Hertz Annual report Hertz Transmission GmbH

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					50Hertz
Annual report 2011
The energy transition –
Our present and future

The energy transition is under way. By the year 2020 at   Furthermore, the enormous growth in wind energy in
least 30 per cent of power generation in Germany must     our network area is met by an increase of just 19 per
come from renewable sources. The current German           cent in power consumption.
Atomic Energy Act has nuclear energy scheduled to be
phased out completely in Germany by 2022.                 A large amount of electricity therefore has to be safely
                                                          collected and transported to the centres of consump-
As the responsible transmission system operator in        tion in the south and south-west of Germany. To ensure
north and east Germany, we give priority to collecting    this takes place, we will be investing over € 3.6 billion in
all electricity from renewable sources in our network     our transmission network over the next ten years.
area in accordance with the German Renewable Energy
Act (EEG). We are now ‘European champions’ in the         The expansion of electricity transmission networks is
field, because already more than 18 per cent of power     one of the most urgent tasks for the energy industry on
consumption in our network area is generated by vola-     its way to providing a climate-friendly and sustainable
tile renewable energy.                                    energy supply. This grid expansion can only take place
                                                          with the consent of broad sections of society – as the
However, this presents us with the considerable chal-     result of a wide-ranging public dialogue. This relates
lenge of providing a safe, market-oriented electricity    equally to system operators, politicians, the business
system around the clock and under dynamic market          and scientific communities and the public at large.
conditions.




50Hertz at a glance
As of: end of 2011


                                                                                      Value (share in Germany)
      Surface area                                                                         109,360 km² ( 31 % )
      Length of lines                                                                         9,840 km ( 28 % )
      Maximum load                                                                       approx. 17 GW ( 20 % )
      Electricity consumption                                                          approx. 98 TWh ( 20 % )
      Installed capacity                                                          approx. 37.400 MW ( ~ 35 % )
      – thereof renewables                                                                16,750* MW (~ 29 % )
      – thereof wind energy                                                               11,570* MW ( ~ 41 % )
      Employees                                                                                               694
      Revenue                                                                                      € 6.9 billion
      – thereof generated by grid                                                                   € 0.6 billion
      Transformers and switching stations                                                                       65

                                                                                                  * Provisional data
Balance Sheet and Profit and Loss Statement

50Hertz* (pro forma consolidation in line with HGB)



  Result
                                                                                               50Hertz                50Hertz
                                                                                            31.12.2011             31.12.2010
                                                                                            in € million           in € million
  Assets
  A.                 Fixed assets                                                              1,540.9                 1,370.0
  B.                 Current assets                                                             1,142.6                1,063.9
  C.                 Prepaid expenses                                                               3.4                     4.0
  D.                 Separate loss account for the creation of provisions                           4.1                     4.2
  E.                 Funding surplus on plan assets                                                 1.5                     0.2
                                                                                               2,692.5                 2,442.3



  Liabilities
  A.                 Equity                                                                      857.2                    717.9
  B.                 Special items                                                                  7.9                     8.4
  C.                 Provisions                                                                 1,010.1                  656.3
  D.                 Liabilities                                                                 596.6                   840.0
  E.                 Prepaid expenses                                                            220.7                   219.7
                                                                                               2,692.5                 2,442.3




  Profit and Loss Statement
                                                                                               50Hertz                 50Hertz
                                                                                   01.01. – 31.12.2011     01.01. – 31.12.2010
                                                                                            in € million            in € million

  1.                 Revenue                                                                   6,948.5                 5,595.3
  2.                 Other income                                                                  80.6                    74.8
  3.                 Material costs                                                          – 6,714.9               – 5,318.7
  4.                 Personnel expenses                                                          – 58.9                  – 50.8
  5.                 Depreciation and amortisation                                               – 60.7                  – 69.9
  6.                 Other operational expenses                                                 – 112.1                – 102.9
  7.                 Net interest                                                                – 25.8                  – 23.2
  8.                 Extraordinary income                                                             –                   – 1.9
  9.                 Earnings before taxes (EBT)                                                   56.7                  102.7



* The 50Hertz Group includes 50Hertz Transmission GmbH and 50Hertz Offshore GmbH
Governing bodies of the company

50Hertz Transmission GmbH is a wholly owned subsidiary         Members of the Supervisory Board
of Eurogrid GmbH (Eurogrid) and is based in Berlin. Elia
System Operator NV / SA (Elia), a publicly listed Belgian      Daniel Dobbeni
electricity transmission system operator, and Industry         Chairman of the Executive Committee of Elia System
Funds Management (IFM), an Australian infrastructure fund,     Operator NV / SA, Braine-I’Alleud, Belgium
hold indirect interests in Eurogrid GmbH via Eurogrid Inter-   Chairman
national CVBA, a Belgian company. 50Hertz is controlled
and supervised by Eurogrid GmbH and a six-person Super-        Ulrich Freese*
visory Board, which includes employee representatives. In      Vice-Chairman of the Mining, Chemical and Energy
accordance with 50Hertz’s articles of association, two of      Industrial Trade Union (IG BCE), Spremberg
the Supervisory Board seats are held by employee repre-        Vice-Chairman
sentatives. The remaining four members are elected by the
shareholders, whereby one member is proposed by the            Florian Guddat*
Mining, Chemical and Energy Industrial Trade Union             Master Electrician for electrical power systems,
(IG BCE). The Supervisory Board member elected on the          Grossschwabhausen
basis of a proposal by IG BCE is considered to be an em-
ployee representative on the Supervisory Board.                Werner Kerschl
                                                               Investment Director of Industry Funds Management (UK) Ltd,
                                                               London, United Kingdom
Management
50Hertz is represented by two managing directors acting        Dr Lutz Pscherer*
jointly or by one managing director and one authorised         Electrical Engineer, Berlin
senior manager. The managing directors are appointed
and dismissed by the 50Hertz Supervisory Board.                Jacques Vandermeiren
                                                               Vice-Chairman of the Executive Committee of Elia System
                                                               Operator NV / SA, Antwerp, Belgium
Members of the management
                                                               * Employee representative
Boris Schucht, Berlin, Chief Executive Officer
(from 1 January 2012; until 31 December 2011 spokesman)

Lars Bespolka, Berlin, Chief Financial Officer
(until 28 February 2011; since 10 January 2011 not
responsible for a specific department)

Hans-Jörg Dorny, Neuenhagen near Berlin,
Chief Human Resources Officer

Udo Giegerich, Berlin, Chief Financial Officer
( until 9 January 2011 not responsible for a specific
department )

Dr Frank Golletz, Dresden, Chief Technology Officer
(since 1 April 2011)

Wolfgang Neldner, Berlin, Chief Technology Officer
(until 31 March 2011)
50 Hertz
Annual report 2011
    Contents

    Overview                                              5


1
    Olivier Feix interviews Boris Schucht,
    Chief Executive Officer of 50 Hertz                   6
    Our profile                                          10
    Greetings from the Chairman
    of the Supervisory Board                             12
    Supervisory Board report for 2011                    13
    Milestones in 2011                                   17




    Our contribution to
    the energy transition                                21


2
    We are the trailblazers of the energy transition –
    Core responsibilities of 50 Hertz                    23
    Accountability is our business                       25
    We get involved – Energy policy and energy law       29
    Core responsibility – System management              35
    Core responsibility – Infrastructure                 41
    Core responsibility – Market development             49
    Core responsibility – EEG and KWKG processes
    and management of system services                    53
    Financing                                            59
    Our staff                                            63
    50 Hertz almanac                              67


3
    Key data for 50 Hertz                          68
    Capacity / Generation                          69
    EEG costs                                      74
    Load / Consumption                             76
    Operation                                      78
    Exchange and transport                         79
    Wholesale market                               82




    Management report                             85


4
    Course of business and economic environment    86
    Annual financial statements                   102
     Balance sheet                                102
     Profit and loss statement                    104
     Cash flow statement                          105
     Fixed asset table                            106
    Notes                                         109
     Auditor’s report                             124
Overview
Olivier Feix interviews Boris Schucht,
Chief Executive Officer of 50 Hertz      06

Our profile                              10

Greetings from the Chairman
of the Supervisory Board                 12

Supervisory Board report for 2011        13

Milestones in 2011                       17
      ‘We are well equipped
       for the exciting tasks
       that lie before us.’




