EUR 8.0 m (prior year: EUR 7.9 m). (9) Provisions The provisions for pension obligations arise from the settlement amount of the liabilities offset of EUR 22.0 m (prior year: EUR 20.1 m) and the fair value of the assets offset (covering assets) of EUR 12.4 m (prior year: EUR 12.0 m). The tax provisions recognized relate to periods not yet covered by the tax group.

Notes to the financial statements 50Hertz Transmission GmbH Annual Report 2012 • 75

Other provisions break down as follows: 31 Dec 2012 In EUR m

31 Dec 2011 In EUR m

Change In EUR m

361.1

530.5

– 169.4

Easements for line use rights

67.9

63.7

4.2

Network user charges

89.2

119.8

– 30.6

– 

202.4

– 202.4

EEG balancing energy

27.0

– 

27.0

Personnel-related provisions

12.0

11.4

0.6

Provisions for potential losses

2.8

4.5

– 1.7

14.7

8.4

6.3

574.7

940.7

– 366.0

52.8

51.3

1.5

627.5

992.0

– 364.5

Outstanding EEG and KWKG invoices

EEG subsequent delivery obligations (old mechanism)

Litigation risks

Sundry other provisions

No more provisions were recognized for EEG subsequent delivery obligations as a result of the old EEG mechanism expiring. Provisions for the German phased retirement scheme of EUR 4.6 m (prior year: EUR 6.1 m) were offset under other provisions against the cash surrender values from the employer’s liability insurance cover (covering assets) of EUR 3.2 m (prior year: EUR 4.0 m).

76 • Annual Report 2012 Notes to the financial statements 50Hertz Transmission GmbH

(10) Liabilities 31 Dec 2012 In EUR m Total

31 Dec 2011 In EUR m

Due in

Total

< one year

> five years

39.4

39.4

– 

Trade payables

173.3

173.2

Liabilities to affiliates

763.8

Due in < one year

> five years

50.8

50.8

– 

0.0

184.0

184.0

0.0

463.8

– 

300.7

0.7

– 

763.0

463.8

– 

300.0

– 

– 

56.4

56.0

0.4

48.3

48.3

– 

thereof from taxes

1.7

1.7

– 

1.2

1.2

– 

thereof relating to social security

0.4

0.4

– 

0.1

0.1

– 

1,032.9

732.4

0.4

583.8

283.8

0.0

Prepayments received

thereof to shareholder Other liabilities

At EUR 763.0 m (prior year: EUR 300.0 m), liabilities to affiliates relate almost exclusively to the financing relationship with the shareholder. This includes EUR 258.0 m for the cash pool balance (prior year: receivable of EUR 230.6 m), short-term loan liabilities in connection with the settlement of the EEG of EUR 200 m (prior year: EUR 0.0 m) as well as the mediumterm shareholder loan of EUR 300 m. The remainder relates to accrued interest (EUR 3.6 m) as well as trade payables (EUR 1.4 m). (11) Deferred income

Investment-related construction cost subsidies Income from bottleneck management as well as amounts for future offsetting from voluntary commitments Other amounts

31 Dec 2012 In EUR m

31 Dec 2011 In EUR m

Change In EUR m

48.9

48.5

0.4

138.8

150.2

– 11.4

20.4

21.9

– 1.5

208.1

220.6

– 12.5

Notes to the financial statements 50Hertz Transmission GmbH Annual Report 2012 • 77

Notes to the income statement (12) Revenue 1 Jan to 31 Dec 2012 In EUR m

1 Jan to 31 Dec 2011 In EUR m

Change In EUR m

EEG income

6,343.8

4,415.7

1,928.1

Services for third parties

1,113.4

1,783.6

– 670.2

Cost-matching income

7,457.2

6,199.3

1,257.9

713.7

656.7

57.0

System services

50.3

70.6

– 20.3

Balancing group management

79.8

28.7

51.1

Compensation for network user charges in past periods

44.6

– 12.8

57.4

6.4

6.0

0.4

894.8

749.2

145.6

8,352.0

6,948.5

1,403.5

Network user charges

Other revenue Revenue from grid business

EEG income relates to income from selling renewable energies on the electricity exchange, the agreed EEG cost allocation as well as deliveries to other transmission system operators to offset the burdens on the transmission system operators from the implementation of the EEG. Services for third parties contain the business for selling EEG electricity as well as the procurement of grid losses for other grid operators. In addition to network user charges, revenue from the grid business contains all revenue generated by the Group directly in connection with grid operations. The income from balancing group management represents the cross charging of balance energy costs to all balancing group customers operating in the control area. The compensation for network user charges in past periods includes effects arising with a time delay as a result of the current regulatory framework. These relate to network user charges from earlier periods as well as system services.

(13) Own work capitalized Own work capitalized includes costs from the fiscal year included in production costs as part of the Company’s investment projects.

78 • Annual Report 2012 Notes to the financial statements 50Hertz Transmission GmbH

(14) Other operating income 1 Jan to 31 Dec 2012 In EUR m

1 Jan to 31 Dec 2011 In EUR m

Change In EUR m

76.2

45.6

30.6

176.9

– 

176.9

Income from the reversal of provisions

1.1

1.1

0.0

Income from provisions for potential losses

3.5

1.4

2.1

Income from the reversal of special items for investment grants

0.6

0.5

0.1

Income from the reversal of construction cost subsidies

6.1

9.2

– 3.1

Services

8.2

5.6

2.6

24.3

17.1

7.2

296.9

80.5

216.4

KWKG cost allocation*) Income pursuant to Sec. 19 (2) StromNEV*)

Other income

*) Cost-matching income

The income pursuant to Sec. 19 (2) StromNEV was incurred for the first time in fiscal year 2012 as a result of introducing the nationwide allocation mechanism for special network user charges. According to this, the transmission system operator receives compensation for reductions in network user charges via a nationwide cost allocation. There were no significant effects from other periods recognized under other operating income in fiscal year 2012. Income from currency translation amounted to EUR 0.0 m (prior year: EUR 0.0 m). (15) Cost of materials

Cost of materials, consumables and supplies and purchased goods Cost of purchased services

1 Jan to 31 Dec 2012 In EUR m

1 Jan to 31 Dec 2011 In EUR m

Change In EUR m

– 7,776.2

– 6,502.5

– 1,273.7

– 218.2

– 234.7

16.5

– 7,994.4

– 6,737.2

– 1,257.2

Notes to the financial statements 50Hertz Transmission GmbH Annual Report 2012 • 79

Cost of materials contains a large volume of non-profit items: 1 Jan to 31 Dec 2012 In EUR m

1 Jan to 31 Dec 2011 In EUR m

Change In EUR m

Energy procured under the EEG

– 6,343.8

– 4,415.7

– 1,928.1

Services to third parties

– 1,113.4

– 1,783.6

670.2

Income-matching costs

– 7,457.2

– 6,199.3

– 1,257.9

– 537.2

– 537.9

0.7

– 7,994.4

– 6,737.2

– 1,257.2

1 Jan to 31 Dec 2012 In EUR m

1 Jan to 31 Dec 2011 In EUR m

Change In EUR m

– 51.8

– 46.8

– 5.0

– 7.7

– 7.0

– 0.7

Pension costs

– 3.0

– 3.9

0.9

Other benefit costs

– 0.3

– 0.1

– 0.2

– 62.8

– 57.8

– 5.0

1 Jan to 31 Dec 2012

1 Jan to 31 Dec 2011

Change

Wage earners

169

158

11

Salaried employees

533

486

47

702

644

58

Expenses for the grid business

(16) Personnel expenses

Wages and salaries Social security Expenses

Average headcount for the year

An average of 18 trainees were employed in fiscal year 2012 (prior year: 18 trainees). (17) Amortization, depreciation and write-downs The extraordinary write-downs of EUR 5.4 m recognized in the fiscal year relate to equipment and components whose useful life is considerably restricted in comparison to the useful lives originally forecast as a result of past experiences with cases of damage. This resulted in an extraordinary write-down being recognized in the fiscal year.

