Report of the Supervisory Board

The Supervisory Board supervises the policy of the Management Board and the general course of business within Alliander. The Supervisory Board assists the Management Board with advice and acts as the Management Board’s employer. In this report, the Supervisory Board comments on how it fulfilled its role as supervisor, adviser and employer in respect of the Management Board in 2023.

The year 2023 was dominated by the challenges presented by the energy transition and the need to refocus Alliander’s strategy in line with the changing role in the energy transition. The Supervisory Board’s core tasks include developing strategy and monitoring strategy implementation to achieve sustainable long-term value creation. Time and attention were also devoted to the sale of the Kenter business unit and selecting a new Supervisory Board member.

Supervisory and advisory role

Strategy

The task faced by Alliander and Alliander’s extensive responsibilities require regular action to refocus the strategy. In line with the developments at international, national and regional level and the associated increasing demand for and the challenges hindering realisation of infrastructure and fulfilment of Alliander’s market-facilitating task, the strategy was refocused in 2023. The Supervisory Board was closely involved in this. A fundamental component was how the developments described above directly and indirectly affect Alliander’s activities and the change in role needed to accomplish the task in the run-up to 2030 and beyond. In order to provide a solution on-time to every customer in 2030, the strategy has been refocused. For a detailed description of the strategy, please refer to the report of the Management Board. The Supervisory Board supports the refocused strategy and realises that this represents a major transformation: Alliander will move away from its role as a reactive network operator that facilitates in the background to become a proactive network operator with a leading and visible role in the energy transition.

Through quarterly reports and other instruments, the Supervisory Board monitored the ongoing realisation of Alliander’s strategic objectives throughout the year. Furthermore, in nearly every meeting consideration was given to specific strategic topics, which led to a greater shared understanding of the underlying results in both substantive and transformational terms. The topics that were discussed at length included the problem of increasing network congestion, the ‘feasibility gap’ (the difference between what is needed and what can actually be produced), increasing production output, cost control, digitalisation and customer service.

The Supervisory Board and Management Board’s annual strategy day is a time for reflection and delving into issues. This day focused on realisation of the strategy. During this brief pause, we talked with stakeholders about the practical implementation of several key building blocks of the acceleration task. Discussions were held with representatives of the Province of North Holland about energy-related spatial planning and with representatives of the Municipality of Zaanstad and a contractor about what scaling up and plan reliability in the implementation phase require of the entire (supply) chain, both with regard to the standardisation needed in the district approach and with regard to quicker access to land. The strategy day gave the Supervisory Board a better understanding of the effect of the current acceleration task on day-to-day operations and the related interests that are part of the supply chain in which Alliander operates.

Safety

Safety is an important recurring theme for the Supervisory Board. Both the Supervisory Board and the Management Board feel intrinsically motivated to take safety to an even higher level, both in respect of Alliander’s employees and agency/contract workers and the environment in which Alliander works. The Supervisory Board was pleased to learn that Alliander achieved level 4 on the safety ladder last year. Based on the quarterly reports, the Supervisory Board monitors accidents that lead to sickness absence (lost-time incidents), among other issues. The Supervisory Board has observed a slight increase in the number of lost-time incidents. Fortunately, no serious safety incidents occurred in 2023. For further relevant information, refer to ‘Ensuring a safe energy network, a safe working environment and a secure data environment’. The Supervisory Board emphasises that appropriate attention in the area of safety and embedding in the organisation’s culture is and will continue to be needed. A safe working environment includes personal safety. Alliander aims to create a safe working environment in which everyone feels supported and comfortable. Employees indicated in the 2023 Central Employee Barometer that they perceive Alliander as socially safe. However, the Supervisory Board sees the increasing aggression that employees experience in their interaction with customers and the 100% increase in the number of reported instances of aggression in 2023 as a worrying trend. The Supervisory Board continues to closely monitor developments in this regard.

