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6Ready to accelerateElia Group Activity Report 2019The transition of Europe’s energy system is, without a doubt, one of the greatestchallenges faced by society this century. The shift to a low-carbon society is sureto happen all the faster given the ambitious course set by the European GreenDeal, which aims to make Europe the world’s first climate-neutral continent by2050. The energy transition is Elia Group’s number-one priority. With our retooledstrategy, updated development plans, new corporate structure and additionalcapital, we are ready to accelerate.The Green Deal was not the onlydefining feature of 2019. Theclimate marches and yellow-vestprotests shaped the year too. Howis Elia Group dealing with theseissues?Bernard: “Until recently, calls for climate action were mainly the preserveof non-governmental organisationsand lobby groups. But political playersare gradually starting to take the leadtoo: there are more and more climateministers, and ambitious plans are beingdrawn up. At the same time, though,there are concerns about the cost. Wedon’t want to burden future generations with the consequences of climatechange, but we don’t want to saddlethem with a mountain of debt either.”Ready toaccelerateInterview with Chris Peeters and Bernard Gustin,CEO and Chairman Elia GroupGRI 102-14GRI 102-15Chris: “That’s why it’s important to knowwhich path to pursue when it comesto adopting climate measures. Somedecisions will have a greater impacton the current situation than their costwould suggest, whereas it may take timefor the effects of other decisions to befelt. As grid operators, we need to takeextremely complex decisions at an earlystage, facing all kinds of NIMBY (not inmy back yard) backlash in the process.And yet in the context of the energy transition, we are the ones whose actions willcost consumers the least and will makethe biggest difference in terms of CO2reduction. We strive for the best possiblesocial and environmental solutions. Thatis why the interaction with our variousstakeholders is so important. We want tobe a transparent and reliable advisor topolicy makers. In addition, when planning new infrastructure, all stakeholdersare involved at a very early stage of theproject. Their input is integrated in thevarious planning phases.““ e are increasingly carrying out our activitiesWin an international context, and it’s importantthat we adapt to reflect this.Chris PeetersBernard: “Today, the electricity grid isthe focus of the energy transition. Forthe next two years, Elia and 50Hertz willbe investing a staggering 1.1 billion perannum in the integration of renewableenergy, development of an offshorehigh-voltage grid and in the construction of interconnectors to facilitate theintegration of the European energy market. On top of that, we want to harnessdigitalisation and innovation to open upour grid to new players, different industries and new technologies. While thisapproach creates certain expectationsand puts us under a lot of pressure, wecan see that it really appeals to youngpeople. We’re attracting new profiles.Young engineers who, until recently,wanted to work for the Googles of thisworld are now choosing to come to usinstead. Here, they will find a mix oftechnical complexity and digitalisation,as well as the chance to contribute tofighting global warming.”Elia successfully carried out a capital increase worth 434.8 million in2019. Looking back, what are yourthoughts on the transaction?Bernard: “A capital increase is like ahealth check for a company – it tells youwhether the market understands andbelieves in your strategy. The capitalincrease showed us that our currentshareholders have a lot of faith in us,but it was a huge success on the markettoo. Our share price hit an all-time high,reflecting our ambitions and showingthat the market believes our strategy isintelligent.”Chris: “We’ve noticed that we’re attracting a new kind of investor. Our share isincreasingly being viewed as an attractive tool for investment. Institutionalinvestors want to be part of our growthjourney. They don't just look at us as abond share anymore. That is an important observation.”Won’t you need to launch another capital increase quite quickly ifyou put your growth strategy intoaction?Bernard: “It’s important to strike abalance between adjusting our plansto the market and achieving our owngoals. Both the Board of Directors andthe management team are willing tolook out for opportunities, and if they’repositive for the group, we’ll seize them.There’s been a new dynamic within thegroup since we acquired the additionalstake in 50Hertz. Our teams are ready foraction.”7