80 • Annual Report 2012 Notes to the financial statements 50Hertz Transmission GmbH

(18) Other operating expenses 1 Jan to 31 Dec 2012 In EUR m

1 Jan to 31 Dec 2011 In EUR m

Change In EUR m

– 76.2

– 45.6

– 30.6

– 176.9

– 

– 176.9

Services

– 27.1

– 30.0

2.9

Other expenses

– 31.1

– 35.2

4.1

– 311.3

– 110.8

– 200.5

KWKG cost allocation*) Expenses pursuant to Sec. 19 (2) StromNEV*)

*) Income-matching costs

Other expenses include potential losses from the procurement of energy to cover grid losses as well as allocations to other provisions and to impairment losses. There were no significant effects from other periods recognized under other operating expenses in fiscal year 2012. Expenses from currency translation amounted to EUR 0.0 m (prior year: EUR 0.0 m). (19) Investment result 1 Jan to 31 Dec 2012 In EUR m

1 Jan to 31 Dec 2011 In EUR m

Change In EUR m

Income from profit transfer agreements with affiliates

16.9

8.3

8.6

Write-downs on financial assets

– 0.3

– 

– 0.3

16.6

8.3

8.3

Income from the profit transfer from affiliates relates fully to 50Hertz Offshore. Write-downs on financial assets had to be recognized as a result of the shareholder discontinuing business operations at an investment as intended.

Notes to the financial statements 50Hertz Transmission GmbH Annual Report 2012 • 81

(20) Interest result 1 Jan to 31 Dec 2012 In EUR m

1 Jan to 31 Dec 2011 In EUR m

Change In EUR m

Income from non-current loans

0.0

0.0

0.0

Other interest and similar income

8.2

7.0

1.2

8.0

6.4

1.6

– 23.5

– 28.6

5.1

– 14.7

– 21.4

6.7

– 15.3

– 21.6

6.3

thereof from affiliates Interest and similar expenses thereof to affiliates

With regard to the discounting of provisions, EUR 4.5 m (prior year: EUR 7.2 m) relates to interest expenses and EUR 0.5 m (prior year: EUR 0.5 m) to interest income. In accordance with Sec. 246 (2) Sentence 2 HGB, interest expenses are netted against interest income of EUR 0.5 m (prior year: EUR 0.4 m). (21) Income taxes Income taxes of EUR 4.6 m (prior year: EUR 4.6 m) relate to assessment periods before the consolidated tax group was formed with Eurogrid. (22) Other taxes Other taxes of EUR 0.5 m (prior year: EUR 0.5 m) relate to property tax, vehicle tax and electricity tax. (23) Profit transfer The net profit for fiscal year 2012 of EUR 226,398,289.29 (prior year: EUR 50,348,711.50 was transferred to Eurogrid on the basis of the profit and loss transfer agreement in place. (24) Profit appropriation The other revenue reserves of EUR 1,437,999.17 were released in the fiscal year and transferred to Eurogrid.

The negative cash and cash equivalents at the end of the period (EUR -256.4 m) consist of bank balances of EUR 1.6 m as well as the utilization of the cash pool (liabi­lity) at Eurogrid of EUR 258.0 m. In the prior period, there were short-term deposits as part of the cash pool of EUR 230.6 m (receivable) as well as bank balances of EUR 0.015 m. Income tax-related cash flows amounted to EUR 4.3 m (prior year: EUR 15.1 m) in fiscal year 2012. Other financial obligations On 31 December 2012, there was a purchase obligation for investments and maintenance measures of EUR 206.2 m (prior year: EUR 175.4 m). The purchase obligation exists solely to third parties.

Notes to the statement of cash flows Based on the recommendations of GAS 2 as issued by the German Accounting Standards Committee (GASC), the statement of cash flows shows cash flows from operating, investing and financing activities.

As part of cross-border bottleneck management, 50Hertz Transmission is legally obligated to make investments to avoid future bottlenecks using agreed income generated up to 2007. Taking account of the underlying distribution system under tax law for the first-time recognition of this obligation, and assuming an original total obligation of EUR 122.3 m until the reporting date, means that EUR 122.3 m has been repaid and EUR 44.1 m remains. The volume of agreed bottleneck income had already exceeded the actual investment volume realized as of the reporting date for 50Hertz Transmission’s priority projects, meaning there is no further obligation for the Company.

The cash inflow from operating activities included interest received of EUR 7.5 m (prior year: EUR 6.5 m). Interest payments amounted to EUR 19.1 m (prior year: EUR 21.4 m).

Issuing a guarantee to 50Hertz Offshore resulted in an obligation of EUR 4.2 m which is not currently expected to be utilized.

Other notes

82 • Annual Report 2012 Notes to the financial statements 50Hertz Transmission GmbH

Contingent liabilities In connection with Eurogrid issuing the bond of EUR 500 m on 22 October 2010, 50Hertz Transmission and 50Hertz Offshore were named as additional guarantors. The guarantors are irrevocably, unconditionally and jointly liable for the punctual payment of all amounts Eurogrid is to make in connection with the bond.

in accordance with Sec. 133 UmwG (“Umwandlungsgesetz”: German Law of Reorganizations) amount to five years for liabilities for the transferring legal entities; for the pension obligations arising before the effec­tive date of the spin-off as a result of the BRG (“Betriebsrentengesetz”: German Company Pensions Act), the liability period is ten years.

On 14 June 2011, 50Hertz Transmission and 50Hertz Off­ shore entered a five-year syndicated loan agreement, as additional guarantors, with Royal Bank of Scotland, N.V. as syndicate leader and Commerzbank AG, Luxembourg branch, for a volume of EUR 350 m.

With regard to the electricity procured to cover grid losses based on market conditions, 50Hertz Transmission entered into purchase obligations of EUR 65.9 m (prior year: EUR 137.9 m).

On 9 December 2011, 50Hertz Transmission and 50Hertz Offshore issued a maximum guarantee to BNP Paribas S.A., Frankfurt/Main branch, totaling EUR 126 m to hedge a short-term credit line from Eurogrid. On 27 August 2012, 50Hertz Transmission and 50Hertz Offshore jointly issued a maximum guarantee to with a term until 15 February 2013 to ING Bank, a branch of ING-DiBa AG, Frankfurt/Main branch, totaling EUR 102.5 m to hedge a short-term credit line of Eurogrid.

We currently do not expect any risk of claims relating to the above contingent liabilities to arise. Audit fees The total auditor’s fee calculated pursuant to Sec. 285 No. 17 HGB is disclosed in the consolidated financial statements of Eurogrid GmbH. Related party transactions In the reporting period there were no transactions with related parties which were not conducted at arm’s length.

On 10 September 2012, 50Hertz Transmission and 50Hertz Offshore jointly issued a maximum guarantee to with a term until 15 February 2013 to Coöperatieve Centrale RaiffeisenBoerenleenbank b.a. (Rabobank), Utrecht, Netherlands, of EUR 102.5 m to hedge a short-term credit line of Eurogrid.

Substantial transactions in accordance with Sec. 6b (2) EnWG In accordance with Sec. 6b (2) EnWG, substantial transactions with affiliates and associates or with companies which belong to the same shareholders must be presented.

On 25 October 2011, 50Hertz Transmission, as shareholder of EMCC, issued a maximum guarantee on first demand of EUR 3.7 m to Nordea Bank Finland Plc, German branch, to secure part of a loan granted to EMCC.

Apart from the financing transactions mentioned in the notes to the financial statements, 50Hertz did not enter into any transactions outside of its operating activities.

50Hertz Transmission is jointly and severally liable with Vattenfall Europe Distribution Berlin GmbH and Vattenfall Europe Berlin AG & Co. KG/their legal successor for the obligations from the franchise agreement with the state of Berlin.

