Annual Report 1999739KB - Essent

Exceptional itemsEssent’s results for 1999 were affected by severalexceptional items. These include the gain ofNLG 1,739 million on the sale of the 50% interestin NV EPON by EDON Groep to Electrabel andING.In addition, a provision charged to profit has beenformed to cover existing and expected commitmentsarising from the need to further restructurethe Group’s energy sector. This need is due on theone hand to the continuing, phased deregulationof the electricity and gas markets. This will leadto intensified competition in the markets wherethe Group’s energy companies operate. On theother hand, this need stems from the necessarycost reductions at the distribution companies dueto expected rate adjustments. Furthermore, theprovision will be used to adjust the valuation ofspecific assets if necessary. Withdrawals fromthese provisions are expected to be made primarilybetween 2000 and 2004.Extraordinary income and expense includes theincome generated on the conclusion of crossborderlease agreements relating to a numberof gas networks. EnergyThe net turnover of the Energy segmenttotalled NLG 7,284 million in 1999, 6% lowerthan the pro forma consolidated net turnoverrealised in 1998 by PNEM/MEGA Groep andEDON Groep in this sector. This fall in turnoverrelated to both electricity and gas. Besides lowerelectricity sales, this was due in particular to alower average price for both products. This lowerprice level was due primarily to developments inthe international fuel markets.the supply area was again clearly higher than thehistorical averages, a factor which has a negativeimpact on sales to small consumers which aresensitive to fluctuations in temperature.However, the impact on gross margin was relativelylimited, partly due to new purchase contractsconcluded in the course of 1998 by bothEDON Groep and PNEM/MEGA Groep with theirgas supplier. Sales of imported British gas toindustrial customers, primarily in the southwestof the Netherlands, were strong.The Energy segment’s operating profit amountedto NLG 762 million in 1999, a rise of 45% on the1998 pro forma operating profit. Operating profitas a percentage of turnover totalled 10%. CablecomsNet turnover in the Cablecom segmentamounted to NLG 384 million, up 11% on 1998.The rise in income was due partly to an increasein subscribers, mainly due to acquisitions, andpartly to higher average income per subscriber.During 1999, as scheduled, the Group’s Cablecomcompanies offered various new products and servicesto customers which will lead to a furtherrise in income per subscriber in the years ahead.The operating profit of the Cablecom segmenttotalled NLG 31 million in 1999 (1998: NLG 47million) as forecast. The fall in this result is dueto the unavoidable start-up losses at @HomeBenelux, in which Essent holds a 70% majorityinterest. The broad-band Internet services offeredby @Home Benelux in a number of towns in thesupply area have received an enthusiasticresponse in the market.essent1999Total electricity sales of Essent group companiesamounted to 35,510GWh (–1.6%). This total alsoincludes sales generated by EPZ with third parties.EPZ’s sales were down on 1998 due tochanges in purchasing patterns among these customers.Gas sales did rise from 6,202 cubic metresin 1998 to 6,243 cubic metres, but were againbelow forecast sales based on historical averagetemperatures. In 1999 the average temperature in EnvironmentNet turnover in the Environment segmentwas up from NLG 442 million in 1998 to NLG 774million in 1999. The majority of this increase(NLG 302 million) is due to the acquisition inFebruary 1999 – with retroactive effect to1 January 1999 – of NV VAM. In addition, theexisting activities at PMG Milieu Services andHanze Milieu were further expanded.15annual report