Olivier Feix interviews Boris Schucht, Chief Executive
Officer of 50 Hertz

Olivier Feix : Mr Schucht, 2011 was a turbulent year. What      energy transition. And 50 Hertz has a key role to play here.
were the biggest challenges for 50 Hertz?                       A central element of the energy transition is the expansion
                                                                of the grid. That’s why I like to talk about the ‘network
Boris Schucht : The moratorium on nuclear energy adopt-         decade’ that finally began in 2011. The moratorium altered
ed by the German federal government in March 2011 was           electricity flows in Germany at a stroke; the tools and re-
the starting signal for one of the largest policy-related in-   serves for maintaining secure system operations shrank
dustrial projects in the Federal Republic : the accelerated     even further, whereas the challenges have increased. As a
result we had to redouble our coordination activities in ev-    spective, it was a highly satisfactory year for 50 Hertz.
eryday operations in order to counteract difficult situations
in the network. In our network area, the consequences           Feix : What has 50 Hertz done to prepare the transmission
were particularly felt in Hamburg. We developed a set of        network for the new, faster pace of the energy transition?
measures there for the winter, in order to deal with critical
grid situations at all times.                                   Schucht : The realignment of the energy industry is still of-
                                                                ten reduced to changes in power generation. However, it
This was only possible in close cooperation with neigh-         will only succeed if the necessary network infrastructure is
bouring networks, energy producers and major industrial         created rapidly and technologies for storing energy are de-
customers. The costs for maintaining the security of the        veloped. In 2011 the networks were operated at their limits
system reached record levels in 2011, however, and were         of capacity in order to integrate the renewables, but also
way higher than forecast. They depressed our earnings           to provide low-cost supplies to southern Germany. Even
unduly, but altogether, and that includes the financial per-    today infrastructure expansion is barely keeping pace with
8 · Annual report 2011 Overview




                                                                       ‘Looking at the variety of
                                                                        challenges that we overcame,
the successful changes being made to the energy supply.                 we can be proud of the work
A sensible statutory and regulatory environment is the most
important condition for expanding the grid. We need to                  we completed last year.’
simplify and expedite the planning and approval process-
es, establish uniform nationwide rules and set up an inde-
pendent monitoring function, which checks that projects
are progressing on schedule and identifies problems at an
early stage. Finally, as a transparent and neutral player on
the electricity market, we have to campaign for greater un-
derstanding and acceptance of the need to expand the
networks.

The government’s energy package that came into force in
summer 2011 reinforced the role of the transmission sys-
tem operators as the guardians of system security. It
created new instruments to ensure system stability and
adopted first steps for bringing renewable energy to the
market. Now we have to wait and see how the new statu-
tory framework will accelerate the expansion of the grid. At
the moment we see the new legislation as a very success-
ful basis for effectively speeding up approval procedures.

Feix : So a framework to promote network investment is
a vital condition for the rapid expansion of the grid. Were
your expectations met, and what did 50 Hertz achieve in
2011 in terms of grid development?

Schucht : The regulatory deficits have not yet been ironed      This was recognised in the political arena in 2011, however,
out. The ambitious aims of the energy transition can only       and 50 Hertz trusts that further progress will be made in
be reached if regulatory obstacles continue to be cleared       this direction in 2012 – by which I mean that the statutory
away. Our prediction is that billions will have to be invest-   and regulatory frameworks should be updated, just as the
ed in German transmission networks in the years ahead.          challenges of energy policy have also evolved as a result of
We can only raise this capital on financial markets if regu-    the energy transition.
lations make it possible to earn a risk-adjusted return in
line with the expectations of capital markets, especially       Our capital expenditure came to € 245 million in 2011,
from offshore grid connections. Until now it has not real-      which was a record. This shows that 50 Hertz is ready to
istically been possible for network operators, even those       invest massively, in particular to safely integrate the supply
as efficient as 50 Hertz, to earn anything approaching the      of renewable energy, which is still growing rapidly in north
necessary return on capital. Since the regulations were in-     and east Germany, and to transport it to the consumer
troduced, so on average over the last six years, 50 Hertz       regions in the west and south.
actually only earned a negative return on equity of 1.4 per
cent.                                                           One of the things we are most proud of is that we con-
                                                                nected the offshore wind farm EnBW Baltic 1 in the Baltic
                                                                Sea to our network in 2011 and started operations at the
                                                                new, cutting-edge Transmission Control Center just outside
                                                                Berlin. We have progressed on schedule with our develop-
                                                                ment projects for the onshore network, with the exception
of what is known as the ‘wind bus bar’ between Schwe-             possible without the exceptional efforts of the 50 Hertz staff
rin and Hamburg, which unfortunately was still not able to        and their remarkable commitment to the company and the
go online in 2011, as the approval process in Schleswig-          Elia Group. I would also like to thank our shareholders Elia
Holstein was delayed yet again. But we are confident that         and IFM for the constructive working relationship and for
building work will be able to start in 2012.                      their extensive feedback, support and inspiration, which
                                                                  improved the performance and the results of 50 Hertz.
Feix : Will 50 Hertz still be capable of dealing with such
major changes in the future?                                      The coming year will again be challenging, and it will re-
                                                                  quire all of our energy, as we have a lot of work ahead of
Schucht : In order to get 50 Hertz fit for the long haul of im-   us. One particular focus will be on investment. In terms of
plementing this enormous investment programme and to              our efforts to achieve the desired results and of the future
prepare for the pace of change on electricity markets in          of 50 Hertz, I am nevertheless optimistic that we are well
the next ten years, we completely overhauled our organi-          equipped for the exciting tasks that lie ahead.
sational structures in 2011. We improved processes and
interfaces and launched programmes for training employ-
ees and managers. Doing all this in addition to our every-
day business wasn’t easy, but together we have laid the
groundwork for efficient growth at 50 Hertz. Looking at the
variety of challenges that we overcame, we can be proud
of the work we completed last year. It would not have been
10 · Annual report 2011 Overview




Our profile

50 Hertz – Powering a world in                                     We are an independent transmission system operator and
                                                                   at the same time part of the international Elia Group. Our
progress                                                           shareholders are Elia System Operator NV / SA ( Elia ), a
                                                                   Belgian transmission system operator, which holds 60 per
As a transmission system operator in the centre of Europe,         cent of the shares, and Industry Funds Management ( IFM ),
we stand for the secure integration of renewable energies,         an Australian infrastructure fund, which holds 40 per cent.
for the development of the European electricity market and
for maintaining a high level of security of supply.                As a European transmission system operator, we are a
                                                                   member of the European Network of Transmission System
We are responsible for operating, maintaining, planning            Operators for Electricity ( ENTSO-E ).
and expanding the 380 / 220-kilovolt transmission network
in northern and eastern Germany. Our grid covers an area           50 Hertz is headquartered in Berlin. The heart of our com-
of 109,360 square kilometres and has a length of approxi-          pany is the network control centre in Neuenhagen near
mately 9,840 kilometres. This is roughly the distance be-          Berlin. This is where the flow of energy through the grid is
tween Berlin and Rio de Janeiro.                                   monitored and action is taken to ensure a stable energy
                                                                   system by maintaining the balance between power genera-
We ensure that more than 40% of all the wind power gen-            tion and consumption at all times. The maintenance of our
erated in Germany is integrated into the grid by collecting        transformers and substations as well as our transmission
electricity produced from wind power plants in our grid and        network in the federal German states Berlin, Brandenburg,
transmitting it to consumption centres. Our network forms          Hamburg, Mecklenburg-West Pomerania, Saxony, Saxony-
the backbone for the reliable supply of electricity to more        Anhalt and Thuringia is organised in six regional centres :
than 18 million people – 24 hours a day, 7 days a week,            Regional Centre North in Güstrow, Regional Centre Cen-
365 days a year.                                                   tral in Neuenhagen near Berlin, Regional Centre East in
                                                                   Lübbenau, Regional Centre South in Röhrsdorf ( a district
Our name says it all. 50 hertz is the optimal frequency of         of Chemnitz ), Regional Centre South-West in Bad Lauch-
the current in the electricity grid, and thus forms the basis      städt, and Regional Centre West in Wolmirstedt.
of a reliable electricity supply. The core responsibility of all
transmission system operators is to maintain this grid fre-
quency on an ongoing basis. Together with our German
and international partners, we keep the pulse of the Euro-
pean electricity supply steady at 50 hertz. In addition, we
encourage the development of the electricity market by
securely integrating all renewable energies into the grid,
and by expanding our grid in line with requirements. We
work in a transparent and non-discriminatory manner in
accordance with the principles of network independence
and neutrality stipulated by the EU.
                                                                                                     Annual report 2011 Overview · 11




