Financial policy

In principle, our financial policy is designed to allow us to maintain a solid A rating. This means that we are able to continue to invest in our networks and grow the business thanks to our financial position. It enables us to pursue our strategy. In view of Alliander's task, with effect from the 2025 financial year, a number of changes have been made to the financial framework and dividend policy that will allow us to continue to meet our increased investment needs while maintaining a solid A-rating profile.

Changes in dividend policy

At the Annual General Meeting of Shareholders (AGM) on 17 April 2024, Alliander and the shareholders agreed that they would jointly review whether the dividend policy is still appropriate to Alliander's task. In May 2024, the Management Board initiated discussions on this in the Meeting of Major Shareholders. On 24 January 2025, these discussions resulted in the following agreements on the dividend policy to be implemented from 1 January 2025:

• Continuation of the current payout ratio (in accordance with current policy). As part of the financial policy, the dividend policy provides for distributions of up to 45% of the profit after tax, adjusted for fair value movements, periodic payments relating to loans that are recognised in equity and exceptional items that did not lead to a cash flow, unless investments or financial criteria demand a higher profit retention percentage and/or unless the solvency ratio falls below 30% after payment of dividend.

• Introduction of a dividend cap. Maximisation of the absolute dividend distribution by introducing a dividend cap of €100 million.

• Indexation of the dividend cap. In the first two years, i.e. the payment of dividends for the 2024 and 2025 financial years (actually paid out in 2025 and 2026, respectively), the dividend cap is set at a maximum of €100 million. From the 2026 financial year, the amount of the capped absolute dividend distribution will be indexed annually based on the actual Consumer Price Index (CPI), as published by CBS Statistics Netherlands.

• Evaluation of the policy. After three years, the dividend policy will be evaluated. This includes assessing the impact of any new method decision on Alliander's expected financial results and, more specifically, on the expected dividend distribution and on the FFO/net debt ratio. The results of this evaluation, which will be initiated by the company, will be discussed by Alliander and the shareholders – each adopting a position based on their own responsibilities – and this may, in due course, constitute grounds for adjusting the dividend policy (i.e. tightening or broadening it).

Changes to the financial framework

In late 2024, the Management Board decided to bring the financial framework more in line with the goal of having a solid A-rating profile. The following changes were made to achieve this:

• Lowering the minimum target for the FFO/net debt ratio. The minimum target for the FFO/net debt ratio has been lowered from 15% to 11%. This relaxation is possible because credit rating agency S&P granted Alliander an additional step in Alliander's credit rating on 14 February 2023, in recognition of Alliander being assigned Government Related Entity (GRE) status.

• Reduction in the number of financial ratios. The ratio related to interest coverage and the net debt/(net debt + equity) ratio are no longer used. This brings the financial framework more in line with what is common in the industry.

The following provisions of the financial framework remain unchanged:

• Compliance with regulatory requirements for network operators.

• In a departure from IFRS, when calculating the ratios, the subordinated perpetual shareholder loan and the convertible shareholder loan are treated as 50% equity and 50% debt capital. Security deposits paid and received in the context of network losses are excluded from the ratio calculations.

Ratios on the basis of Alliander’s financial policy

Investment policy

The investment policy is consistent with the financial policy and is part of Alliander’s strategy. Elements of investment policy include compliance with regulatory requirements relating to investments in the regulated domain, such as safety and reliability, and the generation of an adequate return on investment. Ordinary investment proposals are tested against minimum return requirements and criteria as set out in the financial policy. Innovative schemes require specific Management Board approval. As well as quantitative standards, investment proposals must satisfy qualitative requirements. It should also be noted that, in principle, investments in the regulated domain arise from a network operator’s statutory duties.

Social performance

Alliander makes a major contribution to the prosperity of the Netherlands, indirectly through the considerable impact that the distribution of energy has for the Dutch economy and for the quality of life experienced through the permanent availability of energy. This is further explained in our impact model in the section Our impact on society. The dividend distributed to shareholders and payments to providers of capital and government authorities make an indirect contribution to social goals. The way these items are allocated and used is set out below.

Financing

The huge investment challenge and the associated financing requirements for the next couple of years increase the importance of having good access to sources of funding. Alliander has set up its financing based on a number of principles, enabling it to cover its financing requirements in the best way possible for the next couple of years:

• Cost-efficient. Alliander’s good credit ratings, transparent reporting and regular visits to investors enable us to make optimum use of the public capital markets. This allows us to raise funding at the lowest possible costs.

