Annual Report 1999739KB - Essent

essent1999The operating profit of the environment companiestotalled NLG 139 million in 1999, of whichNLG 64 million stemmed from VAM group companies.In 1998 the pro forma operating profit ofthe environment companies was NLG 87 million.The formation of a provision of some NLG 8 millionin connection with the proposed restructuringof two participating interests of Hanze Milieuhad a negative impact on the operating profit ofthe Environment segment.Cash flowAdditions to tangible fixed assets accountedfor NLG 976 million. A number of important projectswere completed in 1999, including theSwentibold power station built by EPZ on theDSM industrial site in Geleen and the bio-energypower station in Cuijk commissioned by EnergySystems (South). Investments in the electricityand gas distribution networks in the supply areatotalled NLG 457 million. CasTel and PaletKabelcom invested further in fibre optic cablesfor their networks. Furthermore, construction of aplant for the production of ‘energy pellets’ fromwaste was started by PMG Milieu Services in1999.Besides additions to tangible fixed assets, investmentswere also made in new participating interests.The major acquisition was that of VAMGroep in Wijster. At the start of the year, EDONacquired the 50% interest in Frigem which it didnot yet hold. In addition, several municipal cablenetworks were acquired, as well as a number ofenvironmental activities concerning both recyclingand end processing.The cash flow was boosted considerably by thesale of NV EDON’s 50% interest in NV EPON.After deduction of funds paid into an escrowaccount for a possible contribution to the solutionfor the Sep ‘brick problem’ (strandedcosts),the net cash inflow was NLG 2,063 million.Financial ratiosProfitability The return on average totalinvestment (excluding extraordinary income)totalled 8.2% in 1999 (1998: 8.1%). The return onaverage equity, calculated on the basis of theprofit on ordinary activities, totalled 14.2% (1998:14.1%).Solvency The solvency of the Group atyear-end 1999, expressed in terms of group equityas a percentage of total assets, totalled 34.5%.Solvency was adversely affected on balance bydecisions taken as part of the harmonisation ofEDON Groep and PNEM/MEGA Groep’s accountingpolicies and depreciation periods (see also thenotes to the financial statements). However, thiseffect was more than offset by retained profit forthe year, to which the gain on the sale of theinterest in EPON made a significant contribution.Corporate income tax As of 1 January1998, the Group’s energy activities became subjectto corporate income tax. The results of cablecomand environment activities were already subjectto corporate income tax. However, during anumber of transitional years (up to and including2001) parliament has decided to apply the zerorate to taxable profits from energy activities.From 2002 onwards, the Group will have to applythe full rate at that time to taxable profits.In 1999 too, the companies operating in the energysector devoted considerable attention to drawingup the opening balance sheet for tax purposes.External appraisers were engaged in order to establishthe market value of the assets as accurately aspossible. In principle, differences between the netbook values for tax purposes and the net book valuesdisclosed in the financial statements based onhistorical cost result in deferred tax assets/liabilities.In view of the current uncertainty concerningthe tax authorities’ definition of ‘market value’, itwas decided that such an item relating to theenergy sector would not be included in the financialstatements for 1999.Dividend policy When Essent was created,the existing arrangements made with shareholdersof PNEM/MEGA Groep and EDON Groepon dividends were adopted. In addition, it wasagreed that the aim would be to pay a dividend inline with the market, reflecting the increasingrisk run by shareholders of the companies due tothe deregulation of the energy markets.16annual report