Our history in brief
– 1887 : The city of Hamburg begins the public supply of
  electricity

– 1894 : The recently established stock corporation
  Hamburger Electricitätswerke ( HEW ) takes over the grid
  built by the city of Hamburg

– 1909 : AEG and Siemens start supplying power to the
  Brandenburg Marches

– 1915 : Berliner Städtische Elektrizitätswerk AG ( BEWAG )      – 2001 : HEW acquires a majority of VEAG
  is established
                                                                 – June 2002 : The transmission network is spun out of
– 1917 : Elektrizitätswerk Sachsen-Anhalt AG is founded            VEAG as the first subsidiary ( Vattenfall Europe Trans-
                                                                   mission GmbH ) of Vattenfall Europe AG
– 1934 : Berliner Kraft- und Licht-Aktiengesellschaft ( BKL ),
  established in the 1930s, is merged with BEWAG to              – September 2002 : VEAG alongside HEW, LAUBAG and
  form Berliner Kraft- und Licht ( BEWAG )-AG                      BEWAG are merged with the new company Vattenfall
                                                                   Europe
– 1954 : The GDR network is separated from the West
  German grid                                                    – 2003 : BEWAG is acquired by the Swedish company
                                                                   Vattenfall AB and renamed Vattenfall Europe Berlin on 1
– 12 December 1990 : Establishment of Vereinigte                   January 2006
  Energiewerke AG ( VEAG ) as a new power transmission
  company on the basis of the Electricity Treaty signed on       – 2006 : Ownership of the transmission network assets in
  22 August 1990                                                   Hamburg and Berlin is transferred to Vattenfall Europe
                                                                   Transmission GmbH
– 1 January 1994 : Sale of VEAG to a consortium
  consisting of the German energy utilities Preussen-            – 2008 : Vattenfall Europe AG announces the planned
  Elektra, Rheinisch-Westfälische Elektrizitätswerke and           disposal of its transmission network
  Bayernwerk, with an interest of 75 per cent, and EBH, a
  holding company owned by BEWAG, VEW, Badenwerk,                – 5 January 2010 : Vattenfall Europe Transmission GmbH
  EVS and HEW, with a 25 per cent stake                            is renamed 50 Hertz Transmission GmbH

– 1995 : ‘Electric unification’ between East and West            – 9 May 2010 : Sale of 50 Hertz Transmission GmbH to the
  Germany – the VEAG grid is connected to the West                 new shareholders Elia System Operator NV / SA ( Elia )
  European ETSO association                                        and the Australian infrastructure fund Industry Funds
                                                                   Management ( IFM )
12 · Annual report 2011 Overview




Greetings from the Chairman
of the Supervisory Board

50 Hertz has shifted up another gear since it was acquired
by Elia and IFM. As an independent transmission system
operator, the company had already begun to differentiate
itself from other transmission system operators and to es-
tablish itself as a pioneer in Europe.

Examples include the wind farm connections in the Baltic
Sea – Baltic 1 was inaugurated in May 2011 and Baltic 2 is
in the implementation phase – and the integration of a very
high proportion of renewable energy into our high-voltage
grid : 40 per cent of all the renewable energy generated in    With their financial and technical support for development
Germany is fed into the 50 Hertz control area. Despite the     projects in the 50 Hertz network, shareholders Elia and IFM
sharp decline in available generating capacity and increas-    ensure that 50 Hertz is and, above all, will be in future able
ing levels of cross-border trade, we are able to meet our      to completely fulfil its responsibilities and cope with fore-
customers’ requirements and to ensure their security of        cast developments in the German energy market. This is all
supply. Also important are our involvement in pan-regional     the more important in the context of the energy transition,
initiatives aiming to ensure a secure flow of energy in the    the most sweeping economic modernisation project taking
European grid, such as Coreso and TSO Security Cooper-         place at the beginning of the new millennium.
ation, and the success of market coupling mechanisms in
overnight and spot markets in nine countries, the gradu-       In this situation of radical upheaval, 50 Hertz intends to
al integration of intraday markets and the use of the latest   overcome the challenges ahead and seize the opportunity
technologies, such as HTLS power lines.                        of making a major contribution to developing and manag-
                                                               ing a secure energy mix such as Germany and Europe are
These are all areas where 50 Hertz stands out, especially      targeting for the year 2025.
thanks to the synergies that we have within the Elia Group
in terms of efficiency, expanding specialist knowledge, re-    As the Chairman of the Supervisory Board and on behalf of
search and development, support for regional, national and     all its members, I am proud and pleased that 50 Hertz can
European politics and cooperation within the European          count on the support of its shareholders and all its staff to
Network of Transmission System Operators for Electricity       turn this vision into reality.
( ENTSO-E ).

Our objective is ambitious : to respond around the clock,
seven days a week to the expectations of various stake-
holders, who include customers, consumers, political de-
cision-makers at all levels of government and society at       Daniel Dobbeni
large. That is our vision of our public duty and our respon-   Chairman of the Supervisory Board
sibility to society!
                                                                                                  Annual report 2011 Overview · 13




Supervisory Board report for 2011

Dear Readers,                                                 All matters requiring the approval of the Supervisory
                                                              Board and other important matters were presented to the
In accordance with statutes and the articles of association   Supervisory Board for resolution and discussed in detail.
of 50 Hertz Transmission GmbH, the facultative Supervi-       Resolutions were generally passed in the ordinary meet-
sory Board, which includes employee representatives, is       ings. Resolutions on changes to company management
responsible for advising and monitoring company manage-       personnel were taken in extraordinary Supervisory Board
ment on a regular basis. The Supervisory Board is to be in-   meetings held after the ordinary meetings on 8 March and
volved in decisions of fundamental importance to the com-     15 December 2011. In addition, three resolutions were tak-
pany. In the reporting period, which comprises the calendar   en by circulation of documents for reasons of urgency. The
year 2011, the Supervisory Board carried out its responsi-    Supervisory Board examined the items requiring approval
bilities as follows :                                         to ensure they were lawful, correct and cost-effective. No
                                                              conflicts of interest were disclosed by members of the
The Supervisory Board held meetings at the company’s          Supervisory Board, and no circumstances came to light
registered offices on 8 March, 23 September and 15 De-        to suggest that any could have existed.
cember 2011 to discuss company business. To prepare
for the meetings, the Supervisory Board was given an ex-
tensive written report on the state of the company and        Main discussion points
comments on the agenda items to be discussed. Before
each of these plenary meetings, a separate meeting was        The main points discussed in the Supervisory Board meet-
held with the employee representatives on the Superviso-      ings in the reporting period were the signing of an agree-
ry Board, in which the management report and the agenda       ment between the company and nkt cables GmbH, a man-
items were discussed. In the meetings the company man-        ufacturer of undersea cables, on the payment of overrun
agement provided information on the course of business        costs in connection with the construction of a grid con-
and major transactions as well as on strategy and plan-       nection for the offshore wind farm Baltic 1, the signing of
ning. The meetings offered ample opportunity for critical     an agreement between the company and EnBW Baltic 1
questions, suggestions and other comments to be ad-           GmbH & Co. KG on the purchase of licences for the wind
dressed to company management. Between the meet-              farm Baltic 1 and the signing of agreements with banks on
ings the Chairman and the Vice-Chairman of the Supervi-       altering the financing structure, including the provision of
sory Board regularly exchanged information and ideas with     collateral. Furthermore, the Supervisory Board discussed
management and discussed company strategy, the course         giving authorisation to sign a settlement with the Feder-
of business and risk management. The Chairman and Vice-       al Network Agency, to approve investment budgets and
Chairman of the Supervisory Board were notified without       to seek legal review of the ruling by the Federal Network
delay by the CEO of events of vital importance for judging    Agency on permissible regulatory returns on equity for the
the situation and performance of the company and for cor-     second regulation period. Information and discussions also
porate governance.                                            focused on the progress made in a project to restructure
                                                              and prepare the company to cope with the substantial in-
                                                              vestment programme.
14 · Annual report 2011 Overview