Activity-based financial statements in accordance with Sec. 6b (3) EnWG The activities of 50Hertz Transmission belong exclusively to the field of electricity transmission. For this reason, the separate activity-based financial statements to be prepared in accordance with Sec. 6b (3) EnWG are in line with the Company’s financial statements.

50Hertz Transmission is jointly and severally liable with Vattenfall Europe Distribution Hamburg GmbH and Vattenfall Europe Hamburg AG & Co. KG/their legal successor for the obligations from the franchise agreement with the Free and Hanseatic City of Hamburg.

Disclosures on company boards The members of the supervisory board and management are presented in a separate list, included as an attachment to the notes to the financial statements.

As part of the spin-off of Vattenfall Europe Distribution Berlin GmbH and Vattenfall Europe Berlin AG & Co. KG/their legal successor performed in 2006, legal entities involved in the spin-off are jointly and severally liable for liabilities arising before the effective date of the spin-off. The liability periods

Expenses for management remuneration amounted to EUR 1,643k in the reporting period (prior year: EUR 1,560 k). It consists of fixed remuneration, performance-related remuneration and other fixed components. The increase is also attributable to additional management members.

Notes to the financial statements 50Hertz Transmission GmbH Annual Report 2012 • 83

Pension obligations covered by the employer’s pension liability insurance for former members of management amount to EUR 0.4 m (prior year: EUR 0.4 m).

The management of 50Hertz Transmission GmbH

Boris Schuch The members of the supervisory board of 50Hertz Transmission received EUR 21 k for their activities (prior year: EUR 20 k). Udo Giegerich In fiscal year 2012, new employee representatives were elected for the Company’s supervisory board. The super­ visory board was reconstituted on 22 August 2012. Dr. Biermann The changes to the composition of the Company’s super­ visory board were published in the Bundesanzeiger (German Federal Gazette). Dr. Frank Golletz Loans granted to board members Loans granted to members of the supervisory board amounted to EUR 6 k as of the reporting date (prior year: EUR 9 k). The loans bear interest at 5 % p. a. and have terms of ten years. An amount of EUR 3.0 k was repaid in the reporting period. Berlin, 12 February 2013

Hans-Jörg Dorn

84 • Annual Report 2012 Notes to the financial statements 50Hertz Transmission GmbH

Company boards Members of the supervisory board Daniel Dobbeni Chairman of the Board of Eurogrid International CVBA, Braine-I’Alleud, Belgium – Chairman – Ulrich Freese* Deputy Chaiman of the German Mine, Chemical and Power Workers’ Union, Spremberg – Deputy Chairman – (until 17 December 2012) Peter Hausmann* Member of the Executive Board of the German Mine, Chemical and Power Workers’ Union, Hanover – Deputy Chairman – (since 18 December 2012) Markus Berger Chief Officer Asset Management of Elia System Operator S.A., Antwerp, Belgium (since 22 August 2012) Werner Kerschl Investment Director of Industry Funds Management (UK) Ltd, London, UK Andrea Ludwig* Electrical engineer, Berlin Dr. Lutz Pscherer* Electrical engineer, Berlin Jacques Vandermeiren Chairman of the Executive Committee of Elia System Operator NV/SA, Antwerp, Belgium (until 21 August 2012) *Employee representative

Members of management Boris Schucht Berlin, Chairman Dr. Dirk Biermann Berlin, markets and system operations division (since 1 April 2012) Hans-Jörg Dorny Neuenhagen near Berlin, HR division Udo Giegerich Berlin, commercial division Dr. Frank Golletz Dresden, technisches Ressort

Notes to the financial statements 50Hertz Transmission GmbH Annual Report 2012 • 85

Audit opinion We have audited the annual financial statements, comprising the statement of financial position, the income statement, the cash flow statement and the notes to the financial statements, together with the bookkeeping system, and the management report of 50Hertz Transmission GmbH, Berlin, for the fiscal year from 1 January to 31 December 2012. Pursuant to Sec. 6b (5) EnWG [“Energiewirtschaftsgesetz”: German Energy Industry Act], our audit of the financial statements additionally covered compliance with the accounting duties pursuant to Sec. 6b (3) EnWG, which requires separate accounts to be kept for activities pursuant to Sec. 6b (3) EnWG. The maintenance of the books and records and the preparation of the annual financial statements and management report in accordance with the German commercial law and compliance with the duties pursuant to Sec. 6b (3) EnWG are the responsibility of the Company’s management. Our responsibility is to express an opinion on the annual financial statements, together with the bookkeeping system, the management report and compliance with the accounting duties pursuant to Sec. 6b (3) EnWG based on our audit. We conducted our audit of the annual financial statements in accordance with Sec. 317 HGB [“Handelsgesetzbuch”: German Commercial Code] and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the annual financial statements in accordance with [German] principles of proper accounting and in the management report are detected with reasonable assurance and such that it can be assessed with reasonable assurance whether the accounting duties pursuant to Sec. 6b (3) EnWG have been met in all material respects. Knowledge of the business activities and the economic and legal environment of the Company and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the books and records, the annual financial statements and the management report as well as for compliance with the accounting duties pursuant to Sec. 6b (3) EnWG are examined primarily on a test basis within the framework of the audit. The audit includes assessing the accounting principles used and significant estimates made by management, evaluating the overall

presentation of the annual financial statements and management report as well as assessing whether the carrying amounts and classification of accounts pursuant to Sec. 6b (3) EnWG are reasonable and verifiable and that the consistency principle has been observed. We believe that our audit provides a reasonable basis for our opinion Our audit of the annual financial statements, together with the bookkeeping system, and the management report has not led to any reservations. In our opinion, based on the findings of our audit, the annual financial statements comply with the legal requirements and give a true and fair view of the net assets, financial position and results of operations of the Company in accordance with [German] principles of proper accounting. The management report is consistent with the annual financial statements and as a whole provides a suitable view of the Company’s position and suitably presents the opportunities and risks of future development. Our audit of compliance with the accounting duties pursuant to Sec. 6b (3) EnWG, which requires separate accounts to be kept for activities pursuant to Sec. 6b (3) EnWG, has not lead to any reservations.

Berlin, 13 February 2013 Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft

Glöckner Herlitz German Public Auditor German Public Auditor

03

Report on the fiscal year 2012 of 50Hertz Offshore GmbH

Business and general background conditions Fiscal year Statement of financial position Income statement Cash flow statement Statement of changes in fixed assets Notes to the financial statements Audit opinion



88 94 94 96 97 98 100 107

88 • Annual Report 2012 Report 50Hertz Offshore GmbH

Business and economic environment 50Hertz Offshore GmbH (50Hertz Offshore) is a subsidiary of 50Hertz Transmission GmbH (50Hertz Transmission), which has a 100 % shareholding in 50Hertz Offshore. Both companies have their registered offices in Berlin. The Company was restructured at the beginning of fiscal year 2012. All of 50Hertz Offshore’s employment agreements were transferred to 50Hertz Transmission. Since then, 50Hertz Offshore has performed its business activities with­out its own workforce. All services necessary for the operations of the Company are rendered by 50Hertz Transmission under existing service contracts. The general managers appointed since 15 December 2011 serve their function for both the Company and 50Hertz Transmission.

