Income statement for 2021
Net profit amounted to €242 million in 2021 compared with €224 million in 2020. Profit is up by €18 million, due to higher revenue (€111 million) and other factors. The higher regulated tariffs in particular, but also the growth in the number of connections and transmission volumes, increased the revenue from regulated electricity and gas sales by €111 million compared to 2020. At the same time the extra revenue also has implications for the costs, which are €91 million higher than in 2020. As a result of the high level of investment in recent years, depreciation increased by €37 million. The increase in energy prices has a knock-on effect on the purchase costs for compensating network losses, which are €35 million higher than in 2020. The increase in the tariffs charged by TenneT also had a negative impact on our profit. As a result of these higher tariffs for transmission capacity, these costs increased by €14 million compared to 2020.
The tax expense is €17 million higher than in 2020 due to our higher profit, but also because of a tax gain of €19 million in 2020 following adjustment of the corporate income tax rates. In 2021, this adjustment led to a tax gain of €5 million.
The net profit is affected every year by incidental items, which, in 2021, had a positive impact of €12 million on our profit. Net profit excluding exceptional items worked out at €230 million, €9 million higher than the comparable profit in 2020. These incidental items are explained in more detail later in this report.
The most significant trends in our profits/losses are discussed below in greater detail.
Net revenue in the 2021 financial year rose by €111 million compared with the previous year, from €2,009 million to €2,120 million. The (regulated) revenue from electricity and gas increased by €113 million and €12 million respectively. For electricity, this increase is mainly attributable to higher tariffs, although the higher number of connections also played a role. In the case of large business customers, the revenue is partly linked to the transmission volumes. In 2020, these volumes were affected by COVID-19, but this effect was limited in 2021. The higher transmission volumes also led to a revenue increase of €9 million relative to 2020. The increased revenue for gas can be fully attributed to the higher (regulated) tariffs. The higher revenue generated by metering services (€3 million) is due to both a larger number of connections and an increase in the tariffs.
Other revenue is €17 million lower compared to 2020. This is mainly due to the one-time revenues realised in 2020.
Operating expenses rose from €1,736 million in 2020 to €1,827 million in 2021. This €91 million increase was primarily caused by the following factors:
The increase in investments in recent years also resulted in a higher depreciation expense of €37 million.
The procurement costs for compensating network losses were €35 million higher than in 2020. This is mainly due to the higher energy prices at the time of purchase.
The costs for procuring transmission capacity rose by €14 million as a result of the higher tariffs set by TenneT.
There was an increase of €12 million in the costs of contractors and materials as a consequence of the larger work package executed in combination with the price increases on the market.
The employee benefit expenses rose by a good €30 million. This is due to both growth in the size of the organisation and the agreed increases in the collective labour agreement. However, this was also offset by an increase in capitalised production, as more work was carried out for investment projects. On balance, this factor had little impact on operating expenses.
Other operating expenses were down €6 million compared to the cost level in 2020. This is mainly due to the one-off expense of €10 million in 2020 for forming a provision for a loss-making maintenance contract in one of the business units. The partial release of this provision in 2021 resulted in a non-recurring income item of €5 million.
The most significant trends in expenses are discussed below in greater detail.
Employee benefit expenses (permanent and temporary)
Employee benefit expenses
The total employee benefit expenses for both internal and external employees were €32 million higher than in 2020. The costs associated with our own workforce rose by €26 million due to the addition of more than 100 FTEs and the increase in average costs per FTE as a result of the collective labour agreement wage increase. The number of agency FTEs also increased by more than 150 full-time equivalents. These agency employees were hired to ensure sufficient staffing for the work package and also for digitalisation projects. The larger workforce also led to an increase in capitalised production of €30 million relative to 2020; as a result, the effect on total operating expenses was zero.
The sufferance tax charges rose by €3 million compared with 2020, to €154 million. This is mainly due to additional charges that were imposed by some municipalities in 2020. The trend in the amount of sufferance tax payable over the past five years is illustrated in the graph above. In 2017, the costs were lower due to the release from provisions related to successful legal proceedings. On the other end, expenses were higher in 2018 due to the fact that several municipal authorities in the former Enexis service area imposed retrospective tax charges over previous years. Because some of these charges are non-recurring, the costs were €6 million lower in 2019 compared with 2018. In 2020, the sufferance tax charges increased due to an additional tax charge imposed by some municipalities and more kilometres of cables and pipes in the ground. A few years ago, the legislative powers agreed to abolish the sufferance tax charges on electricity and gas infrastructure. This means that as of 2022 municipalities can no longer charge sufferance taxes to Liander.
Costs of network losses - electricity and gas
Transmission capacity costs
Costs of network losses - electricity and gas
The costs of network losses, at €103 million, were up by €35 million compared with 2020. Since 1 January 2020, the network operators have had a statutory obligation to purchase gas in compensation of network losses. This resulted in an expense of €7 million for Liander in 2020. The costs of compensating network losses in the electricity and gas infrastructure increased in 2021, mainly due to the higher procurement prices paid for electricity and gas.
Transmission capacity costs
Transmission capacity costs in 2021 amounted to €267 million, an increase of €14 million compared to the previous year (2020: €253 million). These costs mainly consist of the costs for transmission capacity charged by TenneT. The increase is mainly due to the higher tariffs charged by TenneT.
Depreciation and impairment
The depreciation charges and impairment losses on non-current assets amounted to €498 million, which is an increase of €37 million compared with the preceding year (2020: €461 million). The increase in depreciation is due to the higher level of investment.
The construction of energy networks is a long-term investment for us, based on an estimated useful life of 40 to 50 years. The Netherlands wants to become climate neutral by 2050, and one of the measures to achieve this is to replace natural gas for heating with sustainable heating solutions over the next 30 years. The question we ask ourselves is whether, and, if so, which part of, our gas distribution networks will remain important in the long term for the distribution of, say, alternative gases. Given the current useful life of 40 to 50 years, developments in the heating transition (such as natural gas-free districts) will also lead to part of the gas network being taken out of service earlier than originally planned. This has been provided for in the new method decision for 2022-2026 by allowing a higher return for gas, among other measures.
Network investments and maintenance costs
The graph below shows the trends for maintenance costs and network investments over the past five years. Total expenditure on network investments and maintenance costs in 2021 was €1,351 million, an increase of €155 million compared with 2020 (€1,196 million). The increase is mainly due to higher investments (€124 million).