To this end, the Supervisory Board passed a number             Appointment of managing directors
of resolutions regarding organisational and personnel
changes. The Supervisory Board also received wide-             and authorised senior managers
ranging reports on changes in the regulatory framework
and supported the company in its endeavours to improve         Following the proposal of the shareholders’ meeting and
this environment by bringing its influence to bear in the      with reference to its resolution dated 2 December 2010, the
political arena. Lastly, the Supervisory Board discussed the   Supervisory Board approved by circulation of documents
business plan for the year 2012. This has the peculiarity      the appointment of Udo Giegerich as managing director
that the investment budget for the years 2012 to 2021 in       of 50 Hertz Transmission GmbH until 31 December 2013,
particular has been prepared in an operating environment       with immediate effect by way of precaution. As Wolfgang
marked by great uncertainty, and another decision will         Neldner resigned his managing directorship as of 31 March
be required on adjusting the budget in 2012 in light of        2011, the Supervisory Board followed the proposal of the
changes in the regulatory framework.                           shareholders’ meeting and appointed Dr Frank Golletz as
                                                               managing director with effect from 1 April 2011 for a period
                                                               of three years. The Supervisory Board also appointed
Financial statements 2011                                      Dr Dirk Biermann as managing director for a period of three
                                                               years with effect from 1 April 2012. Finally, the Supervisory
In the meeting held on 8 March 2012, the Supervisory           Board appointed Boris Schucht as Chief Executive Officer.
Board examined the financial statements for the financial      The Supervisory Board approved the appointment of
year 2011 and the management report. The Supervisory           Jochen Müller, Dr Lorenz Müller and Dr Yvonne Saßnick as
Board made use of the report by Ernst & Young, the             authorised senior managers. The Supervisory Board also
elected auditors, to do so. The auditors audited the           approved the appointment of Wolfgang Bogenrieder and
financial statements with reference to the accounts            Gert Schwarzbach as authorised senior managers and
and the management report and issued an unqualified            instructed company management to appoint authorised
certificate of confirmation. The head auditor presented        senior managers using their best professional judgement.
the findings of the audit in the meeting held on 8 March
2012 and answered the Supervisory Board’s questions.           The Supervisory Board approved the appointment of Udo
The Supervisory Board did not identify any circumstances       Giegerich and Dr Frank Golletz as managing directors
warranting objections to the financial statements or to        of 50 Hertz Offshore GmbH and of Uwe Herzfeld as an
the statements made by company management in this              authorised senior manager.
context.


                                                               Managing director matters
                                                               At the meetings on 8 March and 15 December 2011, the
                                                               Supervisory Board approved changes to organisational
                                                               structures and thereby changes to the division of senior
                                                               management responsibilities. The changes adopted on
                                                               15 December 2011 came into effect on 1 April 2012.

                                                               The Supervisory Board signed an agreement with Wolfgang
                                                               Neldner terminating his contract of service as managing
                                                               director and signed contracts of service with each of
                                                               Dr Frank Golletz and Dr Dirk Biermann for the duration of
                                                               their appointment as managing directors. Furthermore,
                                                               the Supervisory Board monitored the managing directors’
                                                               personal and company targets and assessed the perfor-
                                                                 Annual report 2011 Overview · 15




mance against targets for the year 2010 for Boris Schucht,
Lars Bespolka and Hans-Jörg Dorny. The assessment of
performance against targets for Wolfgang Neldner formed
part of the termination agreement. The Supervisory Board
approved an adjustment to the system of performance
evaluation for managing directors, which now rewards the
sustainable achievement of company targets in addition to
meeting personal and company targets. The performance
evaluation system applies to the 2011 financial year. Finally,
the Supervisory Board approved an adjustment to the re-
muneration of managing directors and some other amend-
ments to their contracts. Matters concerning managing
directors were initially discussed in the Supervisory Board’s
Steering Committee and then voted on by the entire
Supervisory Board.



Other business
No transactions other than those mentioned above took
place between the company and related parties or their
close family members. No contracts were signed between
the company and members of the Supervisory Board, and
no loans were made to Supervisory Board members. The
Supervisory Board was not aware of any other sources of
transactions to which it should have been party or which
would have required its approval.

The Supervisory Board expresses its thanks to the compa-
ny’s management, the works council members and all em-
ployees for their successful work and commitment in 2011.

Berlin, March 2012

On behalf of the Supervisory Board,




Daniel Dobbeni
( Chairman )
                                                                                                    Annual report 2011 Overview · 17




Milestones in 2011

19 and 20 January 2011 – Grid balancing alliance               May 2011 – Energy transition and moratorium on
The grid balancing alliance is sealed. All four German         nuclear power
transmission system operators have approved and signed         The German transmission system operators are
the agreement. This will save some € 300 million a year in     responsible for system security within their control areas
control energy for the benefit of network users.               and issued a statement on the planned energy transition
                                                               and the moratorium on nuclear power.
February 2011 – Completion of phase one of the
project to develop 50 Hertz                                    2 May 2011 – The first commercial wind farm in the
Phase one of the development project is concluded              Baltic Sea, EnBW Baltic 1, is connected to the grid
successfully. The project aims to further develop the          EnBW Baltic 1 is the first commercial German offshore
strategic orientation of 50 Hertz in order to prepare it for   wind farm to enter service. It was inaugurated in the
the forthcoming programme of growth as a transmission          presence of German Chancellor Dr Angela Merkel and the
system operator with two shareholders and as part of the       Premier of Mecklenburg-West Pomerania, Erwin Sellering.
Elia Group.
                                                               14 June 2011 – Eurogrid GmbH signs a new loan
14 April 2011 – Completion of the regional planning            agreement on improved terms
procedure for the third section of the South-West              The parent company of 50 Hertz, Eurogrid GmbH, agrees a
Interconnector                                                 new credit line of € 350 million for a period of five years to
The regional planning procedure for the third section of       secure the funding of network expansion and strengthen its
the European priority project ‘Halle ( Saale )-Schweinfurt     financial profile.
Connection’ ( South-West Interconnector ) is completed.
This decision is another important step towards ensuring
the continued integration of the high and growing share of
renewable energy in north-east Germany into the grid.