Economic environment The business activities of 50Hertz Offshore comprise the planning, approval, construction, acquisition, maintenance and operational management of electricity lines as well as the associated plants and facilities for connecting offshore wind turbines/farms erected in the Baltic Sea – within the 12-mile zone/German Exclusive Economic Zone – to the grid. In accordance with Sec. 17 (2a) EnWG (“Energie­wirt­ schaftsgesetz”: German Energy Industry Act), the obligation for connecting offshore wind farms to the grid primarily rests with the transmission system operator 50Hertz Transmission. To make a distinction from its onshore activities, 50Hertz Transmission assigned this task to 50Hertz Offshore. Under the previous legal framework, the transmission system operator responsible was obligated to establish the connection to the grid by the time the respective offshore wind farm was ready to commence technical operations (Sec. 17 (2 a) Sentence 1 Clause 2 EnWG). However, the orders for establishing connection to the grid could only be issued once there was reasonable assurance that the planned offshore wind farms would actually be built. Otherwise, there would be the risk of stranded investments for connecting the offshore wind farms to the grid and of the projects ultimately not being realized. This was supported by the position paper published by the Federal Network Agency in October 2009, in which it pointed out its understanding of the obligation to be connected to the grid as defined by Sec. 17 (2 a) EnWG. A central component of this position paper was a catalog of criteria which the project sponsor financing the offshore wind farms could use to

provide reasonable assurance of the project being realized. If the project sponsor financing an offshore wind farm ful­ filled these criteria, the Federal Network Agency assured the transmission system operator obligated to connect the wind farm to the grid that it would in any case recognize the investments made for connection to the grid in its cost and efficiency reviews (in particular even if the offshore wind farm projects were not realized). In order to remove any obstacles hindering investment, the German lower house of parliament enacted the Third Act Revising the Legislation Governing the Energy Sector on 29 November 2012, which was confirmed by the upper house of parliament on 14 December 2012. The law came into force on 28 December 2012. The new statutory regulations provide for a change from the previous system of connecting to the grid based on the offshore wind farm meeting the criteria towards structured grid expansion. Short, medium and long-term plans of the transmission system operators are approved by the authorities responsible (Federal Maritime and Hydrographic Agency (“Bundesamt für Seeschifffahrt und Hydrografie”), Federal Network Agency), with the public being included by means of broad consultation. The planned measures are then incorporated into the federal requirements planning. The new law also regulates liability for any delays and interruptions when establishing the grid connections. In such cases, the offshore wind farm affected receives compensation from the transmission system operator, which can then pass on the costs incurred – taking into account any deductibles – to the grid users via a newly introduced offshore liability cost allo­ cation, provided the transmission system operator has not acted with willful intent. If the transmission system operator acted negligently, it must pay a deductible of a limited amount. For 50Hertz Transmission’s control area, there were new orders from 4 offshore wind farm project sponsors in fiscal year 2012, meaning there were 21 orders in total for connecting to the grid as of year-end 2012, some of which are in competition with each other in terms of location. As a result of the newly introduced offshore grid development plan, these orders serve as a basis for planning the future offshore grid. Due to this new regulatory framework, the expansion of offshore wind energy exploitation is to be given permanent basis.

Report 50Hertz Offshore GmbH Annual Report 2012 • 89

Investments After Baltic 1, the first wind farm to be connected to the grid, was commissioned in the prior year, intense work is underway to complete the second connection Baltic 2, with production of the sea and land cables already having begun. Construction and laying of the underwater cable route is planned to begin in 2013. Prior work involved removing munitions and other metal parts to exclude any danger to persons and materials as far as possible when laying the cables. The commissioning of the wind farm and its connection to the grid is currently planned for mid-2014. Investments in fiscal year 2012 amounted to some EUR 109m, down on the prior-year figure. They primarily relate to connecting Baltic 2 to the grid. There are further grid connection projects currently in preparation.

Economic situation of 50Hertz Offshore The Company operates exclusively in the field of electricity transmission as defined by Sec. 6b (3) EnWG. For this reason, the separate activity-based financial statements to be prepared correspond to the Company‘s financial statements. Results of operations In the past fiscal year, the Company generated almost all of its revenue from the remuneration received from granting rights of use of its assets (completed assets and assets under construction) to 50Hertz Transmission amounting to a total of EUR 23,856.2 k (prior year: EUR 10,967.7 k). This rise in revenue is attributable to the increase in the Compa-

ny’s fixed assets as result of expanding its investing activities (in particular connecting the wind farms Baltic 1 and Baltic 2 to the grid). In addition to revenue, the Company generated other operating income of EUR 13,500.1k (prior year: EUR 11,015.2 k), primarily from allocating expense-matching costs to the shareholder.

Income statement

2012 In EUR k

2011 In EUR k

Change In EUR k

Revenue and income

37,419.4

22,029.4

15,390.0

– 12,856.8

– 9,400.6

– 3,456.2

Interest result

– 7,671.1

– 4,325.0

– 3,346.1

Result from operating activities

16,891.5

8,303.8

8,587.7

– 16,891.5

– 8,303.8

– 8,587.7

Operating expenses

Profit transfer to the shareholder

90 • Annual Report 2012 Report 50Hertz Offshore GmbH

Operating expenses amount to EUR 12,856.8k (prior year: EUR 9,400.6 k). In addition to amortization and depreciation incurred on non-current assets (EUR 6,985.9 k), significant items also include costs for insurance (EUR 2,072.3 k) as well as for inspection and maintenance services (EUR 1,412.0k). Under the regulatory framework, a portion of operating expenses and the interest result represent expense-matching costs, initially allocated to the shareholder which in turn then allocates a portion of these to the other transmission system operators. The allocated expense-matching costs represent other operating income for the Company.

Financing requirements increased in line with investing activities, which in turn led to increased interest expenses, thereby increasing the overall negative interest result. There was an increase in the result from operating activities. This was primarily attributable to the considerable EUR 15,390.0 k increase in revenue and income compared to expenses which rose to a lesser extent. The profit generated for the year was transferred in full to the shareholder on account of the domination and profit and loss transfer agreement in place.

Net assets and financial position The Company’s assets comprise completed assets, assets under construction and prepayments on assets under construction. The increase in fixed assets on the prior year is primarily attributable to the grid connection (underwater and land cable) for the Baltic 2 offshore wind farm. With regard to the ongoing planning and realization of grid connections, the share of total assets accounted for by fixed assets was around 99 % as in the prior year. The equity to fixed assets ratio came to 41 % (prior year: 44 %).

31 Dec 2012 In EUR k

31 Dec 2011 In EUR k

Change In EUR k

352,286.9

250,030.5

102,256.4

3,534.1

11,137.4

– 7,603.3

355,821.0

261,167.9

94,653.1

Equity

146,020.1

109,020.1

37,000.0

Long-term liabilities

176,342.9

133,342.9

43,000.0

33,458.0

18,804.9

14,653.1

355,821.0

261,167.9

94,653.1

Statement of financial position

Assets Fixed assets Current assets(including prepaid expenses)

Equity and liabilities

Medium and short-term liabilities

Financing and investment activities were primarily performed through equity and a shareholder loan agreement. EUR 37,000 k was added to the capital reserves by the shareholder. The cash pool agreement in place with Eurogrid GmbH (sole shareholder of 50Hertz Transmission, hereinafter referred to as Eurogrid) was used for short-term bridge financing. The Company was solvent at all times due to its inclusion in the cash pool.

Report 50Hertz Offshore GmbH Annual Report 2012 • 91

Statement of cash flows (condensed)

2012 In EUR k

2011 In EUR k

Change In EUR k

Cash flow from operating activities

32,686.6

4.673.7

28,012.9

Cash flow from investing activities

– 109,242.3

– 130.848.9

21,606.6

Cash flow from financing activities

63,108.5

131.696.2

– 68,587.7

– 13,447.2

5.521.0

– 18,968.2

– 2,990.5

10.456.7

– 13,447.2

Change in cash and cash equivalents Cash and cash equivalents at the end of the period

Cash and cash equivalents at the end of the period amounted to EUR -2,990.5 k (prior year: EUR 10,456.7 k), relating entirely to the liabilities due to Eurogrid under the cash pool arrangement (prior year: receivable due from Eurogrid).

133,342.9 k) to 50Hertz Offshore. The cash pool with Eurogrid also continued throughout the entire fiscal year. There is a tax group with 50Hertz Transmission for income tax and VAT purposes.