Sale of Kenter

In December 2022, Alliander announced the start of the process to sell Kenter. The Supervisory Board was heavily involved in the sale process in 2023. After completion of a diligent process, the Supervisory Board approved the sale of Kenter to the consortium of APG and OMERS Infrastructure. In this sale process, the Supervisory Board considered not only the sale price, but also, in particular, the interests of Kenter’s employees and customers, the consortium’s sustainability agenda and its intentions regarding long-term collaboration. The Supervisory Board believes that the consortium is a stable party with significant financial strength and that the sale will give Kenter the opportunity of realising its growth ambitions. The sale also strengthens Alliander’s equity. Given the enormous investment task ahead, the intention is to use most of the one-time book profit generated through the sale to strengthen Alliander’s financial position.

Funding the energy transition

The energy transition presents enormous challenges, and Alliander needs a substantial amount of capital to fund it. Long-term financing was a frequent topic of discussion in 2023. The Supervisory Board notes a number of positive developments in respect of financing. At the end of 2022, the State and Alliander, Enexis and Stedin reached an agreement on the Agreed Capital Requirement Framework for Regional Network Companies (Agreed Framework). Based on the Agreed Framework, credit rating agency S&P has raised the credit rating of the network companies. After being signed by all the parties, the Agreed Framework formally entered into force in 2023. The Agreed Framework has now been used for the first time, by Stedin on this occasion. In addition, the sale of Kenter has further improved Alliander’s financial base. Moreover, the Supervisory Board notes that as a result of the ruling of the Dutch Trade and Industry Appeals Tribunal (CBb), the 2022-2026 method decision has been adjusted by the ACM, resulting in additional income for the network operators for the years 2024 up to and including 2026. Based on the developments outlined above, Alliander has a relatively solid financial position, so accession of the State as a new shareholder is not expected to be needed in the coming years and Alliander can continue to invest in the energy transition at socially acceptable costs.

Financial reporting

In 2023, the Supervisory Board discussed Alliander’s financial and operational results in detail on a quarterly, half-yearly and annual basis. The Supervisory Board feels that the quarterly reports contain sufficient information to monitor progress on achieving the operating results. In addition, the 2022 annual report - including the accompanying audit report - was discussed and approved. The external auditor was also present during the discussions of the annual and interim reports. The Supervisory Board also approved the 2024-2028 business plan and the 2024 budget, which set out the frameworks under the strategic principles of the overall policy. The Supervisory Board’s Audit Committee carried out intensive preparatory work on all these matters.

Internal risk management and control systems

The Supervisory Board (and the Audit Committee in particular) discussed the Internal Audit department’s findings and recommendations from the internal audits as well as the status of actions taken in response to findings from previous audits. Furthermore, the management letter from external auditor Deloitte was examined by us in the presence of Deloitte with the Audit Committee and the Supervisory Board respectively. Based on the work performed, Deloitte concluded that Alliander’s internal controls are of sufficient quality and that Deloitte can rely on the internal controls for its audit of the financial statements. A limited number of new deficiencies were identified and no significant deficiencies were found. Deloitte’s key findings concern the inclusion of ESG data in the business control framework and deficiencies in the allocation of access rights to various IT applications and systems. The Management Board acknowledges the auditor’s findings and will initiate action to address them. In addition, the Supervisory Board discussed the company’s main risks (including control measures), as well as the comprehensive IT, Privacy and Security risk report. The Supervisory Board concludes that Alliander has a robust control framework, which operates effectively and is continuously improved.

Selection of the new auditor

Deloitte has acted as Alliander’s auditor since 2016, and 2023 was the last year of Deloitte’s term as the company auditor. In view of the statutory requirement regarding mandatory auditor rotation, a process to select a new auditor was launched during 2023 under the supervision of the Audit Committee. A European call for tender was issued for this purpose and PricewaterhouseCoopers was selected after a diligent process. PricewaterhouseCoopers will audit Alliander’s financial statements from 2024. Both the Management Board and the Supervisory Board thank Deloitte for all the work performed for Alliander and the pleasant nature of the collaboration.

Cybersecurity

The threat level associated with information security and cybersecurity continues to rise worldwide. So security/cybersecurity is and will continue to be a major focus point. We again made significant progress in this regard in 2023. The CISO Office has developed four strategies to structurally anchor security in Alliander’s organisation<link>. The Supervisory Board was briefed by the CISO on the actions taken by the CISO Office under these strategies to further enhance security resilience. In addition, the Supervisory Board was briefed on work to raise Alliander’s security maturity level. Cybersecurity is essential for Alliander’s continuity, and to deal with the threat of the growing risk of cyberattacks, the Supervisory Board considers it crucial for Alliander to implement proactive measures to ensure the highest possible level of cybersecurity. 