11 March 2011 – Earthquake and nuclear disaster in             6 June 2011 – Germany to phase out nuclear energy
Fukushima                                                      The federal cabinet adopts the package of legislation that
                                                               includes an early phase-out of nuclear power, extensive
14 March 2011 – The German government imposes                  revision of the Energy Industry Act and the Renewable
moratorium on nuclear power                                    Energy Act ( EEG ), a new act to expedite network
The German federal government announces a three-month          expansion, as well as numerous new regulations also
moratorium on nuclear energy to carry out a safety review      relating to energy law.
and shuts down the seven oldest nuclear power plants.

15 April 2011 – Boost for energy transition
The German federal government decides to draw up
extensive legislation to expedite the energy transition
towards energy from renewable sources.
18 · Annual report 2011 Overview




17 June 2011 – Launch of the pilot project to test            August 2011 – 50 Hertz is the series partner of the
high-temperature cables                                       ‘Artist in Residence’ at the Konzerthaus in Berlin
50 Hertz begins practical tests of the latest generation of   The artist in residence programme has a very special place
high-temperature cables ( ACCR – aluminium conductor          at the Konzerthaus in Berlin. 50 Hertz is sponsoring this
composite reinforced – with aluminium oxide matrix ) in       series in the 2011 / 12 season. Every season an artist is
a pilot project at the substation in Güstrow ( Mecklenburg-   selected and presented to the public in a wide range of
West Pomerania ). The pilot site will deliver valuable        concerts and projects. In 2011 / 12 the artist in residence is
operating information about future deployment within          the cellist Sol Gabetta.
the 50 Hertz grid, for example on temporarily increasing
capacity on individual line segments.                         30 August 2011 – Completion of the regional planning
                                                              procedure for the 380 kV Northern Ring Berlin
27 June 2011 – Cutting-edge grid management in the            The assessment by the Brandenburg Ministry for
new control centre                                            Infrastructure and Agriculture completes the regional
50 Hertz inaugurates its new Transmission Control Center      planning procedure for the 380-kilovolt overhead line
at Neuenhagen near Berlin. The guests included politicians    Neuenhagen-Wustermark-Hennigsdorf ( 380 kV Northern
as well as representatives of the energy industry, public     Ring Berlin ).
authorities, trade associations and the media. Special
guests were Günther Oettinger, EU Energy Commissioner,        31 August 2011 – Security of the electricity system
and Jochen Homann, secretary of state at the German           and the energy transition
Federal Ministry of Economics and Technology.                 At the fourth 50 Hertz security conference, representatives
                                                              of the power generation, transmission and distribution
                                                              sectors as well as participants from universities, trade
                                                              associations, public authorities and consultancies met in
                                                              Cottbus to discuss the security of the electricity supply
                                                              against the backdrop of the accelerated energy transition.




5 July 2011 – Plenary meeting of the discussion               7 September 2011 – Future return on equity
platform ‘Sustainable Energy Networks’                        Consultation begins to determine returns on equity from
The German energy industry together with representatives      2013. The Federal Network Agency proposes to cut the
of academia, politics and the German states present the       rate of return for electricity networks from 9.29 per cent to
government with initial proposals for accelerating the        8.2 per cent, but finally adopts a rate of 9.05 per cent ( all
energy transition.                                            figures before corporation tax ).

19 July 2011 – Grid development plan
In line with a resolution of the German Federal Parliament,
the transmission system operators are asked to draw up a
plan for the expansion of the transmission networks.
                                                                                                      Annual report 2011 Overview · 19




October 2011 – 50 Hertz is the main sponsor of the             10 November 2011 – European Grid Declaration
special ‘Windstärken’ ( wind force ) exhibition at the         on Electricity Network Development and Nature
German Technology Museum in Berlin                             Conservation
As the main sponsor of the special ‘Windstärken’ ( wind        The Renewables Grid Initiative presented a European Grid
force ) exhibition at the German Technology Museum in          Declaration on Electricity Network Development and Nature
Berlin, 50 Hertz demonstrates and explains the subject of      Conservation in Europe to the EU Energy Commissioner
wind, the energy it contains and the role of networks. The     Günther H. Oettinger. In the ‘Joint Grid Declaration’ a num-
special exhibition runs until February 2013.                   ber of non-governmental organisations and transmission
                                                               system operators undertake to join forces to advance the
1 October 2011 – The grid balancing alliance goes              expansion of the grid required for the energy transition.
international
The Danish transmission system operator Energinet.dk           18 November 2011 – Website launched for the grid
joins the grid balancing alliance formed by the German         development plan
transmission system operators. This is the first step in the   The four transmission system operators in Germany,
international expansion of the grid balancing alliance, in     50 Hertz, Amprion, EnBW Transportnetze and TenneT TSO,
which 50 Hertz plays a major role.                             are to use the joint website to provide comprehensive
                                                               information and transparency about the preparation of the
9 October 2011 – 50 Hertz sponsors the GutsMuths               grid development plan.
Rennsteig run
The new edition of the traditional Rennsteig autumn run        23 November 2011 – Conference on the Renewable
in Thuringia is organised by the Rennsteig running club.       Energy Act organised by 50 Hertz to discuss the
50 Hertz is one of the main sponsors of this cross-country     market integration of renewable energy
race.                                                          50 Hertz organises the third conference on marketing and
                                                               allocating the costs of renewable electricity with some 260
14 October 2011 – Renewable Energy Act levy for 2012           participants. The conference in Berlin was attended by the
50 Hertz and the other German transmission system              German Federal Network Agency as well as by network
operators publish the levy payable under the Renewable         operators, electricity traders, electricity sales organisations,
Energy Act for 2012. The levy is set at 3.592 euro cents per   market experts, power plant operators, IT experts and
kilowatt-hour.                                                 auditors from Germany, Austria and Switzerland.



6 October 2011 – Redispatch costs are increased                7 December 2011 – Framework scenario for the grid
The Federal Network Agency publishes its forecast for          development plan
redispatch costs for 2012. They are twice as high as in        The Federal Network Agency approves the framework
2011.                                                          scenario for developments in the energy industry in the
                                                               years ahead. This provides the basis on which transmission
                                                               system operators are to draw up the first National Grid
                                                               Development Plan.
Our contribution
to the energy
transition
Core responsibilities of 50 Hertz          23

Accountability is our business             25

Energy policy and energy law               29

Core responsibility – System management    35

Core responsibility – Infrastructure       41

Core responsibility – Market development   49

Core responsibility – EEG and KWKG
processes and management of system services 53

Financing                                  59

Our staff                                  63
                                                                                               Annual report 2011 Our contribution to the energy transition · 23




We are the trailblazers of the energy transition –
Core responsibilities of 50 Hertz

As a transmission system operator, our duty is ‘to operate, maintain,
optimise in line with demand, strengthen and expand a safe, dependable
and high-performance energy supply network without discrimination.’
This is laid down in section 11 of the Energy Industry Act ( EnWG ).




We have summarised our business in four main areas of responsibility.




1) System management                                                                                        3 ) Market developer
Responsible for the secure operation                                                                        A catalyst for the development of
of the entire electrical system 24                                                                          the electricity market, especially in
hours a day                                                                                                 North and Central Europe




                                                                                                            4 ) Fiduciary role
2 ) Infrastructure                                                                                          Responsible for the financial
Operation, maintenance, planning                                                                            administration of renewable
and expansion of on- and offshore                                                                           energies ( EEG ) and combined heat
infrastructure for electricity transport                                                                    and power ( KWKG )




   Transmission networks : The German electricity grid consists of different voltage levels. The transmission systems – the so-called motorways of
   the power grid – form the backbone of the energy infrastructure. They carry large volumes of electricity – at 220 and 380 kilovolts at the highest
   level – over large distances, directly from large power plants to the regional distribution networks. Furthermore, the transmission systems connect
   the German electricity grid with those in neighbouring countries and thereby enable energy to be traded across borders in Europe.
                                                                                         Annual report 2011 Our contribution to the energy transition · 25




Accountability is our business

As a transmission system operator, we are particularly                     our duties with drive and decisiveness. Our actions are
accountable. We not only act on behalf of our customers                    backed up by courage and enthusiasm, but we never stop
and business partners, but also see ourselves in equal                     questioning our decisions.
measure as a service provider for society and the
economy. The welfare of current and future generations is                  50 Hertz supports and respects the declaration and the
paramount.                                                                 ethical principles of the UN Global Compact.