The Company’s financing was secured throughout the entire fiscal year 2012. 50Hertz Transmission issued non-current shareholder loans of EUR 176,342.9 k (prior year: EUR

Overall picture of the economic situation The year-on-year rise in the result from operating activities in fiscal year 2012 is primarily due to the increase in capital expenditures on property, plant and equipment. Furthermore, other operating income rose as a result of the increased allocation of expense-matching costs to the shareholder. The financial obligations due in fiscal year 2012 were covered at all times by the available liquidity and the share­holder loan.

Opportunity and risk report Risk management system 50Hertz Offshore is included in the risk management process of 50Hertz Transmission. This is characterized by central monitoring of all the Company’s main risks. The risks stemming from the construction of the grid connection are determined, recorded in a standardized manner, evaluated and monitored using the shareholder’s risk guideline. The assessment of potential losses and the likelihood of their occurrence is based on scenarios.

Opportunities and risks Opportunities for the Company lie in the growing investment activities for connecting offshore wind parks to the grid. Planning, construction and operation of the grid connections of offshore wind farms is a new business area and therefore entails uncertainties and technical challenges (especially when manufacturing and laying the cables). For example, in the course of the Baltic 1 project, it became clear how dependent the maritime processes in particular were on weather and offshore ground conditions. In addition to laying the cables, manufacturing them too also has considerable influence on whether the grid correction is made in both a timely and high-quality manner. There is still only a small number of potential suppliers for key components needed to connect the farms to the grid. Although the amendment to the EnWG limits liability, high barriers have been erected to prevent transmission system operators causing economic damage; moreover only a portion of the liability risks can be transferred to the suppliers. This will cause the requirements providing for strict and effective cost management with sufficient and legally watertight documentation to increase once again.

92 • Annual Report 2012 Report 50Hertz Offshore GmbH

Uncertainty regarding approval of an adequate level of income to cover the costs of the operating phase and the conditional ex-post review of investing activities by the regulatory authorities in terms of appropriateness, scope and extent pose a risk for the Company. This is being confronted by constantly monitoring the costs and reasonably weighing up the costs and benefits.

Subsequent events No events of significant importance occurred from the time of the reporting date to the issue date of 50Hertz Offshore’s financial statements. Berlin, 12 February 2013

Overall, there was no threat to the Company’s continuing existence in fiscal year 2012 either from individual risks or an accumulation of individual risks. Furthermore, there are no risks to the Company’s continued existence as a going concern for the subsequent years taking into account the measures taken as well as the insurance cover in place.

Forecast Further business development will primarily be determined by the progress made in preparing for the offshore wind farm projects. In fiscal year 2013, efforts to connect Baltic 2 to the grid will be continued. Investing activities will remain high and most likely increase in subsequent years as a result of additional grid connection projects, which will also cause assets to increase considerably. The financing of these activities over the next few fiscal years will be secured by agreements already in place. Activities relating to operational management, such as maintenance and repair services as well as the implementation of security concepts, will also be driven forward and developed further. This will push costs up. Earnings are expected to increase in 2013 and subsequent years in comparison to 2012. 50Hertz Offshore will continue to make every effort to connect the offshore wind farms to the grid in both a timely and compliant manner. The new legal framework will help uphold investment conditions.

The management

Udo Giegrich

Dr. Frank Golletz

94 • Annual Report 2012 Fiscal year 50Hertz Offshore GmbH

Fiscal year Statement of financial position Note

31 Dec 2012 In EUR k

31 Dec 2011 In EUR k

(1)

352,286.9

250,030.5

352,286.9

250,030.5

Trade receivables

345.8

495.5

Receivables from affiliates

509.0

10,493.0

2,666.1

102.0

3,520.9

11,090,5

13.2

46.9

355,821.0

261,167.9

ASSETS Non-current assets Property, plant and equipment

Current assets

(2)

Other assets

Prepaid expenses

(3)

Fiscal year 50Hertz Offshore GmbH Annual Report 2012 • 95

Note

31 Dec 2012 In EUR k

31 Dec 2011 In EUR k

1,000.0

1,000.0

145,000.0

108,000.0

20.1

20.1

146,020.1

109,020.1

– 

1,716.1

3,374.5

3,231.5

3,374.5

4,947.6

27,075.0

13,838.6

179,333.4

133,361.6

18.0

0,0

206,426.4

147,200.2

355,821.0

261,167.9

EQUITY AND LIABILITIES Equity

(4)

Issued capital Capital reserves Other revenue reserves

Provisions

(5)

Pensions and similar obligations Other provisions

Liabilities Trade payables Liabilities to affiliates Other liabilities

(6)

96 • Annual Report 2012 Fiscal year 50Hertz Offshore GmbH

Income statement Note

1 Jan to 31 Dec 2012 In EUR k

1 Jan to 31 Dec 2011 In EUR k

Revenue

(7)

23,919.3

11,014.2

Other operating income

(8)

13,500.1

11,015.2

Cost of materials

(9)

– 1,744.9

– 2,312.6

Personnel expenses

(10)

– 

– 987.4

Amortization, depreciation and impairment

(11)

– 6,985.9

– 2,650.7

Other operating expenses

(12)

– 4,126.0

– 3,449.9

Interest result

(13)

– 7,671.1

– 4,325.0

Result from operating activities

16,891.5

8,303.8

Expenses from profit/loss transfer

– 16,891.5

– 8,303.8

– 

– 

Net profit for the year

Fiscal year 50Hertz Offshore GmbH Annual Report 2012 • 97

Cash flow statement 1 Jan to 31 Dec 2012 In EUR k

1 Jan to 31 Dec 2011 In EUR k

Change In EUR k

16,891.5

8,303.8

8,587.7

6,985.9

2,650.7

4,335.2

Decrease in provisions

– 1,573.1

– 17,638.8

16,065.7

Increase in receivables and other assets (prior year: decrease)

– 2,853.4

66.9

– 2,920.3

Increase in other liabilities and other equity and liabilities

13,235.7

11,291.1

1,944.6

Cash flow from operating activities

32,686.6

4,673.7

28,012.9

Cash paid for investments in property, plant and equipment

– 109,242.3

– 130,848.9

21,606.6

Cash flow from investing activities

– 109,242.3

– 130,848.9

21,606.6

Cash received from equity contributions

37,000.0

60,000.0

–  23,000.0

Cash received from shareholder loans

43,000.0

80,000.0

– 37,000.0

Cash paid from the profit/loss transfer

– 16,891.5

– 8,303.8

– 8,587.7

63,108.5

131,696.2

– 68,587.7

– 13,447.2

5,521.0

– 18,968.2

Cash and cash equivalents at the beginning of the period

10,456.7

4,935.7

5,521.0

Cash and cash equivalents at the end of the period

– 2,990.5

10,456.7

– 13.447.2

Net profit for the year prior to profit/loss transfer Write-downs of non-current assets

Cash flow from financing activities Changes in cash and cash equivalents

98 • Annual Report 2012 Fiscal year 50Hertz Offshore GmbH

Statement of changes in fixed assets Cost in EUR k 1 Jan 2012

Additions

Reclassifications

Disposals

31 Dec 2012

– 

28.0

– 

– 

28.0

110,130.6

1,748.4

28,895.6

– 

140.774.6

632.5

– 

0.6

– 

633.1

141,918.1

107,465.9

– 28,896.2

– 

220,487.8

252,681.2

109,242.3

– 

– 

361,923.5

252,681.2

109,242.3

– 

– 

361,923.5

Property, plant and equipment Land, land rights and buildings including buildings on third-party land Technical equipment and machinery Other equipment, furniture and fixtures Prepayments and assets under construction