Sustainability

Social, economic and financial sustainability, the SDGs and impact measurement are an integral part of Alliander’s strategy and day-to-day operations. Stakeholders increasingly value the sustainable character of Alliander. More information on sustainability plans and initiatives can be found in the report of the Management Board. The Supervisory Board supports these initiatives which, in our opinion, contribute to long-term value creation in the area of sustainability. A further important achievement worthy of mention is that Alliander won the Sijthoff and Kristal prizes with its 2022 annual report. The Supervisory Board compliments Alliander on this outstanding performance. Both prizes are awarded in recognition of transparent and socially responsible reporting. In addition, CFO Walter Bien was voted one of five ‘Chief Value Officers of the Year’ and the sustainable Westpoort regional office in Amsterdam won the Architectenweb 2023 ‘Office Building of the Year’ award.

The Supervisory Board further approved the issue of a €500 million green bond in 2023, which was successfully placed in 2023. This fits into the strategy for sustainable business operations.

Alliander started preparations for the implementation of the Corporate Sustainability Reporting Directive (CSRD) in 2023. The CSRD is a European directive that requires companies to report on their sustainability performance (Environmental, Social and Governance, or ESG) in their annual reports, starting in the 2024 financial year. The Audit Committee was briefed on developments relating to the CSRD legislation and the impact on Alliander’s reporting and accountability. The Supervisory Board will continue to monitor this closely in 2024.

Other topics

In addition to the topics highlighted above, the Supervisory Board addressed the following issues:

• Important court rulings in cases in which Alliander was involved, and new legislation and regulations that are relevant to Alliander;

• The amended version of the Dutch Corporate Governance Code: in this context, the updated by-laws of the Management Board, Supervisory Board and Supervisory Board committees were approved or adopted;

• The results of the 2023 Central Employee Barometer;

• Approval of the renewal of the Management Board’s authority to issue ordinary shares and to limit or exclude the statutory pre-emptive right of existing shareholders in the issue of shares in connection with a possible conversion of the €600 million reverse convertible hybrid shareholder loan arranged in 2021;

• Approval of the 2023 Internal Audit annual plan.

Role as an employer

In 2023, the Selection, Appointment and Remuneration Committee of the Supervisory Board was once again charged with annually assessing the performance of the individual members of the Management Board and reporting on it to the Supervisory Board. Additionally, the Supervisory Board is responsible for selecting and appointing members of the Management Board. There were no appointments or reappointments to the Management Board in 2023. The Supervisory Board is also responsible for formulating the remuneration policy for the Management Board. In 2023, three changes were made to the Management Board’s remuneration policy. The Supervisory Board renders account for its implementation of the remuneration policy in the Remuneration Report. The Supervisory Board’s role as an employer also includes succession planning for the Management Board members. It discusses the succession plan for the Management Board and for the first management layer below the Management Board on an annual basis. This discussion took place again in 2023 in a plenary meeting of the Supervisory Board. This practice gives the Supervisory Board a good understanding of the potential and capabilities of top management within Alliander.

The Selection, Appointment and Remuneration Committee prepares material on numerous issues for the Supervisory Board’s decision-making, thus supporting the Supervisory Board in its role as an employer. Further details of the work (preparatory or otherwise) done by this committee are provided in the ‘Selection, Appointment and Remuneration Committee’ paragraph of this section.

About the Supervisory Board

Composition

There was one change to the Supervisory Board during the past year. At the General Meeting of Shareholders on 19 April 2023, Bert Roetert (also chair of the Selection, Appointment and Remuneration Committee) stepped down, having completed his second term of office. The Supervisory Board is deeply grateful to Bert Roetert for his contribution as a Supervisory Board member and his outstanding chairmanship of the Selection, Appointment and Remuneration Committee over the past eight years. At the same meeting, Marinka Nooteboom was appointed to the Supervisory Board for a four-year term effective from 19 April 2023, and Frits Eulderink and Thessa Menssen were reappointed as Supervisory Board members for a four-year term. Marinka Nooteboom completed an extensive induction programme after her appointment.

