Accelerating, but we still have a lot to do
Acceleration and expansion, for us, these two words characterise the past half year. We completed a considerable amount of work again in the first half of 2024 resulting in 1,020 megawatt newly built transmission capacity for our customers. We also concluded the first flex contracts with large-volume business customers, which freed up extra grid capacity. With the extra capacity that has become available, we can accommodate the growth in heat pumps and electric mobility and connect new customers. Moreover, we carried out all this work safely: our LTIF (accidents resulting in absenteeism) was considerably lower than in the same period last year. All in all, a promising start of the year; however, we also realise that we still have a lot of work to do.
Reaching the limit
The challenges that we are facing are at least as extensive as our performance. We are reaching the limit of our grid's capacity as well as the available space for building. Demand for renewable energy continues to grow more rapidly than we are able to expand our grid. As a result, waiting lists continue to grow. And, unfortunately, a reversal of this trend is not in sight. Alternative energy carriers, such as green gas, hydrogen, and district heating will play an important role in a future-proof energy system. However, these alternative energy carriers are still being developed and cannot contribute sufficiently in the short term to reducing the pressure on the electricity grid. In addition, the shortage of technical personnel is also affecting us and our contractors. Although technicians are still opting to work for our organisation, we do see a slight decrease in the inflow of new technicians in comparison with 2023.
We are also pushing our grid to the limit by making maximum use of the capacity of our grid. By doing so, we are able to provide new connections and upgrade existing connections for as many customers as possible. Unfortunately, we cannot prevent an increase in the occurrence of outages when making maximum use of the grid’s capacity. In the first half of the year, the number of outage minutes rose to, on average, 12.8 minutes. Whereas this amounted to 11.2 minutes in 2023.
Capital expenditures continue to grow
Capital expenditures increased further in the first half of 2024 mainly as a result of the expansion and upgrading of the electricity grid. Gross capital expenditures amounted to € 648 million in the first half year and were thus € 133 million higher than in 2023. Due to the increase in capital expenditures and the delay with which Enexis receives compensation for these capital expenditures in the existing tariff regulation, the cash flows from operational activities and investments in tangible and intangible fixed assets were € 286 million negative in the first half of 2024 (2023: € 240 million negative).
To finance these investments, we issued a fourth green bond of € 500 million in May 2024. With the proceeds of this bond, we can continue to invest in the expansion and sustainability of our grid.
Net profit over the first half of 2024 amounted to €122 million. This is €107 million higher than in the same period last year. The purchasing costs in connection with grid losses increased significantly in the first half of 2023 due to the strong increase in energy prices. These higher costs were not fully recouped in the tariffs in 2023. The tariffs are now more in balance with the costs in 2024, also due to the new method decisions that the Netherlands Authority for Consumers & Markets (ACM) published on 23 December 2023 following the decision of the Trade and Industry Appeals Tribunal.
Collaborating with stakeholders
Collaborating with our stakeholders is essential for the realisation of our ambitions and dealing with the huge challenges that we are facing. We are engaged in an ongoing dialogue with the Ministry of Climate Policy and Green Growth and the Ministry of Infrastructure and Water Management, with provinces, municipalities, the energy sector, contractors, and many others. Although everyone has their own tasks and challenges, in these dialogues there is a shared awareness that only together we can quickly arrive at good solutions.
This intensive dialogue with our stakeholders is showing results. ACM introduced the priority framework in April, allowing us to give priority to connection requests that are relevant for society. This applies to organisations such as schools, hospitals, and water boards. We signed the Execution Agreement for upgrading the low- and mid-voltage grids with Netbeheer Nederland, Koninklijke Bouwend Nederland, and Techniek Nederland in June. This agreement is completely in alignment with our district approach. We are also pleased that the Dutch House of Representatives adopted the new Energy Act. This act should ensure that the regulations, which in some case hindered the energy transition in the past, will now actually facilitate the energy transition. For example, the act offers additional possibilities to make more flexible use of the grid and share energy. It also provides a new framework for exchanging data. This strengthens the position of businesses and consumers.
Building has the highest priority
To meet the growing demand for energy, we have invested substantially in the past six months in building new infrastructure. If we want to maintain this pace, we need sufficient space to build. At present, there is still a lack of space in many areas. Therefore, acquiring land and obtaining permits is high on our agenda.
In the coming three years, we will be installing 6,860 kilometres of cables and building 4,140 new transformers. It is a huge task to incorporate this in the surrounding area, both for Enexis and for the municipalities where we have to carry out this work. Zoning plan amendments, permit procedures, and objection procedures are time-consuming and demand a lot from our, already overburdened, organisations. Taking into consideration the challenges that each of us are facing, we continue to discuss possibilities to speed up matters.