Non-current assets

Fiscal year 50Hertz Offshore GmbH Annual Report 2012 • 99

Amortization, depreciation and impairment in EUR k

Carrying amount in EUR k

1 Jan 2012

Additions

Reclassifications

Disposals

31 Dec 2012

31 Dec 2012

31 Dec 2011

– 

0.3

– 

– 

0.3

27.7

– 

2,598.0

6,906.5

– 

– 

9,504.5

131,270.1

107,532.6

52.7

79.1

– 

– 

131.8

501.3

579.8

– 

– 

– 

– 

– 

220,487.8

141,918.1

2,650.7

6,985.9

– 

– 

9,636.6

352,286.9

250,030.5

2,650.7

6,985.9

– 

– 

9,636.6

352,286.9

250,030.5

100 • Annual Report 2012 Notes to the financial statements 50Hertz Offshore GmbH

Notes to the financial statements General The Company is registered in the commercial register of Charlottenburg district court under HRB no. 108780. The purpose of the Company is the construction, acquisition, maintenance, operational management and operation of electricity lines as well as the associated plants and facilities for connecting offshore wind turbines/farms erected in the Baltic Sea to an electricity transmission or distribution grid. The Company primarily commissions the services of its shareholder 50Hertz Transmission GmbH (50Hertz Transmission). A domination and profit and loss transfer agreement is in place between 50Hertz Offshore and 50Hertz Transmission. In fiscal year 2012, there was a tax group with 50Hertz Transmission for income tax and VAT purposes. The financial statements of 50Hertz Offshore were prepared in accordance with the provisions of the HGB (“Handelsgesetzbuch”: German Commercial Code) and the supplemen­ tary provisions of the GmbHG (“Gesetz betreffend die Ge­sell­schaften mit beschränkter Haftung”: German Limited Liability Companies Act) as well as in observation of the EnWG [“Energiewirtschaftsgesetz”: German Energy Industry Act). The fiscal year is the calendar year. All amounts are in thousands of euros (EUR k). In the interest of clarity, items have been combined in the consolidated income statement and in the statement of financial position and disclosed separately and explained in the notes. The income statement has been prepared using the nature of expense method. In fiscal year 2011, the size criteria pursuant to Sec. 267 (1) HGB for a small corporation were exceeded for the first time; the Company now fulfills the size criteria for a mediumsized corporation as defined by Sec. 267 (2) HGB for a second time and has prepared the financial statements in line with the requirements for this legal form accordingly. 50Hertz Offshore is included in the consolidated financial statements of Eurogrid GmbH (Eurogrid), with its registered office in Berlin, and in the consolidated financial statements of Elia System Operator NV/SA, with its registered office in Brussels, Belgium. The consolidated financial statements of Elia System Operator NV/SA with the largest group of companies can be obtained from Elia System Operator NV/SA, Boulevard de l´Empereur 20, 1000 Brussels, Belgium. The consolidated financial statements prepared by Eurogrid covers the smallest group of companies and can be obtained

from the elektronischer Bundesanzeiger (Electronic German Federal Gazette) (www.ebundesanzeiger.de). The Company is registered in the commercial register of Charlottenburg district court under HRB no. 130427 B.

Accounting and valuation methods ASSETS Fixed assets Property, plant and equipment are stated at cost less depreciation. Borrowing costs are not included. Amortization is recognized on a straight-line basis. The useful lives are based on expected life cycles determined for each asset with regard to technical equipment and in particular offshore facilities (20 years). In the fiscal year, the useful lives for offshore wind turbines were brought into line with the provisions of the Federal Network Agency in order to better meet the regulatory requirements through the accounting and to increase the informative value of the financial statements in terms of the applicable regulation framework. The change in the useful lives for offshore wind turbines has an annual effect on earnings of EUR 844k. Impairments are only recorded when the asset needs to be written down to a lower net realizable value. Separately usable moveable fixed assets costing less than EUR 150 that have a limited life are recognized immediately in profit or loss. Assets costing between EUR 150 and EUR 1,000 are posted to a collective item pursuant to Sec. 6 (2 a) EStG (“Einkommensteuergesetz”: German Income Tax Act) in the year of acquisition also for the statutory accounts. The collective item is written off in installments of one fifth in the year in which it is recognized and each of the following four years. Current assets Receivables and other assets are stated at their nominal value or net realizable value, whichever is lower. All recognizable individual risks and the general credit risk are accounted for by appropriate allowances. Prepaid expenses Prepaid expenses refer to expenses of the reporting date, insofar as they concern future periods.

Notes to the financial statements 50Hertz Offshore GmbH Annual Report 2012 • 101

EQUITY AND LIABILITIES

The interest portion from the increase in personnel-related provisions was recorded in the interest result in the prior year.

Equity The issued capital is measured at nominal value. Provisions In the calculation of provisions, all recognizable risks and uncertain liabilities were taken into account as required according to prudent business judgment and recorded at the settlement value necessary. Provisions with a term of more than one year are discounted at the average market interest rate prevailing over the past seven fiscal years for instruments of similar terms that is issued and published by Deutsche Bundesbank. The projected unit credit method was selected for pension obligations and long-service bonuses accounted for in the prior year. Discounting was calculated using the mean market interest rate of 5.13 % for a remaining term of 15 years in accordance with the RückAbzinsV (“Rückstellungsabzinsungsverordnung”: German Ordinance on the Discounting of Provisions). The interest rate of 5.13 % p. a. was also used for the measurement of obligations from working lifetime accounts. The calculations were based on the 2005 G mortality tables of Prof. Dr. Klaus Heubeck. Future salary increases were set at 3.5 % p. a. Expected pension increases were taken into account at rates between 1.00 and 3.00 % p. a. In the prior year, a portion of the defined pension plans was fully covered by employer’s pension liability insurance at one insurer. The amount of these defined pension obligations was therefore measured based on the fair value of the covering assets where it exceeds the guaranteed minimum amount. It was assumed that the fair value of the covering assets corresponded to the cash surrender value announced by the insurer as of the reporting date.

Liabilities Liabilities are recognized at the settlement value deemed necessary. Deferred taxes 50Hertz Offshore is included in the consolidated tax group for income tax purposes of 50Hertz Transmission. Deferred taxes arising due to temporary or quasi-permanent differen­ ces between the carrying amounts of assets, liabilities, pre­paid expenses and deferred income in the statutory accounts and their tax carrying amounts or due to tax loss carryforwards are determined at the level of the controlling entity.

Notes to the statement of financial position (1) Fixed assets The statement of changes in fixed assets provides an overview of amortization, depreciation and impairment. Fixed assets in the prior year were primarily characterized by subsequent costs relating to the grid connection (underwater and land cable) for the offshore wind farm Baltic 1. The sharp increase in prepayments and assets under construction on the prior year mainly reflects the progress made in the grid connection projects for the offshore wind farm Baltic 2 as well as for additional offshore projects.

(2) Receivables and other assets 31 Dec 2012 In EUR k

thereof due > one year

31 Dec 2011 In EUR k

thereof due > one year

Trade receivables

345.8

– 

495.5

– 

Receivables from affiliates

509.0

– 

10,493.0

– 

509.0

– 

36.3

– 

2,666.1

– 

102.0

– 

3,520.9

– 

11,090.5

– 

thereof from shareholder Other assets

102 • Annual Report 2012 Notes to the financial statements 50Hertz Offshore GmbH

In the fiscal year, receivables from affiliates contained VAT receivables from the shareholder due to the tax group in place for VAT purposes. As of 31 December 2012, no trade receivables and trade payables (prior year: EUR 554.1 k) were offset against each other. Other assets primarily contain a credit note from a supplier. (3) Prepaid expenses This item mainly contains prepaid insurance contributions. (4) Equity The Company’s issued capital of EUR 1,000 k is fully paid in and is held in full by 50Hertz Transmission. The shareholder passed a resolution on 11 December 2012 to make a contribution of EUR 37,000 k to the capital reserves which was performed before the end of the fiscal year 2012. As of year-end, the capital reserve amounted to EUR 145,000 k. (5) Provisions 31 Dec 2012 In EUR k

31 Dec 2011 In EUR k

Change In EUR k

– 

1,716.1

– 1,716.1

3,374.5

3,231.5

143.0

2,195.4

2,464.1

– 268.7

– 

202.3

– 202.3

Dues, fees, contributions

911.0

497.5

413.5

Litigation risks

133.0

– 

133.0

Restoration obligation

102.8

34.6

68.2

32.3

33.0

– 0.7

3,374.5

4,947.6

– 1,573.1

Provisions for pensions and similar obligations Other provisions Thereof: Outstanding invoices Personnel-related provisions

Other provisions

Effective 1 January 2012, all of the Company’s employee arrangements were transferred to 50Hertz Transmission, as a result of which the provisions for pension and other personnel-related provisions were also transferred to 50Hertz Transmission.