The following retirement schedule applies to the Supervisory Board. The appointment period is assumed to be two four-year terms. This may be extended by two additional two-year terms, as long as sufficient reasons are given for this in the report of the Supervisory Board. At year-end 2023, the composition of the Board was as follows:

The personal details, principal and additional positions of the members of the Supervisory Board are included in the ‘Supervisory Board’ paragraph in the ‘Corporate Governance’ section.

Independence of the Supervisory Board

The articles of association and the Supervisory Board’s by-laws contain provisions on independence and conflicts of interest. The composition of the Supervisory Board is such that the members are able to operate independently and critically vis-à-vis one another, the Management Board and any particular interests involved. All members of the Supervisory Board are independent within the meaning of best practice provisions 2.1.7 to 2.1.9 of the Dutch Corporate Governance Code. They also all operate independently within the meaning of the Electricity Act 1998 and the Gas Act,

Members of the Supervisory Board must report any additional positions they hold to the Supervisory Board beforehand and those positions are specified in the annual report. No Supervisory Board members hold an additional position that is in conflict with their Supervisory Board membership at Alliander. Moreover, none of the Supervisory Board members holds more than the maximum admissible number of supervisory positions with large Dutch companies or major foundations. The number and nature of the other positions of each Supervisory Board member are such that a proper fulfilment of the tasks is assured.
No material transactions involving potentially conflicting interests of Supervisory Board members took place in 2023.

Diversity

Both the Management Board and Supervisory Board recognise the added value of diversity in a broad sense and gender diversity in particular. The current diversity policy applicable to the Management Board and Supervisory Board was written with this in mind. Alliander is subject to the provisions on the balanced allocation between men and women of seats on the Management Board and Supervisory Board pursuant to the Dutch Act on the appointment quota and target ratios (‘Diversity Act’). The Supervisory Board observes a diversity policy for the composition of both the Management Board and the Supervisory Board, which gives consideration to the following elements:

• a balanced gender ratio with a target percentage of at least 33% women and at least 33% men;

• a complementary composition in terms of experience and professional background (the areas of knowledge and experience are included in the Supervisory Board’s Profile);

• a balanced age structure.

The composition of the Management Board remains unchanged compared to 2022. The Management Board consists of four directors and there is a good balance in terms of diversity of knowledge, background and experience and age. The gender ratio in the Management Board is 25% female to 75% male, meaning that the target ratio has not been met.

The composition of the Supervisory Board remains unchanged compared to 2022. The Supervisory Board currently consists of two men and three women, which equates to a gender ratio of 40% male to 60% female. Bert Roetert’s departure and the arrival of Marinka Nooteboom has led to a reduction in the average age of the Supervisory Board. The current composition of the Supervisory Board is balanced, knowledgeable and diverse: each Supervisory Board member has specific experience and the background necessary to fulfil his/her role within the Supervisory Board. Consequently, the composition of the Supervisory Board complies with the diversity policy.

When future vacancies in the Management Board and the Supervisory Board are filled, the basic principle is that the diversity policy should be implemented further where possible. The Supervisory Board determines in advance which aspects of diversity should be considered in order to maintain or improve the desired mix in the composition of the Management Board or Supervisory Board. The quality of the candidates is the main deciding factor, but diversity (in a broad sense) is an important point for consideration when coming to a decision. When recruiting and selecting members of the Management Board and Supervisory Board, Alliander uses the services of specialised consultancies in addition to its own network.