8Ready to accelerateElia Group Activity Report 2019Chris: “If the authorities need to speedup the energy transition, additionalinvestments will be required, so capitalincrease for organic growth can be postponed. However, the major unknown isnon-organic growth.”In 2019, the corporate structure wasadjusted and Elia Group becamea holding company. What was therationale behind the change?Chris: “We are increasingly carrying outour activities in an international context,and it’s important that we adapt to reflect this. We have just as many activitiesabroad as we do in Belgium. Under thenew corporate structure, our Germansubsidiary 50Hertz is a business unit withequal standing. The change has enabledus to strike the right balance betweengroup dynamics and local identity.”Bernard: “We’re on the lookout for synergies in strategy, finance, innovation,safety, and more within the group. Andwe’re also prioritising a local approach.It was a conscious decision to give preference to a German minority shareholderin 2018. Our relationship with Germandevelopment bank KfW is going reallywell because everyone involved feelsthat it’s a good deal. That much is clearfrom KfW’s extremely active involvementin our management bodies. KfW helpsus to make better decisions becausethey have a better insight into the localcontext.”Will the future internationalisationof the group affect the make-up ofthe Board of Directors?Another major highlight of 2019was the launch of Elia’s first offshore projects in Belgium. The seasounds like a risky place for an electricity system operator to work.Chris: “That’s why we took so much careover the projects. Both the Nemo Linkcable (interconnector with the UnitedKingdom) and the Modular Offshore Grid(switching platform 40 km off the coast,for connecting offshore wind farms tothe mainland) were delivered on timeand on budget, and both met the required quality standards. Nemo Link wasthe first interconnector to manage that.The MOG was a stupendous achievement too. Just two and a half years ago,the project hadn’t even been set down inlaw. Today, the first offshore wind farmsare already connected to it. I am exceptionally proud of what our teams haveachieved.”Bernard: “50Hertz has more experience with offshore projects, so we wereable to put their skills to good use. Ourcombined experience is a key driver forour future growth. Most reports placeoffshore wind potential at 400 GW, withabout half coming from the North Sea.We’re currently sitting at 25 GW, so amassive increase is needed. Moreover,the grid is to be connected at Europeanlevel, and we’re ahead of the pack theretoo. With its Combined Grid Solution project, 50Hertz is currently working on thefirst hybrid interconnector between Danish and German offshore wind farms.”Bernard: “Until now, we’ve been boundby the Belgian Electricity Act. But theholding company is a non-regulatedcompany, so we can adapt the make-upof our management bodies to reflect ouractual situation. Since half of our activities are located in Germany, it seems onlylogical, in the long run, to have boardmembers who have a firm grasp of thelocal situation and can advise us on it.”“Chris: “Our international position meansthat we examine complex problems frommultiple angles. We have strong teamsin both countries, and they don’t alwaysagree. Working together yields constructive solutions: our first joint study on thefuture of the European electricity system(Future-proofing the European energysystem towards 2030) is proof of that. Weare thinking ahead, rather than simplyresponding to developments as theyhappen.”Bernard: “The fact that we have activitiesin two countries makes us somewhatatypical for our sector. But that is precisely what gives us a broad outlook. Ourin-house change process was instigatedby a German who speaks perfect Frenchand understands Dutch. Our operationalactivities are managed, at group level,by a committee with equal numbersof Belgian and German members. Bylooking around ourselves, we can identify new needs faster and take actionto address them – digitalisation beingjust one example. We’re actively seekingpartnerships, too. I’d also like to mentionElia Grid International. Their consultancyposition enables them to provide interesting leads for the group. They are animportant part of the puzzle.”Chris: “Then there’s technical leadershiptoo. The 50Hertz grid has one of thehighest proportions of renewable energy(60% in 2019). You can’t really tell at firstglance, but there is a great deal happening behind the scenes to keep the gridstable without impacting consumptionbehaviour. The SuedOstLink will be thefirst time that underground cables witha voltage level of 525 kV have been used,while the Combined Grid Solution will bethe first project in the world to connecttwo offshore wind farms.” e don’t want to burden future generations with theWconsequences of climate change, but we don’t want tosaddle them with a mountain of debt either.Bernard Gustin“Elia Group wants to be