Notes to the financial statements 50Hertz Offshore GmbH Annual Report 2012 • 103

(6) Liabilities 31 Dec 2012 In EUR k Due in

Total

Trade payables Liabilities to affiliates thereof to shareholder Other liabilities thereof from taxes

31 Dec 2011 In EUR k Due in

Total

< one year

> five years

< one year

> five years

27,075.0

27,075.0

– 

13,838.6

13.838.6

– 

179,333.4

2,990.5

176,342.9

133,361.6

18.7

133,342.9

176,342.9

– 

176,342.9

133,361.6

0.0

133,342.9

18.0

18.0

– 

– 

– 

– 

18.0

18.0

– 

– 

– 

– 

206,426.4

30,083.5

176,342.9

147,200.2

13,857.3

133,342.9

Liabilities to affiliates relate almost exclusively to a loan taken out by the Company of EUR 176,342.9 k (prior year: EUR 133,342.9 k) as well as to liability from the cash pool of EUR 2,990.5 k (prior year: EUR 0.0 k). As of 31 December 2012, no trade receivables and trade payables (prior year: EUR 554.1 k) were offset against each other.

Notes to the income statement (7) Revenue Revenue includes the return on investment, amortization, depreciation and impairment, trade tax and subsequent amounts charged on account of the conversion of useful lives for offshore facilities. Revenue from the shareholder was generated entirely from granting rights of use of network facilities for connecting offshore wind farms to the grid. (8) Other operating income The allocation of non-capitalizable offshore costs to the shareholder is recorded as a key component under other operating income. The following items were included in the calculation:

Allocation of expense-matching costs Allocation of other costs Allocation to the shareholder Income from the allocation of purchased services to third parties Sundry other operating income

1 Jan to 31 Dec 2012 In EUR k

1 Jan to 31 Dec 2011 In EUR k

Change In EUR k

12,802.5

10,345.5

2,457.0

– 

355.2

– 355.2

12,802.5

10,700.7

2,101.8

– 

314.5

– 314.5

697.6

– 

697.6

13,500.1

11,015.2

2,484.9

Sundry other operating income primarily contains income from the reversal of provisions (EUR 621.4 k).

104 • Annual Report 2012 Notes to the financial statements 50Hertz Offshore GmbH

(9) Cost of materials 1 Jan to 31 Dec 2012 In EUR k

1 Jan to 31 Dec 2011 In EUR k

Change In EUR k

– 332.8

– 220.9

– 111.9

– 1,412.1

– 2,091.7

679.6

– 1,744.9

– 2,312.6

567.7

Expenses for raw materials, consumables and supplies and purchased goods Expenses for purchased services

Expenses for raw materials, consumables and supplies primarily contain expenses for the procurement of electricity. Expenses for purchased services mainly include expenses for thirdparty services. (10) Personnel expenses 1 Jan to 31 Dec 2012 In EUR k

1 Jan to 31 Dec 2011 In EUR k

Change In EUR k

Wages and salaries

– 

– 705.2

705.2

Social security

– 

– 66.7

66.7

Expenses for pension and other benefit costs

– 

– 215.5

215.5

– 

– 0.1

0.1

– 

– 987.4

987.4

thereof for old-age pensions

All employees at 50Hertz Offshore were transferred to 50Hertz Transmission as of 1 January 2012. As a result, no personnel expenses were incurred during the fiscal year. The Company did not have any employees in 2012 (prior year: 3). (11) Amortization, depreciation and write-downs The increase in amortization, depreciation and write-downs by EUR 4,335.2 k to EUR 6,985.9 k is primarily due to the depreciation for connecting the offshore wind farm Baltic 1 to the grid, recognized for an entire fiscal year for the first time, as well as adjusting the useful lives to the provision of the Federal Network Agency.

Notes to the financial statements 50Hertz Offshore GmbH Annual Report 2012 • 105

(12) Other operating expenses 1 Jan to 31 Dec 2012 In EUR k

1 Jan to 31 Dec 2011 In EUR k

Change In EUR k

– 924.8

– 1,406.1

481.3

– 54.8

– 93.9

39.1

– 2,072.3

– 1,558.8

– 513.5

Rent and leases

– 683.3

– 43.6

– 639.7

Sundry other expenses

– 390.8

– 347.5

– 43.3

– 4,126.0

– 3,449.9

– 676.1

1 Jan to 31 Dec 2012 In EUR k

1 Jan to 31 Dec 2011 In EUR k

Change In EUR k

8.3

12.9

– 4.6

8.3

12.9

– 4.6

– 7,679.4

– 4,337.9

– 3,341.5

– 7,676.0

–  4,262.7

– 3,413.3

– 7,671.1

– 4,325.0

– 3,346.1

Services Legal and consulting fees Insurance contributions

(13) Interest result

Other interest and similar income thereof from affiliates Interest and similar expenses thereof to affiliates

Interest income from and interest expenses to affiliates arise from the utilization of the cash pooling system and the granting of a long-term loan from the shareholder. The remaining interest expenses of EUR 3.4 k (prior year: EUR 75.2 k) relate to the mark-up of long-term provisions.

Other notes

There were no income tax-related cash flows as a result of the tax group with 50Hertz Transmission.

Notes to the statement of cash flows Based on the recommendations of GAS 2 as issued by the German Accounting Standards Committee (GASC), the statement of cash flows shows cash flows from operating, investing and financing activities.

Other financial obligations On 31 December 2012, there was a purchase obligation for investments and maintenance measures towards third parties of EUR 329,571k (prior year: EUR 362,819 k). There was no purchase obligation towards affiliates.

The cash inflow from operating activities included interest received of EUR 8.3 k (prior year: EUR 12.9 k). Cash paid for interest amounted to EUR 7,676.0 k (prior year: EUR 4,262.7 k).

Contingent liabilities In connection with Eurogrid issuing a bond of EUR 500 m on 22 October 2010, 50Hertz Offshore was named an additional guarantor. The guarantors are irrevocably, unconditionally and jointly liable for the punctual payment of all amounts Eurogrid is to make as part of the bond.

Cash and cash equivalents at the end of the period amounted to EUR –2,990.5  k (prior year: EUR 10,456.7 k), relating entirely to the liability due to Eurogrid under the cash pool arrangement.

106 • Annual Report 2012 Notes to the financial statements 50Hertz Offshore GmbH

On 14 June 2011, 50Hertz Offshore entered a five-year syndicated loan agreement, as an additional guarantor, with Royal Bank of Scotland, N.V. as syndicate leader and Commerzbank AG, Luxembourg branch for a volume of EUR 350 m. On 9 December 2011, 50Hertz Offshore and 50Hertz Trans­mission issued a maximum guarantee to BNP Paribas S.A., Frankfurt/Main branch, totaling EUR 126 m to hedge a short-term credit line of Eurogrid. On 27 August 2012, 50Hertz Offshore and 50Hertz Transmission jointly issued a maximum guarantee with a term until 15 February 2013 to ING Bank, a branch of ING-DiBa AG, Frankfurt/Main branch, of EUR 102.5 m to hedge a shortterm credit line of Eurogrid. On 10 September 2012, 50Hertz Offshore and 50Hertz Transmission issued a maximum guarantee with a term until 15 February 2013 to Coöperatieve Centrale RaiffeisenBoerenleenbank b.a. (Rabobank), Utrecht, Netherlands, of EUR 102.5 m to hedge a short-term credit line of Eurogrid.