Evaluation 

In accordance with the Dutch Corporate Governance Code, at least once a year and without the Management Board being present, the Supervisory Board evaluates its own performance, the performance of the individual committees of the Supervisory Board and that of the individual Board members. This evaluation takes place once every three years under external guidance. The evaluation was coordinated by an outside consultant in 2021 and this will occur again in 2024. In 2023 the Supervisory Board conducted the evaluation itself without external coordination. The collaboration between the Supervisory Board and the Management Board was also evaluated. The Management Board provided prior input for the evaluation of its collaboration with the Supervisory Board.
Some points from the self-evaluation merit further explanation. The Supervisory Board is pleased with the close collaboration between the Management Board and Supervisory Board during the process aimed at refocusing Alliander’s strategy. Both Alliander’s context and the scenarios for the future were researched further and discussed in great detail, resulting in a clear picture of Alliander’s task in the coming years. This helps the Supervisory Board in its efforts to closely supervise completion of this complex task and also the management of the intended growth of the organisation. The Supervisory Board is also pleased that the balance between advice and supervision, as agreed upon in 2022, could be perpetuated this year. The Supervisory Board notes that this balance strengthens the relationship between the Supervisory Board and the Management Board and retains the element of constructive criticism in that relationship. The Management Board also values this, because in addition to supervision of the Management Board’s performance of its duties and fulfilment of its responsibilities, the specific expertise of the Supervisory Board members can be freely accessed when discussing solution directions and/or developing a vision. In respect of 2024, this requires the Supervisory Board to continue to closely compare current results with the refocused strategy toward 2030 and beyond. The Supervisory Board further believes that, thanks to the changes to the committees in 2023 and the arrival of a new Supervisory Board member, there is a good balance in terms of the diversity in background, knowledge and experience of the individual members, which is conducive to more effective supervision and more relevant advice. This, too, is important in the light of the task ahead for Alliander and its Management Board. As in 2022, both the Management Board and the Supervisory Board experience the supervision as intensive but enjoyable. In view of the large number of internal and external developments, more consultation than usual took place between the Supervisory Board and Management Board in 2023.

Meetings, procedure and attendance

Seven Supervisory Board meetings were held in 2023, five scheduled meetings and two additional meetings that were convened to review the sale of Kenter and the issuance of a green bond. The Supervisory Board meetings are preceded by a ‘private session’ in which only Supervisory Board members participate. The other participants in the Supervisory Board meetings are Management Board members and, by invitation, the external auditor and members of management. Outside the meetings, the Management Board informed us on relevant topics and there was also regular contact in the interim, both between the Supervisory Board members themselves as well as between the Supervisory Board and the Management Board.
Bram Sieben and Miranda de Bliek acted as the Supervisory Board’s Corporate Secretary and secretary respectively in 2023. The secretary prepared the Supervisory Board meeting agendas, liaising with the chairpersons of the Management Board and the Supervisory Board.

The Audit Committee met six times in 2023, and the Selection, Appointment and Remuneration Committee held three meetings. The table below shows each Supervisory Board member’s attendance record at the scheduled Supervisory Board meetings and committee meetings.

• *Following the resignation of Bert Roetert (also Chair of the Selection, Appointment and Remuneration Committee), the Supervisory Board appointed Gerard Penning to chair the Selection, Appointment and Remuneration Committee with effect from 1 May. Effective the same date, Marinka Nooteboom was appointed to the Audit Committee. 

Audit Committee

Topics discussed by the committee in 2023 included the 2022 financial statements, the 2023 half-year report, the regular quarterly reports, risk management, the 2024-2028 business plan (including the 2024 budget), the Internal Annual Audit Plan and reports submitted by the Internal Audit Department and the audit plan and reports submitted by the external auditor. The discussions relating to the audit plan included consideration of the scope of the audit, the materiality to be used and the audit fee. In addition, topics such as taxation, cost savings, the issuance of a green bond, longer-term financial projections and the structurally higher level of investment (and the required funding) for the implementation of the energy transition, implementation of the Corporate Sustainability Reporting Directive (CSRD) and ‘managing for broad prosperity’, the developments of the cross-border leases, integrity and fraud, risks in the areas of IT, security and privacy, and the update of the Internal Audit Charter were discussed. The Audit Committee also devoted considerable time to the procurement and selection process for a new external auditor.

Selection, Appointment and Remuneration Committee

The Audit Committee met six times in 2023 in the presence of the CFO, the Director of Corporate Control, the Internal Audit manager and the external auditor. Depending on the agenda, internal specialists also attended some meetings and reported on relevant topics in their capacity as experts. In addition, the chair of the Audit Committee talked regularly with the CFO, the external auditor and the Internal Audit manager outside the meetings.