a leadingEuropean energy company. Howdid this aim manifest itself in 2019? ur German partner KfW helpsOus to make better decisions.It has a better insight into thelocal context.Bernard GustinLast but not least, who would youlike to thank?His Majesty the King visited the Modular Offshore Grid(MOG) at its inauguration on Tuesday 10 September 2019.The energy transition means anincrease in electrification. To whatextent has there already been convergence with sectors like transportand heating?Chris: “Since we’re a regulated monopoly,we have a specific role. We’re also notthe only system operator. That said, I’dlike to highlight the IO.Energy project inBelgium – it’s a project that was devisedwithin Elia and aims to get consumersactively involved in the electricity market.Following analysis, together with BelgianDSOs, we launched a call for cooperationin late 2018, and we’re currently testingthe first projects on smart buildings andlocal energy communities.”Bernard: “We’re not trying to do anyoneelse’s job – not the distribution sector’s,and not the commercial market’s. If weall work together, we can come up withthe best solutions for the customer.Thanks to this approach, our work is trulyconsumer-centric.”What do you need to focus on in2020?Bernard: “We’ve created a lot of expectations regarding integration andsynergies with 50Hertz. Now it’s time forus to deliver. We’ve set up some exciting initiatives centred on digitalisation,to name but one example. At the sametime, we’re also thinking about our nextbig project. I firmly believe that companies grow by undertaking projects andsetting ambitious goals. The last twoyears have been fantastic for us. Now weneed to make sure that we can keep ongrowing.”Chris: “We’re standing on the threshold of something new and exciting.The good news is that the various focalpoints underpinning our strategy haveshown us the best way to move forward.Digitalisation will become increasinglyrelevant at European level, and we haveopportunities to achieve more organicgrowth. We’ve laid the foundations. Nowit’s time for us to build on them. Forinstance, we’re about to see a new waveof offshore projects. We need to makethe most of the opportunities we havenow so that we can take further steps inthe future.”Chris: “From a CEO’s point of view, thereare a number of critical relationshipsthat are vital for success. One of those isthe relationship between the CEO andthe CFO. These are two complementaryroles that balance and challenge eachother. Just as critical is the relationshipbetween the CEO and the Board ofDirectors, which largely comes down tothe CEO’s relationship with the Chairman of the Board. With that in mind,I’d like to thank Catherine Vandenborreand Bernard Gustin for our excellentpartnership. I’d also like to say a specialword of thanks to all the employees whohave worked so hard to get Elia Groupwhere it is today. Our achievements arethe result of major efforts by a greatmany people at Elia and 50Hertz. Andthen there are all the departments thatconstantly strive to ensure that the lightsstay on and the grid, system and marketare ready for the future. Finally, I’d like tothank the authorities and the regulators.Our discussions with them have beenconstructive, which has enabled us toimplement the projects that are neededfor the future.”Bernard: “It’s great to see how well ourteams in both countries are coming on.A lot of that is down to Chris. He takesa real interest in the field. The management team also sat on all the workinggroups with the Board of Directors,contributing in a very natural, open way.That kind of transparency is important,and fosters trust. Then there are theregulators and the authorities, who fullyunderstood our aims and gave us allthe support we needed. When we wereexpanding our German managementteam, we were able to draw on the assistance and advice of our German partnerKfW, with whom we have a very positiverelationship. Finally, I’d like to thank ourshareholders, who made our capital increase such a success and thus demonstrated their faith in us.”9

10The context of the energy transitionElia Group Activity Report 2019The context of theenergy transitionSupranationalcoordinationThe increasing share of renewables and the trendtowards more decentralised generation with amuch larger number of players is making thebehaviour of the power system more variable andcomplex. In addition, all over Europe we are seeing grid development lag behind rapidly evolvingrenewable generation. This is causing congestionproblems and considerable redispatching costs insome European countries. Given the already highdegree of interconnectedness and integration of theEuropean power system and markets, respondingto these challenges often requires a supranationalapproach.GRI 102-15,As transmission system operators, Elia and 50Hertz lead