Finance

GRI 201-2

50Hertz is working for a successful energy transition - in other words, for a steadily increasing share of renewable energies to be safely integrated into the electricity system. According to the Federal Government's target, by 2030 65 percent of the electricity consumed should come from renewable sources. For this reason, 50Hertz will invest around 3.4 billion euros over the next five years in the optimisation, reinforcement and expansion of the electricity transmission grid, the construction of an offshore grid and the construction of interconnectors in order to foster the development of the European energy market. The generation landscape in Germany and throughout Europe is changing fundamentally - from large supply centres to decentralised renewable plants. Electricity generated from renewable sources is volatile and subject to fluctuations. Security of supply is thus becoming an increasingly complex task. This is a challenge that 50Hertz is taking up at all Costs.

Sustainable business continues to require responsible and robust financing

The ambitious investment programme for the next few years, with which we are providing significant support for the energy transition process, was continued in the 2018 financial year: at Euro 492 million, we exceeded the previous year's investments by Euro 31 million.

Extensive investments in the grid and demand continues to grow

50Hertz as the main company of the Eurogrid Group, 80 percent of which is owned by Elia System Operator SA/NV and 20 percent by Kreditanstalt für Wiederaufbau AöR, has already invested around 3.1 billion euros in the expansion of our grid and the construction of grid connections for offshore wind farms (OWP) over the past five years. And we expect to exceed this amount in the coming years.

These investments must be financed. As a result of the long-term planning horizon of our investment measures, a sustainable financing strategy is required, which can be regarded as a reflection of the investments. Within this strategy, we are guided by the following principles:

• We finance our investments conservatively, i.e. we refrain from speculative approaches in the selection of financing instruments and their collateralisation as well as in maturity transformations (taking into account the "golden financing rule").
• In specific terms, the structure of the overall financing thus depends on the volume of the individual investment projects and the corresponding time commitment of capital for the investment measures.
• Only standard financial instruments whose economic and legal effects can be assessed by us are used.
• We primarily use public capital markets to create transparency about our financing conditions.
• Sustainable value creation from the company's activities contributes to the overall financing. We also measure the debt servicing capacity of 50 Hertz on this Basis.
• By means of a new dividend policy, we agreed with the owners on the goal of securing a sustainable financing structure through financial cornerstones.
• These sustainable financing guidelines were confirmed by the rating agency Moody's with a Baa1 rating and a stable outlook. In addition, Standard & Poor's published a report with a rating of BBB+ and a stable outlook for the first time.
• In 2018, a sustainability rating with an improved ESG rating was published for the second time by the Sustainalytics agency.

In 2016, 50Hertz was therefore able to successfully place a EUR 750 million bond on the market at favourable terms. This bond financing was expanded in the same year by an agreement with a consortium of banks to provide a syndicated long-term loan of EUR 150 million. As a result of this favorable financing situation and the cash flow generated in the current year, 50Hertz was again able to dispense with an expansion of external financing in 2018.