The topics discussed included strategic staff planning, the diversity, inclusion and equality policy and the Alliander leadership competencies. The HR dashboard was also discussed. This dashboard presents topics such as FTE development, sickness absence, age and the gender ratio. The committee additionally carried out preparatory tasks for the Remuneration Report. Furthermore, on behalf of the Supervisory Board, the committee advised on adjustments to the remuneration policy for the Management Board. The Supervisory Board held discussions (through the committee) with the Committee of Shareholders on this matter in early 2023. The AGM subsequently adopted these changes to the remuneration policy at the recommendation of the Supervisory Board. Moreover, acting for the Supervisory Board, the committee conducted the annual individual performance reviews with members of the Management Board. This was done in line with the organisation-wide Personal Result and Development system, using feedback from fellow Management Board members and direct reports regarding the perceived quality of leadership and job performance, and the Management Board’s own reflections on performance and the reflections of the Supervisory Board as input for discussion. The progress made relative to collective and individual goals and personal development was discussed. In addition, the committee worked intensively on the process culminating in the appointment of Marinka Nooteboom. The committee met on three occasions in 2023. In addition to the committee members, the CEO, the HRM director and the Corporate Secretary also attend the meetings.

Contact with the Works Council

The Supervisory Board feels it important to maintain strong contacts with the Works Council; this contact gives us a feeling for what is really going on in the organisation. It is customary for the Supervisory Board to meet twice with the Works Council and the Management Board in what is known as an Article 24 ‘Works Councils Act’ meeting. The members of the Supervisory Board who were appointed on the basis of the Works Council’s enhanced right of recommendation have regular contact with the Executive Team of the Works Council. In September, the Supervisory Board once again held its annual meeting with the Works Council. The themes this year were the challenges and dilemmas associated with Alliander’s immense infrastructure construction task. The topics discussed included workload, culture and how attitudes in society are hardening. The Supervisory Board is pleased with the quality of the discussions and the open relationship with the Works Council.

Contact with shareholders

The Annual General Meeting of shareholders (AGM) is one of the opportunities for contact with the shareholders. During the AGM, the Supervisory Board renders account regarding performance of its supervisory duties. Nearly all the members of the Supervisory Board attended the AGM on 19 April 2023, which was chaired by the chair of the Supervisory Board. In addition to rendering account regarding the supervisory activities, this is also an excellent opportunity for an informal exchange of thoughts and ideas. The AGM approved all the resolutions on the agenda, including the matter of Alliander’s entering into/signing the Agreed Framework with the State. Additionally, the shareholders were updated on the status of the Kenter sale process. The Management Board consults informally with the major shareholders on a regular basis. The topics discussed included the future energy system, the refocused strategy, the sale of Kenter, the outcome of the tender procedure for appointing a new external auditor and developments in legislation and regulations. The Supervisory Board was consistently kept informed in respect of these topics. The Supervisory Board feels positive about the good relationship and constructive collaboration with the shareholders during the past year.

Advice to shareholders regarding the financial statements

The 2023 financial statements were prepared by the Management Board and signed by the Management Board and Supervisory Board. Deloitte Accountants B.V. audited the financial statements, attended the Supervisory Board meeting during which the audit of the financial statements was discussed, and issued an unqualified audit opinion. The independent auditor’s report is included in this annual report under ‘Other Information’. The Supervisory Board will present the 2023 financial statements and the dividend proposal for the 2023 financial year to the AGM on 17 April 2024 and request their adoption. A proposal will furthermore be made by the Supervisory Board to the AGM to discharge the members of the Management Board from liability for the management policy pursued in the 2023 financial year, and to discharge the members of the Supervisory Board from liability for their supervision of that management policy.

Word of gratitude

During the past year, the organisation worked hard on the energy transition change management task and to meet operational challenges. It was a challenging year that required everyone to give their best. The importance of Alliander’s work became even more apparent in 2023, and the work output was higher than in the previous year. The Supervisory Board is proud of the results achieved by all units in the organisation and expresses its thanks to all the employees, management, the Works Council and the Management Board for their flexibility, effort and engagement. We wish to thank the shareholders and other stakeholders for their support and confidence in Alliander.

Supervisory Board, 28 February 2024

Annemarie Jorritsma-Lebbink (chair)
Frits Eulderink
Marinka Nooteboom
Thessa Menssen
Gerard Penning