Activity-based financial statements in accordance with Sec. 6b (3) EnWG The activities of 50Hertz Offshore belong exclusively to the field of electricity transmission. For this reason, the separate activity-based financial statements to be prepared in accordance with Sec. 6b (3) EnWG are in line with the Company’s financial statements. Disclosures on company boards Members of management: Udo Giegerich Berlin, commercial director Dr. Frank Golletz Dresden, technical director The general managers did not receive any remuneration from the Company. Berlin, 12 February 2013 50Hertz Offshore GmbH

We currently do not expect any risk of claims relating to the above contingent liabilities to arise. Udo Giegerich Audit fees The total auditor’s fee calculated pursuant to Sec. 285 No. 17 HGB is disclosed in the consolidated financial statements of Eurogrid GmbH. Substantial transactions in accordance with Sec. 6b (2) EnWG In accordance with Sec. 6b (2) EnWG, substantial transactions with affiliates and associates or with companies which belong to the same shareholders must be presented. In the reporting year, the Company did not enter into any transactions outside of its operating activities. The volume of services utilized by 50Hertz Transmission in fiscal year 2012 (service and general contractor agreement) amounted to EUR 7,603.2 k (prior year: EUR 5,060.5 k).

Dr. Frank Golletz

Notes to the financial statements 50Hertz Offshore GmbH Annual Report 2012 • 107

Audit opinion We have audited the annual financial statements, comprising the statement of financial position, the income statement, the cash flow statement and the notes to the financial statements, together with the bookkeeping system, and the management report of 50Hertz Offshore GmbH, Berlin, for the fiscal year from 1 January to 31 December 2012. Pursuant to Sec. 6b (5) EnWG [“Energiewirtschaftsgesetz”: German Energy Industry Act], our audit of the financial statements additionally covered compliance with the accounting duties pursuant to Sec. 6b (3) EnWG, which requires separate accounts to be kept for activities pursuant to Sec. 6b (3) EnWG. The maintenance of the books and records and the preparation of the annual financial statements and management report in accordance with the German commercial law and compliance with the duties pursuant to Sec. 6b (3) EnWG are the responsibility of the Company’s management. Our responsibility is to express an opinion on the annual financial statements, together with the bookkeeping system, the management report and compliance with the accounting duties pursuant to Sec. 6b (3) EnWG based on our audit. We conducted our audit of the annual financial statements in accordance with Sec. 317 HGB [“Handelsgesetzbuch”: German Commercial Code] and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the annual financial statements in accordance with [German] principles of proper accounting and in the management report are detected with reasonable assurance and such that it can be assessed with reasonable assurance whether the accounting duties pursuant to Sec. 6b (3) EnWG have been met in all material respects. Knowledge of the business activities and the economic and legal environment of the Company and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the books and records, the annual financial statements and the management report as well as for compliance with the accounting duties pursuant to Sec. 6b (3) EnWG are examined primarily on a test basis within the framework of the audit. The audit includes assessing the accounting principles used and significant estimates made by management, evaluating the overall

presentation of the annual financial statements and management report as well as assessing whether the carrying amounts and classification of accounts pursuant to Sec. 6b (3) EnWG are reasonable and verifiable and that the consistency principle has been observed. We believe that our audit provides a reasonable basis for our opinion. Our audit of the annual financial statements, together with the bookkeeping system, and the management report has not led to any reservations. In our opinion, based on the findings of our audit, the annual financial statements comply with the legal requirements and give a true and fair view of the net assets, financial position and results of operations of the Company in accordance with [German] principles of proper accounting. The management report is consistent with the annual financial statements and as a whole provides a suitable view of the Company’s position and suitably presents the opportunities and risks of future development. Our audit of compliance with the accounting duties pursuant to Sec. 6b (3) EnWG, which requires separate accounts to be kept for activities pursuant to Sec. 6b (3) EnWG, has not lead to any reservations.

Berlin, 13 February 2013 Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft

Glöckner Herlitz German Public Auditor German Public Auditor

Publishing information Editor 50Hertz Transmission GmbH Eichenstrasse 3A 12435 Berlin Telephone +49 (0)30 5150-0 Fax +49 (0)30 5150-4477 Board of Directors Chairman and Chief Executive Officer (CEO) Boris Schucht Chief Technical Officer (CTO) Dr. Frank Golletz Chief Officer for Markets and System Operations (CMO) Dr. Dirk Biermann Chief Human Resources Officer (CHRO) Hans-Jörg Dorny Chief Financial Officer (CFO) Udo Giegerich Editorial staff Olivier Feix (in charge) Silja Bilz Picture credits Jan Pauls, Andreas Teich, Frank Wölffing, Archiv 50Hertz, Anna Subbotina/Fotolia.com CDU/CSU parliamentary group in the Bundestag/ Christian Doppelgatz Copyeditor Textperlen, Bärbel Philipp Print Book and Offset Printing Company H. Heenemann GmbH & Co. KG Concept and design CB.e Clausecker | Bingel AG agency for communication

List of abbreviations 50Hertz Transmission 50Hertz Transmission GmbH, Berlin 50Hertz Offshore 50Hertz Offshore GmbH, Berlin ACSS Aluminium conductor steel support (type of high-temperature conductor) Amprion Amprion GmbH, Dortmund (formerly RWE Transportnetz Strom GmbH, Dortmund) CAO Central Allocation Office GmbH, Freising CHP Combined heat and power DMBilG Act on the Opening Balance Sheet in Deutsche Mark and the Reassessment of Share Capital (D-Mark Opening Balance Sheet Act) DRS German Accounting Standards E.ON edis E.ON edis AG, Fürstenwalde/Spree EEG German Act on Granting Priority to Renewable Energy Sources (Renewable Energy Sources Act) EEX European Energy Exchange AG (electricity exchange) Elia Elia System Operator NV/SA, Brussels/Belgium EMCC European Market Coupling Company GmbH, Hamburg Energinet.dk Energinet.dk, Fredericia/Dänemark ENTSO-E European Network of Transmission System Operators for Electricity EnWG German Electricity and Gas Supply Act (Energy Industry Act) EnBW EnBW Transportnetze AG, Stuttgart EPEX EPEX Spot SE, a subsidiary of EEX and the French company Powernext SA, which has its headquarters in Paris (electricity spot market) Eurogrid Eurogrid GmbH, Berlin Eurogrid International Eurogrid International CVBA/SCRL, Brussels/Belgium FNA Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway, Bonn GW Gigawatt HGB German Commercial Code High voltage direct-current transmission HVDC HRB Commercial Register Section B IDW Institut der Wirtschaftsprüfer in Deutschland e. V. (Institute of Public Auditors in Germany, Incorporated Association), Dusseldorf IFM Industry Funds Management PTY Ltd, Melbourne/Australien IFRS International Financial Reporting Standards IG BCE Mining, Chemical and Energy Industrial Union kV Kilovolt kWh Kilowatt-hour KWKG Law on the Conservation, Modernization and Development of Combined Heat and Power (German CHP Law) MVA Megavolt ampere MW Megawatt PSE  PSE S.A., Polskie Sieci Elektroenergetyczne Spółka Akcyjna, Polish Transmission System Operator RückAbzinsV Regulation on the determination and announcement of rates for discounting provisions (Regulation on the calculation of accrued interest on provisions) TenneT TSO TenneT TSO GmbH, Bayreuth TWh Terawatt-hour Transmission system operator TSO Vereinigte Energiewerke AG VEAG WEMAG WEMAG Netz GmbH, Schwerin

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50Hertz Transmission GmbH Eichenstrasse 3A · 12435 Berlin T +49 (0)30 5150-0 F +49 (0)30 5150-4477 [email protected]