Governance

Corporate Governance

Tasks and responsibilities
Board of Management

The Board of Management holds the ultimate responsibility for the performance of Eneco Group. The Board of Management is appointed by the Supervisory Board and is accountable to the Supervisory Board and the General Meeting of Shareholders (AGM).

The Board of Management of Eneco Group has four members. Their biographies can be found on Eneco Group's corporate website.

Strategic Board in addition to the Board of Management

Eneco Group decided to introduce a new corporate governance structure mid-2017. The energy transition is accelerating and we see great opportunities and challenges in the market. This means that we have to speed up the transformation of the company and also improve our performance. And it demands that we increase the speed, quality and agility of our decision-making and execution power. A model that allows more people within the organisation to assume responsibility. Therefore, besides the formal responsibility that the four members of the Board of Management have, we also work with a Strategic Board consisting of the members of the Board of Management and the Chief HR Officer. A Chief Customer Officer will be added to the Strategic Board in 2018. Each portfolio in the Strategic Board has a strategic focus, which is crucial for Eneco Group's success.

Supervisory Board

The Supervisory Board of Eneco Group advises the Board of Management, operates independently and supervises the policy of the Board of Management and the general course of business in the Eneco Group. The Supervisory Board is appointed by the AGM.

The Supervisory Board of Eneco Group has seven members and has appointed three committees:

  • The Remuneration, Selection and Appointment Committee, which provides advice on matters such as the remuneration of the members of the Board of Management, the selection and appointment of members of the Board of Management and the nomination of members of the Supervisory Board. This committee is a combination of the former Remuneration Committee and the Selection & Appointment Committee. Mirjam Sijmons chairs this committee. The other members as of 1 February 2017 are Edo van den Assem, Marike van Lier Lels, Rob Zandbergen and Atzo Nicolaï.
  • The Audit Committee supervises the integrity of the financial and non-financial reporting, the internal control and the risk management. The Audit Committee also supervises the internal and external audit process. Henk Dijkgraaf (chair), Marco Keim and Rob Zandbergen are members of this committee.
  • The guidance committee future shareholdership, about which agreements have been made in the shareholders’ covenant. Edo van den Assem (chair), Marike van Lier Lels, Rob Zandbergen and Atzo Nicolaï are members of this committee.
Shareholders

The shares of Eneco Group are held by 53 Dutch municipalities. Within six months after the end of the financial year, or more often if the Supervisory Board or Board of Management considers this necessary, Eneco Group will organise a General Meeting of Shareholders (AGM). The annual report is discussed and the annual financial statements are adopted during the AGM.

Code of conduct

Conduct and integrity norms that have been laid down in writing apply to everyone within Eneco Group. Confidential counsellors have been appointed within Eneco Group to which employees can report integrity complaints (see Integrity and compliance).

Integrity and compliance

Eneco Group pursues an active and proactive compliance and integrity policy with the aim to ensure that we comply with laws and regulations.

Integrity

Eneco Group can only fulfil its leading sustainable role properly if we adhere to the highest standards of conduct. The norms and values that apply for us have been laid down in the Eneco Code of Conduct.

We have paid a lot of attention within Eneco Group in 2017 to stimulating the desired conduct. By constantly innovating and improving, we make the difference and are valuable for our customers, shareholders and employees. In order to accelerate this process, we have rolled out a culture programme with the name ‘The new way of Working’. The main aim of this programme is the further elaboration of our values. Our values - customer first, together, inspiring trust and assuming responsibility - stand for what we believe in, how we wish to conduct ourselves towards one another and towards society. Exactly what our strategy asks of us. It is our guideline that helps us to constantly take the right decisions about the question of how we should carry out an activity.

In the past year, we also continued to work on building a positive culture by giving workshops. In these workshops, we stimulate everyone to discuss the importance of integrity and compliance with our rules and standards and to bring this into practice in their daily work. We also pay attention regularly to our integrity awareness by communicating about dilemmas and by means of e-learning.

We constantly pay attention to fraud detection and dealing with integrity issues that have arisen. There is a reporting desk for integrity issues and Eneco Group has two confidential counsellors. Employees who are the victim of undesired psychosocial working conditions such as bullying, discrimination or sexual harassment can contact these confidential counsellors. In 2017, the integrity reporting desk received 101 reports and the confidential counsellors received 19 reports, which is a small increase compared to the number of reports in 2016.