We have established four core values – performance,                        As a transmission system operator, we have undertaken
dependability, trust and commitment – in our corporate                     to organise and carry out network operations transparently
culture. They determine our attitudes and guide our                        and without discrimination, and we give the various market
thoughts and actions.                                                      participants a guarantee that this is so.



    GREAT            NETWORK
                                                      50Hertz top goals
                                                      50Hertz values
                                                                           Commitment out of conviction
    EFFICIENCY       DEVELOP-
                     MENT                                                  As a service provider for society, our active and far-sighted
                                                                           commitments extend beyond the mandatory duties defined
                                                                           by law to other areas compatible with our statutory duties.
   VALUE-BASED CORPORATE CULTURE PERFORMANCE                               We focus on adding value – in our region, for people
                                                                  IT
                                                                       Y   and for social cohesion. In our network area we sponsor
                                                         B   IL
                                                      DA                   outstanding, distinctive projects that promote a diverse
                                                  N
                                             PE                            cultural landscape, protect the natural world or address
                                        DE
    COMPET-          HIGH                         T
    ITIVE            SECURITY                US                            social concerns. The welfare and well-being of children and
                                        TR
    EARNINGS         OF SUPPLY                                             young people is particularly close to our hearts.
                                                      COMMITMENT


                                                                           Special exhibition ‘Windstärken’ ( wind force ) in the
                                                                           German Technology Museum in Berlin
Performance is at the centre of our activities and not just                Inspiring young people to discover the natural sciences
as a physical concept ( energy per unit of time ). We want                 and technology is a topic of great interest to us. As the
to deliver top performance for our customers, business                     main sponsor of the special ‘Windstärken’ ( wind force )
partners and society by efficiently and precisely using                    exhibition at the German Technology Museum in Berlin, we
our competences and skills and by enhancing them                           bring to life the subject of wind and its energy – primarily
with discipline, courage and creativity. Dependability is                  for children and young people. The diverse aspects of
the sine qua non for integrity and accountability and for                  wind as a natural phenomenon are attractively presented
empowering others to take on responsibility. We stand                      in a space of some 1,050 square metres. They range
by what we say and act sincerely and transparently. A                      from its influence on nature, art and culture to the idea of
dependable supply goes without saying. We take people’s                    using the power of the wind to generate energy. There is
concerns and needs seriously and involve them at an early                  an extensive programme to accompany this first major
stage of the resolution process. Consistency is key to our                 exhibition, with various free activities on offer for school
activities. Without dependability and mutual respect, no                   classes and nurseries, guided tours for adults, and special
trust can be established. Trust and openness are important                 visits for the blind and visually impaired. We are also taking
to us. This entails cultivating constructive and critical                  an active part in round-table and podium discussions in
communication as equals. We would like to bring our                        connection with the special exhibition.
commitment to bear in shaping the future. We approach
26 · Annual report 2011 Our contribution to the energy transition




GutsMuths Rennsteig run                                             Regional and local
The GutsMuths Rennsteig run in Thuringia is one of the
biggest cross-country races in Germany. It follows the              value creation
Rennsteig ridgeway through the Thuringian forest, and
around 15,000 runners, Nordic walkers and hikers take               Our grid expansion activities are also an expression of
part every year. On 9 October 2011 the Rennsteig running            our regional and local value creation. We involve local
club organised a new version of the Rennsteig autumn run.           companies to give a boost to economic development in
This cross-country race takes place over 20.5 kilometres            the respective regions. Excavation and foundation work,
on the first section of the Rennsteig marathon route from           forestry, landscaping, road and water works and other
Neuhaus to Masserberg. We were there as the primary                 activities are contracted out to companies from the area.
sponsor of the event. Some keen runners and employees               We also enable young scientists to develop new ideas and
of 50 Hertz also took part in the race as a sign of their           contribute them to the projects – like the use of ecological
commitment to the region.                                           management of overhead lines.

Series partner of the ‘Artist in Residence’
at the Konzerthaus in Berlin                                        Focus on the challenges of today
The Konzerthaus stands at the centre of the illustrious
Gendarmenmarkt square in Berlin. Together with the                  and tomorrow
French and German cathedrals it forms one of the most
imposing architectural ensembles in Europe. The four                The energy transition requires the active collaboration of
venues of the Konzerthaus in Berlin are host to more                business and science and a process of open dialogue
than 500 events presenting music in all its facets – from           between them. Our contribution to research and
symphony concerts and chamber music to new music.                   development is intended to advance efficient energy
The artist in residence programme has a very special place.         technology and the transformation of the energy economy
50 Hertz sponsors this series, in which an artist is selected       into a climate-neutral, secure and cost-effective energy
every season and is presented to the public in a wide               supply. Our activities concentrate principally on network
range of concerts and projects. In the 2011 / 12 season, the        expansion and on the unrestricted use and development
artist in residence is the cellist Sol Gabetta.                     of storage capacities for electricity. We therefore began to
                                                                    build a scientific network many years ago.
Donations
50 Hertz boasts a long tradition of promotional activities          In 2011 we took part in approximately 30 research and
in the form of donations to specific projects. In 2011, for         development projects. They include contracts for studies
instance, we supported MAILÄR, a mobile youth work                  awarded to universities and research institutes as well
project organised by the charity Valtenbergwichtel e.V.             as involvement in demonstration and European alliance
in Lusatia; the library treasure hunt for children run by           projects. These studies and projects focused in particular
the children’s university of the Technical University in            on aspects of system security, generation and load as
Ilmenau; the 2011 village and children’s festival run by            well as increasingly on grid development ( overlay grid )
the Sächsischer Heimatverein Lippitsch e.V.; the village            and storage techniques. Research and development and
festival in Streumen celebrating its 750th jubilee; the new         consultancy activities are coordinated by means of an Elia
sport centre in Vieselbach for the SV 1899 Vieselbach e.V.,         Group function. In this field it is especially important to use
and the ‘96 Hours’ event in Wendemark put on by the                 synergies and new findings from across the Group and to
broadcaster rbb Rundfunk Berlin-Brandenburg.                        adopt a European perspective.
                                                                             Annual report 2011 Our contribution to the energy transition · 27




