Annual Report 1999739KB - Essent

The intention is to distribute an amount ofalmost NLG 150 million to shareholders for 1999,corresponding to a pay-out ratio of 25% of the netprofit on ordinary activities. In 1998, PNEM/MEGA Groep paid NLG 57.4 million to its shareholders,while EDON Groep shareholders receivedNLG 21.7 million.Prospects for 2000 The progressive deregulationof the energy markets will lead to furtherpressure in 2000 on prices and gross margins generatedon sales to customers who are already freeto choose their energy supplier. Furthermore, therates for sales to protected customers and rates fornetwork transmission services, in so far as theyrelate to electricity, have been set by the DTe atlower levels than Essent considers necessary togenerate an adequate – that is to say in accordancewith the risk profile of these activities –return on investment. Although the DTe and theMinister for Economic Affairs have undertaken toexamine whether there are grounds for a one-off‘standard return adjustment’, the outcome of thisprocess is uncertain.However, Essent’s energy companies have initiatedmeasures to reduce costs which are expectedto result in an operating profit in the energy sectorwhich is at least equal to that recorded in1999.A sharp rise in turnover is expected in theCablecom segment, due both to the connectionsacquired in February 2000 from NV Rendo and arise in income from new products and servicessuch as quick ‘broad-band’ Internet access, interactiveaudio/visual services under the Mr Zapname and telephone services via cable.Higher turnover and an improved operatingprofit is expected in the Environment segmenttoo, despite expected increasing pressure on collectionpayments for industrial waste and contractingrecycling margins in a number of areas.The divisions Essent operates as a multi-utility group inthe energy, cablecom and environment markets.It has opted for a divisional structure in order toserve these different markets optimally whileat the same time generating efficiency benefits.All products and services are however marketedunder the same brand name: Essent. EnergyEssent divides its energy market into threecategories: the large business market, the smallbusiness market and the consumer market. In thelong term, the company sees potential for growthprimarily in the small business and consumermarkets. On the other hand, interesting opportunitiesin the large business market will certainlybe seized.The business market Following theannouncement of the proposed merger, the organisationmade an enthusiastic start as EssentEnergie. This division operates in those parts ofthe energy market which have already beenderegulated and trades on the Amsterdam PowerExchange (APX).The rapid start of Essent Energie in the Netherlandswas slightly checked by the NMa suspendingpermission for operations until the end ofOctober. Sales of energy to the business marketare made from Vught, with a branch in Zwolle.The trading office of Essent Energie was establishedin Amsterdam. The deregulated energymarket was turbulent in its early stages.The launch of the Amsterdam Power Exchange inthe spring prompted a wide range of strategies inthe sector. Essent Energie has chosen to adopt avaried purchasing policy and to focus especiallyon good customer relations. In its view thisapproach forms the best basis for the expansionof the organisation. For example, Essent Energiedecided not to purchase exclusively via the APXor imports, but to buy from protocol contractedparties as well.With regard to non-captive customers, Essentfocuses its operations on the small and mediumsizedbusinesses market. In this area, customisedcontracts and flexibility in additional services areimportant tools for recruiting and retaining customers.essent199917annual report