• Green. Alliander sees that, alongside a sound financial policy, shareholders and other investors are increasingly focusing on sustainability. Alliander endorses the importance of sustainability and so the company’s sustainability targets play a prominent role in the management of the business and external financing. Alliander is able to issue green bonds and green Euro Commercial Paper (ECP). The company also has a committed Sustainability Linked credit facility. This financing structure is a financial incentive for Alliander to make sustainable investments and to conduct its business sustainably. Our sustainability efforts have been rewarded with a B sustainability classification by rating agency ISS ESG and a medium Risk classification by Sustainalytics. This puts us among the high-performing companies in our sector in terms of sustainability performance, according to these rating agencies. It allows Alliander to take advantage of the growing demand for green debt instruments and, as a result, achieve favourable financing conditions.

• Scalable and flexible. We are capable of upscaling our funding rapidly and cost-efficiently in order to meet our ever increasing financing needs. Apart from upscaled financing programmes, this also requires adequately proportioned liquidity lines. It will only remain possible to use our ECP programme to issue flexible and competitively priced short-term debt instruments if there is sufficient coverage from comitted bank credit lines. 

• Guaranteed in the long term. To be able to finance our investments in the long term as well, agreements with the State regarding possible capital support were laid down in the Framework Agreement. Based on these agreements, accession of the State as a new shareholder will be possible under certain conditions. This guarantees a minimum credit rating of A- (minus), which provides a great deal of comfort to Alliander’s current and future financiers.

Our financial stakeholders

Alliander pursues an active policy of maintaining an open and constructive dialogue with shareholders, bondholders, financial institutions, credit rating agencies, sustainability rating agencies, analysts, and the media. We provide all stakeholders with timely and accurate relevant information on finances, strategy, risks, sustainability and other matters, in reports, in press releases, and in meetings, as well as by other means.

Shareholders

All of Alliander’s shares are held directly by Dutch provincial and municipal authorities. A full list of the shareholders can be found on www.alliander.com. The authorised share capital of Alliander N.V. is divided into 350 million shares with a nominal value of €5 each. All the shares are registered shares. As at 31 December 2024, there were 136,794,964 issued and paid-up shares. Contact with shareholders primarily takes place during the shareholders’ meetings. The company and its shareholders also meet outside of the shareholders’ meetings. A summary of the various shareholder dialogue structures can be found on the Alliander website.

Institutional investors

Institutional bond investors, such as asset managers, insurance companies and pension funds, provide a large part of our loan capital financing. These are mostly Europe-based professional players on the international financial markets. We keep existing and potential bondholders informed of the company’s financial position and results, as well as developments in the industry by actively engaging in Investor Relations activities in addition to complying with ordinary publication requirements. In this context, a Non-Deal Roadshow is held every other year. We arranged the last one in November 2023. During 2024, we only engaged in deal-related Investor Relations activities. 

Banks

Alliander has access to a back-up credit facility of €900 million, committed by seven banks, which matures in December 2028. The fee paid for this facility depends in part on Alliander’s performance in relation to a number of sustainability KPIs. As in previous years, no use was made of the credit facility during the past year. A €300 million loan arranged with the European Investment Bank was drawn down in 2017 and 2018. The loan becomes repayable in full in 2031.

In addition to this syndicated credit facility with a group of banks, Alliander has five bilateral credit facilities with individual banks. In 2024, these committed back-up credit facilities were increased from €400 million to €1 billion. They mature at the end of 2025, with the option to extend by one year, up to December 2026 at the latest. No funds were drawn down from these facilities during 2024.

Rating agencies

Alliander has credit ratings from S&P and Moody’s. These ratings comprise a long-term rating with an outlook and a short-term rating. The outlook is an indication of the expected change to the long-term rating over the next few years. On 2 February 2024, S&P confirmed that Alliander’s credit rating is A+ with a stable outlook. This means that the Credit Watch Positive status put in place on 13 October 2023 has been withdrawn. There were no changes to Moody’s credit rating. At year-end 2024, Alliander’s credit ratings were as follows:

During the reporting period, Alliander was in contact with the rating agencies on several occasions. Among other topics, we discussed the developments in the regulations, the demand for electricity, the increase in investments and the congestion problem. The recent financial performance figures and forecasts that Alliander provided on these occasions were taken into account by S&P and Moody’s when assessing Alliander’s creditworthiness.