Compliance with laws and regulations

Non-compliance with national and international laws and regulations leads to risks with regard to our licence to operate and our reputation, in addition to the financial effects of fines and invalid agreements. Eneco Group has a group-wide compliance policy, carries out an annual compliance programme and has a Compliance Officer to support this. The Compliance Officer works together closely with the Legal and Regulatory Affairs departments to stimulate the compliance with laws and regulations within the company. In addition, compliance representatives are active in every business units.

Assurance is obtained internally by means of the In-Control statement and audits. Various supervisory bodies, including the Netherlands Authority for Consumers & Markets (ACM) and the Dutch Data Protection Authority supervise the enforcement of laws and regulations externally.

Eneco Group made a huge effort in 2017 to carry out the unbundling of Eneco and Stedin correctly and to ensure that both companies are compliant with the unbundling act.

In accordance with European regulations, MiFID II will enter into force on 3 January 2018. Eneco Group examined in 2017 whether it is required to apply for a MiFID licence. After a thorough examination and external verification, it was concluded that Eneco qualifies for an exemption from the obligation to have a MiFID licence and Eneco applied for this at year-end 2017.

In 2017, a lot of attention was given to the implementation of the new General Data Protection Regulation, which will come into force in May 2018. We reported eight data leaks to the Data Protection Authority.

In addition, it is apparent from the Declaration of Compliance with the Code of Conduct for Suppliers, Metering Companies and Independent Service Providers that we handle the data of our customers with due care. The declaration for 2017 is included in this annual report and can also be found on our corporate website (Our conduct agreements).

We handled a compliance incident within Eneco Group in 2017 which we listed in the above Declaration. It had been observed that Eneco Consumenten B.V. gave customers more insight through an insight service than was actually permitted based on the customer mandate. Upon discovery, the necessary measures were taken so that this situation was ended as of 17 May 2017.

The Netherlands Authority for Consumers & Markets (ACM) imposed a fine of € 1 million on our subsidiary Oxxio on 8 March 2017. This was because the ACM discovered that Oxxio accidentally submitted the wrong data to the Contract End Register (CER). This was caused by the transition to a new contract system within Oxxio. Oxxio considers it very unfortunate that the wrong data was sent to the register. We consider the fine disproportionate, also because customers themselves did always receive the correct information and could switch to another energy supplier penalty free. We have therefore decided to lodge an appeal. This appeal at the court is planned in 2018.

Supervisory Board Report

Sustainable and independent

The Supervisory Board hereby presents the 2017 Annual Report and Financial Statements of Eneco Groep N.V. (Eneco), as prepared by the Board of Management. Eneco Group came into being on 31 January 2017 after the unbundling of Eneco Holding in an energy company and a grid operator.

Eneco Group has demonstrated this year that it can operate excellently as an independent company. The combination of sustainable production, supplying energy and providing services has proven to be a sound choice also without the grid. The Supervisory Board would therefore like to compliment the Board of Management and the employees.

Further in the energy transition

Eneco has again taken impressive steps in the energy transition in 2017. This included an acquisition resulting in expansion of Eneco's generation capacity in the Netherlands by 17 already operational onshore wind farms and a number of wind farms in development. Within the context of the subsidy scheme for the Stimulation of Sustainable Energy Production (SDE+) for onshore wind, Eneco has submitted applications for in total around 250 MW. And, in cooperation with Rabobank West-Brabant Noord, the first Dutch Solar Hub was taken into operation. As a result of Eneco's sustainability drive, sustainable energy is now being supplied to companies such as Schiphol Group, the Dutch railway company NS and Google as well as around 2.1 million Dutch households. Eneco strengthened its sustainable position internationally through the acquisition of the Belgian activities of Eni and an interest in the German green energy company LichtBlick. In addition to investments in wind energy, heating and solar energy, Eneco also invested considerably in sustainable innovations in the area of energy storage and savings, such as Jedlix and the HeatWinner. Eneco Group is also working together with Mitsubishi Corporation on the largest battery for electricity storage in Europe.

Covenant with shareholders

Preparations for the unbundling took place in 2016. The agreements with 53 municipal shareholders about the period after the unbundling were an important element in this. These agreements, laid down in statutes and a covenant, concern matters such as the strategic long-term plan. The strategic long-term plan was adopted by the Board of Management in 2017. The strategy 2018-2022 was discussed with the shareholders committee before the summer, and subsequently the main points of the strategy were discussed with the shareholders.