As the pilot of the ENTSO-E working group ‘2050                To deepen our contacts to universities, we founded
Electricity Highways’ we were able to position the working     a scientific advisory board for energy infrastructure
group as a pioneer on the topic of the ‘Electricity System     three years ago. The network includes several partner
2050’ with regard to the European Commission and               universities situated in our control area. The members
external stakeholders. In 2011 the working group designed      are professors who are distinguished by their exceptional
a comprehensive programme of studies and cleared it            knowledge in areas including electricity grids, high-
with all the relevant interest groups, including a public      voltage technology, and energy and regulatory law. The
consultation. The European Commission has indicated that       partnerships with the technical universities of Berlin,
it is prepared to provide several million euros in funding     Magdeburg and Cottbus are particularly close. In 2011
as part of the seventh European research framework             we continued talks with this group about operational and
programme ( FP7 ). We were able to attract all relevant        strategic challenges and officially launched an initiative to
interest groups to take part in the three-year study project   attract new people from the university environment.
e-HIGHWAY2050. We are involved in this study project via
the Elia Group.
                                                               Transparency
In the context of the Commission’s Energy Roadmap
2050, the main aim of the project is to draw up a modular      Above and beyond compliance with statutory and
development plan on a pan-European Electricity Highways        regulatory transparency standards, we strive for open, fair
System 2050 ( MoDPEHS ). It is intended to identify long-      and objective dealings with all our stakeholders in terms
term trends in network development and builds on the           of data management as well. This includes proactively
European ten-year network development plan ( TYNDP )           creating data transparency wherever publication poses
from ENTSO-E, with the objective of describing the             no risk to system security, and no competitive restrictions
necessary steps for a European overlay grid in five-year       apply. Based on this conviction we continually examine
stages up to 2050. The steps identified in the course of       what additional data may be of interest and can be made
MoDPEHS will be incorporated into a binding master plan        available to the public in the course of our transparency
by the European Commission.                                    process. At the same time we attach great importance to
                                                               preparing the data to make it understandable and user-
As the syndicate partner for the Harz regenerative model       friendly for our stakeholders. All the necessary processes
region, we are committed to finding a model solution in        and activities are centrally managed by our transparency
our control area to increase the cost-effectiveness and        officer.
security of supply as well as the climate and environmental
neutrality of the electricity supply. The Harz regenerative
model region is one of six model projects that is being
funded as part of the initiative E-Energy – ICT-based energy
system of the future organised by the German Federal
Ministry of Economics and Technology in partnership
with the German Federal Ministry for the Environment,
Nature Conservation and Nuclear Safety. By coordinating
generation, storage and consumption, the region wants to
show that a stable, dependable and consumer-oriented
supply of electrical power is possible with a maximum level
of energy from renewable sources.
                                                                              Annual report 2011 Our contribution to the energy transition · 29




We get involved – Energy policy and energy law

Our duties to society are defined by a number of legal
frameworks – statutes, regulations and directives – at            The Energy Industry Act ( EnWG ) forms the legal basis for the
national and European levels. The main regulations                German energy industry. It stipulates that network operators
for operators of transmission systems in Germany are              must operate, maintain, optimise in line with demand, strengthen
laid down in the Energy Industry Act ( EnWG ), and the            and expand a safe, dependable and high-performance energy
corresponding regulations, such as the regulation on              supply network without discrimination. Operators of transmission
access to electricity supply networks ( StromNZV ) and the        systems are required to manage the transmission of energy
regulation on fees for access to electricity supply networks      through the network, having regard to the exchange of energy
( StromNEV ), the Renewable Energy Act ( EEG ) and its            with other network alliances. By including and operating their
regulations, the Energy Line Expansion Act ( EnLAG )              transmission systems within national and international alliances
and the New Grid Expansion Acceleration Act ( NABEG ).            they contribute to a safe and dependable electricity supply system
The EnWG and the EEG together with their regulations              in their control area and therefore to a secure energy supply. In
implement a large number of European rules. Other items           addition, the transmission system operators hold what is known as
of European Union energy legislation apply directly in            system responsibility, i.e. they are entitled and obliged to take all
Germany, such as Regulation 714 / 2009 / EC on conditions         necessary steps to avert threats or disruptions to the safety and
of grid access for cross-border electricity trade and             dependability of the electricity supply system.
Regulation 713 / 2009 / EC on setting up the Agency for
Cooperation of Energy Regulators.                                 New Grid Expansion Acceleration Act ( NABEG ) : The Act was
                                                                  passed in 2011 and contains additional provisions to speed up
In order to contribute to a better understanding of               the development of the high-voltage networks. It lays down clear
operating realities and the electricity system at the political   rules on the use of new technologies, such as high-voltage, direct-
level, we accompany the legislative processes, making             current transmission ( HVDC ). NABEG supplements the Energy Line
proposals at an early stage and providing transparent             Expansion Act ( EnLAG ) and applies to all future grid development
information. In addition, we regularly address authorities        activities. It makes reference to the grid development plan to be
and politicians regarding important matters such as the           drawn up in accordance with EnWG.
regulatory framework, licensing procedures and investment
conditions. The Public Affairs department also maintains          The German Renewable Energy Act ( EEG ) is intended to promote
an intensive dialogue with partners and decision-makers.          the development of power generation facilities fuelled by energy
This entails organising workshops at regional, national and       from renewable sources. The main objective of EEG is climate
European levels as well as holding political discussions          protection; it is intended to reduce dependence on fossil fuels and
with all parties.                                                 energy imports. It stipulates that EEG facilities have a prior claim to
                                                                  a grid connection and that network operators must give priority to
In 2011 our endeavours focused on the accelerated energy          collecting, transmitting and distributing electricity from renewable
transition, concentrating in particular on securing a high        sources. The high-voltage network is to be expanded without delay
quality of supply, improving the regulatory framework for         as required.
investment, on what is known as the corridor model for
system services, the development of network access                The EU Directive concerning common rules for the internal
prices, the German Renewable Energy Act and its subsidy           market in electricity ( 2009 / 72 / EC ) stipulates that the high-
mechanisms, European market integration, the Grid                 voltage network must guarantee unrestricted electricity trading, free
Development Plan for Germany and regulation.                      access to and non-discriminatory use of the grid.
30 · Annual report 2011 Our contribution to the energy transition




European energy policy                                              To finance network development projects, the European
                                                                    Commission has proposed to set up an infrastructure fund
European energy policy pursues the following strategic              to be known as the Connecting Europe Facility, which is
goals : a functioning energy market, security of the energy         intended to be funded with some € 9 billion for the period
supply, support for energy efficiency, development of               2014 to 2020.
renewable sources of energy and the convergence of
national energy networks. Since the publication of a                In the energy market the European Network of
comprehensive European energy strategy for the period               Transmission System Operators for Electricity ( ENTSO-E )
2011 to 2020 in November 2010, these goals have been                started work on various network codes on the basis of
implemented by various initiatives from the European                non-binding guidelines from the European regulatory
Commission.                                                         agency ACER. These deal with capacity and congestion
                                                                    management, grid connection and operational security.
The regulation on wholesale energy market integrity and             The network codes are to be issued as EU regulations
transparency ( REMIT ) came into force on 28 December               and therefore mandatory for all market participants directly.
2011. It governs wholesale electricity trading in the               We are playing an active role in the preparation of the
European Union, in particular supply and transport                  network codes in the context of ENTSO-E and as part of
contracts for natural gas and electricity and derivatives           the Elia Group.
based on them. Among other things, the new rules
prohibit the use of insider information and other market
manipulation. The Agency for the Cooperation of                     Energy policy in Germany
Energy Regulators ( ACER ) is to monitor all transactions
in cooperation with the national regulatory authorities             The catastrophe at the Japanese nuclear power plant in
and provide the member states with data to help them                Fukushima was the trigger for the Accelerated Energy
investigate infringements and enforce sanctions. In future,         Transition in Germany. On 14 March 2011 the German
market participants will also have to be publicly registered.       government imposed a moratorium on nuclear power
50 Hertz falls within the scope of the regulation, as the           plants in Germany and ordered a safety review on short
company operates on wholesale energy markets, both                  notice. As a result, the eight oldest nuclear power plants
contracting for the transport of electricity and trading            were shut down definitively. The shutdown altered
derivatives and other products on the EPEX spot market to           electricity flows in Germany. As the power plants in
meet its obligations as a transmission system operator.             Brunsbüttel and Krümmel were offline for maintenance
                                                                    when the moratorium took effect, the closure of the
On 19 October 2011 the European Commission published                remaining plants mainly affected the feed-in situation
a draft regulation with guidelines for pan-European                 outside the 50 Hertz control area. The consequences were
energy networks ( EU Energy Infrastructure Package ). The           nonetheless felt in our area, particularly in the Hamburg
regulation aims at identifying and supporting electricity and       region. In 2011 50 Hertz therefore had to take frequent
gas network development projects of European interest               action to maintain system stability, drawing up a detailed
and at improving the legal framework for pan-European               emergency plan for winter 2011 / 12 and developing a
network development by simplifying and speeding up                  range of other short-, medium- and long-term measures to
approval procedures and laying down rules for allocating            cope with difficult network situations.
costs in cross-border projects.
                                                                              Annual report 2011 Our contribution to the energy transition · 31