the way in the energytransition. Our grids have a crucial role to play in the decarbonisation of theenergy sector and society in general.Besides the rise of renewable generation, the energy transition is also bringing other changes: increasing decentralised generation, more supranationalcoordination and the emergence of innovationssuch as the Internet of Things (loT), artificial intelligence (AI) and blockchain that are contributing tothe fast-paced digitalisation of our society.As a result, new market players and technologiesappear such as electric vehicles, battery storage,Power-To-X technologies, etc. In a future, decarbonised and progressively digital world, managingthe power system becomes increasingly complex.Not only will electricity generation become evermore weather-dependent, it will also be producedby millions of assets connected everywhere in theEuropean grid. Both transmission and distributionsystem operators will need more flexibility to keepthe system in balance and to manage congestionsand voltage issues.Current trendsand evolutionsIncreasing sharesof renewablesThe decarbonisation of the energy sector based onincreasing shares of renewables will remain the mostimportant driver of change in Europe. This trend ispropelled by the political objective to counter climatechange and build a sustainable energy future, but isalso supported by the rapid development and decliningcosts of renewable technologies themselves. In addition, the current design of electricity markets is drivingthe decarbonisation trend because of the zero marginalcosts of renewables. We expect to see this trend pickup speed, which has important direct repercussions ongrid development needs and on system operation, butalso indirect consequences, such as increasing societaland political expectations that companies should beplaying their role in combating climate change.DecentralisationFollowing the trend of decarbonisation, we believethat the move towards more dispersed, smaller andlocal generation sources, which mainly connectto lower voltage grids, is also likely to continue.“Prosumer” numbers will rise and they will move tothe forefront of the electricity system even more,empowered by technologies that allow them toplay a much more active role. New technologies,increasing electrification and sector integration alsostimulate the emergence of new players such asservice providers targeting end-consumers. For example, balancing service providers are exploring thepotential of delivering flexibility to different playersalong the value chain.DigitalisationThe fourth trend, which is being introduced at arapid pace, will accelerate the speed of the decarbonisation and the decentralisation of production.Elia Group expects to see massive amounts ofrenewables coming online at all levels of the grid,electrification powering activities such as mobilityand heat & cooling, more international cooperation,and millions of people producing and storing theirown electricity. To respond to this, the Group believes that a new way of managing the future powersystem is required in order to maximise the benefitsof the energy transition. This will be possible thanksto the digitalisation of the power system connectingall electrical devices and various players in the system. The emergence of new digital technologies willallow new capabilities for improving the gathering,transfer, processing, and visualisation of data, aswell as the automation of decisions and actions inmanaging the power system. Some of these digitaltechnologies include (but are not limited to) the Internet of Things, cloud computing, big data, artificialintelligence and blockchain.11

12Our storyElia Group Activity Report 2019OurstoryOur core tasksGRI 102-2GRIDOWNERSHIPA Europeantop 5 TSOGRI 102-1Elia Group is active in electricity transmission. Weensure that production and consumption are balanced around the clock, supplying 30 million endusers with electricity. With subsidiaries in Belgium(Elia) and northeast Germany (50Hertz), we operate19,271 km of high-voltage connections. As such, EliaGroup is one of Europe‘s top 5 TSOs.In addition to our activities as TSO, Elia Group provides various consulting services to internationalcustomers through our subsidiary Elia Grid International (EGI). Elia is also part of the Nemo Link consortium that is operating the first subsea interconnector between Belgium and the UK.We deliver the infrastructure ofthe futureWe develop, build and maintain ourtransmission infrastructure accordingto long-term needs. We heavily invest inthe integration of renewable energy, thedevelopment of an offshore high-voltagegrid and the construction of interconnectors to make the energy transitionhappen and to facilitate the integrationof the European energy market.TRUSTE

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