Recently, the first municipalities entered into a collaboration agreement with Enexis. This agreement contains joint agreements regarding the measures that are required to provide sufficient electricity to these municipalities in the future as well. Municipalities can use these agreements to organise support and capacity within their own organisation. We intend to enter into collaboration agreements with additional municipalities in the near future.
Improving the district approach
We urgently need the aforementioned transformers to future-proof our grid in the districts. The pressure on local electricity grids in residential areas is increasing considerably due to the popularity of electric vehicles, heat pumps, and solar panels. The electricity grid is becoming fuller and fuller here as well. With the district approach, we upgrade the low-voltage grids in a district in one go. We shared the initial planning for the district approach in the beginning of July. Although the planning can change, we have chosen to share this information already. It is our aim to be as transparent as possible towards our customers.
Besides the municipalities, our contractors are also crucial for the execution of our district approach. We succeeded in outsourcing more work to contractors in the first half of the year. This new way of working, i.e. ‘moving up in the chain’ is something everyone has to get used to. We are still encountering some obstacles in the execution. For instance, we see that we have to further adapt our processes and systems to support the new way of working optimally. We are constantly discussing how we can improve our way of working so that we can get more work done faster.
Towards more flexible energy consumption
In addition, we are also looking into innovative ways to increase the efficiency of the energy supply and make better use of the capacity of our grids. We are increasingly making use of sensors, 25,000 Distribution Automation LIght (DALI) measurement points, and AI to balance the demand and supply of energy on our grid. The DALI boxes are installed in high- and mid-voltage stations to collect data. We also use this data and information to support the collaboration with large-volume business customers.
We took important steps with a number of business customers in the past half year. For instance, a pilot is being conducted at the Kempische Business Park in Bladel with eighteen business customers who are sharing their energy via an energy hub. Enexis is supporting these business customers with data and new types of contracts.
We are also introducing a new type of contract this year, the capacity-limiting contact. If we anticipate a shortage of capacity, we ask customers as from 1 megawatt contracted transmission capacity to temporarily reduce energy consumption or feed in less energy. They receive a financial compensation for this. We concluded a capacity-limiting contract with paper manufacturer Sappi in Maastricht, who is making no less than 24 megawatt flexible capacity available. This is by far the largest flex contract with an industrial customer in the Netherlands. With this extra capacity, we can make capacity available for other large business customers and households. We appreciate that customers like Sappi are open to new solutions to prevent the overburdening of the grid and to create room for new customers in the area. We hope that this collaboration will also inspire other customers.
Heat strategy approved
Our heat strategy, which our shareholders approved in April of this year, can also provide a good alternative. District heating is the best alternative for natural gas for roughly one third of the built environment. Until now, district heating projects were hardly being initiated due to the financial risks, an insufficient base of support, a negative image, the complex playing field, and the uncertainties in laws and regulations. The Dutch Collective Heat Act will be discussed in the House of Representatives after the summer recess. This provides perspective. Our aim is to realise district heating in our service area in 2030 equalling the energy demand of 50,000 households. A precondition for this is that municipalities designate areas for the roll-out of district heating as soon as possible. As might be expected, we are working together closely with our partners in this area as well.
The way forward
We have benefited from the ongoing dialogue with our stakeholders and the focus on innovation. This varies from awareness of the energy shortage in the political arena to collaboration between businesses, who are increasingly open to new types of contracts. We are also asking households to make smarter use of energy. In this manner, we all contribute to ensuring that our grid remains accessible for everyone. We are succeeding better and better at adapting to a constantly changing reality. We are proud of our colleagues who work hard every day to achieve this. Moreover, Enexis and its contractors have succeeded in carrying out all this extra work safely.
Our experience and our ability to come up with effective solutions is growing with each step that we take. At present, still with the -painful- knowledge that we are not proceeding fast enough to offer all our (future) customers a connection on our grid at the moment that they desire. We fully understand the frustration of customers who have to wait for a connection. In the meantime, we ask our customers to do what they can to help solve the problem by adapting their energy usage. We do not take this lightly and we realise that this is a big change. At the same time, we believe that flexible energy usage is an inseparable part of a future-proof energy system. And that everyone can contribute to this.
Our task is clear: we have to further intensify our efforts as 2050 is rapidly approaching. We can only achieve this if everyone works together. Together, we can accelerate even faster.
Executive Board Enexis Holding N.V.
Rutger van der Leeuw
Mariëlle Vogt
Han Slootweg
Jeroen Sanders