Agreements were also made in this covenant about the manner in which possible future changes in the shareholder base would be given form. A lot of work was carried out in 2017 to facilitate this possible (partial) change in the shareholder base while ensuring that Eneco can continue to pursue its sustainable strategy. This is set out in more detail below in the Future Shareholdership Guidance Committee.

Composition and method of operation of the Supervisory Board

The Supervisory Board held ten regular meetings in 2017. The annual report and the financial statements were discusses with Deloitte Accountants. As customary, a Supervisory Board member also participated in the consultation meetings of the Central Works Council in 2017. The chair of the Supervisory Board and the chair of the Board of Management discussed matters frequently this year, at least weekly. In addition to the regular meetings there was regular contact between Supervisory Board members and the Board of Management.

Regular consultations were held with the Shareholders Committee in 2017. The chair of the Supervisory Board participated in these consultations or was replaced by another Supervisory Board member. In addition, at the initiative of the Supervisory Board, three consultations were held between the Shareholders Committee and (a delegation of ) the Supervisory Board.

Attendance overview Supervisory Board

Meeting date

Edo

van den Assem

Mirjam Simons

Henk Dijkgraaf

Marike

van Lier Lels

Marco

Keim

Rob Zandbergen

Atzo

Nicolaï

17 March

1 June

30 June

13 July

11 September

22 September

2 November

15 November

24 November

20 December

Committees

As in 2016, working in Supervisory Board committees proved its value in 2017. The committees have made it possible to divide the supervision of the management of Eneco over various important topics without any concessions to the quality of this supervision.

Future Shareholdership Guidance Committee

As mentioned above, agreements were made with the shareholders in 2016 about their future shareholdership and other matters. In 2017, the Supervisory Board delegated the preparations for this topic to a guidance committee consisting of four Supervisory Board members and hired their own legal and financial advisers to assist them. The purpose of the guidance committee was to carry out the preparations for the decision-making of the Supervisory Board with regard to the consultation process and to prepare any follow up actions in connection with this. The consultation process concerned an assessment among the 53 shareholding municipalities about whether or not they intend to keep their shares in Eneco. The guidance committee regularly discussed matters within the committee and with the Board of Management. Consultations were held on a weekly basis during the past period. Practically all shareholders have stated their intentions with regard to their shareholdership: some wish to remain shareholders of Eneco, some wish to reduce their shareholding in Eneco without local preconditions, and finally there are a number of shareholders that opt for reduction under locally formulated preconditions. The Supervisory Board respects the shareholders’ different choices and aims to ensure that Eneco's sustainable strategy, continuity and value creation are not jeopardised by changes in the shareholder base. The Supervisory Board aims to ensure that the company's interests are safeguarded and that the interest of all stakeholders are taken into consideration in the event of changes in the shareholder base. Besides shareholders, this also impacts, in particular, customers, employees and suppliers. In view of the various interests of stakeholders, the Supervisory Board aims to ensure that the company and the shareholders engage in a careful process together to attract new shareholders where necessary.

Remuneration, Selection and Appointment Committee

The Remuneration Committee and the Selection and Appointment Committee have been combined as of 1 February into one Remuneration, Selection and Appointment Committee. Remuneration, selection and appointment topics were discussed six times in 2017. Consultations were also held in the first half of 2017 with a delegation of shareholders regarding a new remuneration policy for the Board of Management and Supervisory Board of Eneco Group. In the summer of 2017, the Supervisory Board and the Shareholders Committee decided to suspend the preparations for a new remuneration policy until a later to be determined date in connection with the current process regarding the shareholdership of Eneco. In addition, the composition of the Supervisory Board was discussed in the committee following the wish of the shareholders to - in view of the current process about the future shareholdership of Eneco - temporarily add an eighth member to the Supervisory Board. The recruitment and selection process for this eighth Supervisory Board member was started at the end of the year. The shareholders are closely involved in this process through representatives.

Marike van Lier Lels was reappointed as a member of the Supervisory Board by the General Meeting of Shareholders on 22 September 2017. Furthermore, the selection and appointment process for the successor of Henk Dijkgraaf, vice-chairman of the Supervisory Board and chairman of the Audit Committee, was also started at the end of 2017. Mr. Dijkgraaf is scheduled to step down in March 2018.

Audit Committee

The Audit Committee of the Supervisory Board supervises the policy of the Board of Management with regard to the financial information provision, including the information exchange with the external auditor, and the functioning of the risk management systems. The risk limits on a company level have been laid down in various concrete policy statements, codes and guidelines in areas such as safety, trading mandates, authorisations and conduct. The Audit Committee paid special attention to a number of topics in 2017. This concerned the first half-year report of the unbundled Eneco Group, preparations for the strategic plan 2018-2022, the investments in Eni Belgium and LichtBlick, and the updating of the Treasury Charter. The topic of cyber security was also discussed in the Audit Committee, in part due to the increased attention for this issue in society.

Self-assessment of the functioning of the Supervisory Board

The Supervisory Board carried out a self-assessment in 2017 with the assistance of an external specialised agency. The assessment helps the Supervisory Board to optimise its composition and role. Following the self-assessment and the discussions about this assessment, the Supervisory Board organised a separate meeting and the members made a number of additional agreements. These agreements chiefly concerned setting apart time for reflection and coordination between the Supervisory Board members, for which there was less opportunity in the past year due to the amount of work.

In conclusion

The Supervisory Board would like to thank all of Eneco's employees, the management, the shareholders, customers and other partners. Thanks to the joint effort of all those involved, Eneco Group has made a significant contribution in 2017 to the energy transition and the realisation of the climate goals.

The majority of the shareholders expressed their intention on 20 December 2017 to pass a resolution of no confidence in the Supervisory Board. The shareholders’ confidence in the Supervisory Board was restored again through mediation.

We advise the shareholders to adopt the 2017 Financial Statements.

Rotterdam, 16 February 2018

On behalf of the Supervisory Board of Eneco Groep N.V.

E.H.M. van den Assem

Remuneration 2017

Board of Management Remuneration Policy

When determining the remuneration of the members of the Board of Management, Eneco Groep N.V. takes its special position in society into account by applying the market principle and the moderation principle.

Point of departure

The primary employment conditions of the Board of Management are determined based on the ‘Remuneration Policy for the Board of Management’ which was adopted by the General Meeting of Shareholders (AGM) of Eneco Holding N.V. on 20 May 2005.

The remuneration policy of the Board of Management must enable Eneco Group to attract and retain qualified management. The median level in the General Market for Senior Executives is the reference point for the desired market position of the employment conditions of the members of the Board of Management. Two policy principles are leading in this respect: the market principle and the moderation principle.

Market and moderation principle

The market principle means that Eneco Group should be regarded as a normal, commercial and market-oriented company. The moderation principle means that the Supervisory Board follows a moderate remuneration policy in view of Eneco Group's history and because 100% of the shares of Eneco Groep N.V. are held by public shareholders (municipalities). This is why the Supervisory Board does not translate the benchmark with companies of a comparable size and complexity in the private sector completely into the current remuneration of the Eneco Group board members.

For the determination of the remuneration policy, the Supervisory Board applies the reference framework of the general employment conditions for senior executives, which is based on the remuneration data of over 200 senior executives. In order to do justice to the market principle, Eneco Group has opted for a position around the median of the reference framework. We thus focus on the medium-large companies in the reference group and we avoid a comparison with the largest companies.

In view of the moderation principle, we apply a reduction to the median outcome. In accordance with the remuneration policy approved by the General Meeting of Shareholders, Eneco Group applies a bandwidth of plus or minus 20% around the reference on the median. With the last salary reference point, the actual 'moderation' has risen to nearly 30% compared to the median.

Variable remuneration

As in previous years, the remuneration of the members of the Board of Management in 2017 was again dependent on performance criteria. The four main criteria are largely in line with the strategic themes:

  1. Financial result (EBITDA)
  2. Revenue from new products (including Toon, HeatWinner, Jedlix, and Luminext)
  3. Suitable shareholders (performance criterion for CEO and CFO) organic growth and growth through acquisitions (performance criterion CSGO) and Operational Excellence (performance criterion COO).
  4. Strengthening staffing, development and collaboration at the top of the Eneco Group.

Eneco Group publishes the remuneration report, which contains further details on the remuneration of the members of the Board of Management, on the website eneco.nl/corporate every year.

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