Legislation on the Energy Transition                             Grid connection to offshore wind power plants
                                                                 The coastal transmission system operators remain
On 15 April 2011 the federal government decided to draw          responsible for connecting offshore wind farms to their
up extensive legislation to accelerate the transition towards    grids after 2015. This gives 50 Hertz unlimited long-term
renewable energies and speed up Germany’s exit from              responsibility for offshore connections in the German Baltic
nuclear energy. On 6 June 2011 the cabinet adopted the           Sea. Grid connections should preferably be carried out as
legislative package containing the nuclear phase-out as well     joint connections in future. For this purpose, the Federal
as extensive revisions of EnWG and EEG, a new NABEG              Maritime and Hydrographic Agency prepares an annual
and many other new regulations in the field of energy law.       offshore grid plan for the exclusive economic area in which
Some of these provisions still need to be refined and put        offshore wind farms suitable for a joint connection have
into practice in the form of regulations. The new rules came     been identified.
into force when they were announced on 4 August 2011.
The amendments to EEG and its regulations came into              Grid development
effect on 1 January 2012.                                        The transmission system operators are required to draw
                                                                 up an annual joint National Grid Development Plan, for
We welcome the legislation, because it strengthens the           the first time as of 3 June 2012, and to hold a public
role of the transmission system operators as guardians           consultation on it. The result is the Federal Requirement
of system security, creates a variety of new instruments         Plan, which is laid down in law. The projects it entails are
to ensure system stability and defines the first steps for       subject to the provisions of the new NABEG for expediting
bringing renewable energies to the market.                       grid development. NABEG accelerates and simplifies the
                                                                 approval procedures for the construction of important
                                                                 extra-high voltage power lines. Responsibility for planning
The most important changes for                                   these power lines, which replaces the regional planning
                                                                 procedure, will be transferred from the authorities in the
50 Hertz include :                                               individual states to the Federal Network Agency. In future,
                                                                 the Federal Network will also be responsible for the plan
Certification                                                    approval procedure; NABEG delegates authority for the
In order to comply with the requirements of the third EU         relevant regulation to the federal government. Any such
energy package, transmission system operators must               regulation requires the approval of the upper chamber of
apply for a licence by March 2012 confirming that they are       the German parliament.
organised as a transmission system operator in line with
statutory regulations. 50 Hertz applied for certification as a
transmission system operator in unbundled ownership.

Renewable energies
The calculation of the EEG allocation may now include
a liquidity reserve of up to ten per cent of the difference
between forecast income and expenses. This was already
applied to the EEG allocation for 2012, but using a very
moderate percentage. In future, the maintenance of the
EEG plant register can also be transferred to the German
transmission system operators. This would give them faster
and better information about installed EEG plants. Also
new is a market premium paid to operators of EEG plants
who do not supply their power to network operators at
the EEG price but sell it themselves at market rates ( direct
marketing ).
32 · Annual report 2011 Our contribution to the energy transition




System security                                                     Underground cables
Energy producers, including producers of energy from                A further important change for 50 Hertz was the
renewable sources, are required to do more for the security         amendment to the EnLAG passed by the German federal
of the system. For example, plants must offer redispatch            parliament on 27 January 2011. In the four pilot projects
if they are technically capable of doing so. Transmission           involving underground cables mentioned in section 2
system operators must purchase these services at market             paragraph 2 EnLAG, a high-voltage power line must be laid
rates. When applying emergency measures to avoid                    and operated underground or buried over a technically and
congestion, the transmission system operators must first            economically efficient section if so required by the authority
carry out measures requiring compensation in accordance             responsible for approving the project. In accordance
with section 11 EEG before those defined in section                 with section 2, paragraph 2, sentence 2, EnLAG, this
13, paragraph 2 EnWG; they may pass on the ensuing                  also applies to the pilot cable section on the South-West
additional costs via the transmission charges. The Act also         Interconnector in Thuringia. This means the previously
obliges distribution system operators, energy producers             optional underground cable may become a contingent
and industrial customers to create the conditions for real-         obligation.
time data transmission. Many operators of EEG plants
must now fit their facilities with remote access equipment.
                                                                    Regulatory framework
Transmission charges / Regulation
Transmission system operators can in future charge local            Regulation serves to ‘ensure effective and undistorted
councils up to € 40,000 per kilometre for the construction          competition in the supply of electricity and gas and
of overhead power lines and include these payments in               to ensure the high-quality and dependable long-term
their revenue cap as ‘costs permanently beyond their                operation of energy supply networks’. This is the wording
control’. EnWG authorises the federal government to issue           in the revised EnWG.
regulations for the nationwide allocation of operating costs
incurred in connection with the integration of electricity          2011 was a base year for incentive regulation, which serves
from renewable sources. We are campaigning for a                    as a basis for calculating the cost base for the second
regulation of this kind to be passed. Power-intensive and           period of incentive regulation from 2014 to 2018.
atypical consumers are fully or partly exempt from the
obligation to pay transmission charges in future; the lost
revenue that results is to be allocated nationwide to all
other grid customers.                                                  In summer 2005 the German regulator, the Federal Network
                                                                       Agency, was given responsibility by the revised Energy
Investment framework                                                   Industry Act for regulating gas and electricity networks for the
A framework to promote network investment is a                         transmission system operators in Germany.
vital condition for the rapid expansion of the grid. The
abolition of the two-year deferment in recognising the
costs of investment budgets therefore represents an
important milestone. This rule was adopted by the federal
government in late 2011 as part of an amendment to the
regulation on the incentive regulation of energy supply
networks ( ARegV ).
                                                                    Annual report 2011 Our contribution to the energy transition · 33




Since 1 January 2009, German network operators have
been subject to the ARegV, a regulatory instrument for
transmission charges. The ARegV is intended to set
incentives for the provision of efficient services. It stipulates
that a regulatory period lasts for five years and that the first
regulatory period begins on 1 January 2009. The Federal
Network Agency – which defines the revenue for the
networks – lays down a revenue cap for the duration of a
regulatory period. The revenue cap for the year 2011 was
determined as of 1 January 2011 by reference to ARegV.

50 Hertz was able to score one important victory in the
test case brought before the Higher Regional Court in
Düsseldorf on the procedure used by the Federal Network
Agency to approve investment budgets. In its ruling dated
23 March 2011, the Higher Regional Court in Düsseldorf
concurred with the arguments advanced by 50 Hertz
and deemed the ‘double recognition avoidance amount’
introduced by the Federal Network Agency and the non-
recognition of changes in interest expenses to be unlawful.
Talks on a settlement were held with the Federal Network
Agency, also on retroactive changes to the approval
procedure for investment budgets, which are expected to
be concluded in February 2012.

As of 31 December 2011, 44 investment budgets have
been approved out of a total of 75 active applications
since 2008. In terms of investment volume, this means the
Federal Network Agency has approved € 2.5 billion out of
a total of € 6.1 billion applied for by the date mentioned
above. Following the introduction of t-0, investing activities,
instead of investment budgets, will in future be approved
in principle by the Federal Network Agency. The budget is
then no longer the object of approval. This is not likely to
alter the volume of the capital expenditure implied by the
investing activities, however.
‘In a rapidly changing
energy environment
I am proud to be
responsible for ensuring
that enough energy is
available where it is
needed, both today
and in the future.’

Hans-Peter Erbring,
Head of System Management, 50 Hertz
                                                                                                           Annual report 2011 Our contribution to the energy transition · 35




Core responsibility – System management

                                                Responsibilities for the
                 50.0 Hz
                                50              system are governed                             Over 1,500 system players in our control area :
          .9
                                                by the Energy Industry                          4 adjacent transmission system operators
     49




                                 .1




                                                Act ( EnWG ). The core                          6 wind farms
                                                responsibility of every                         12 conventional power plants
                                                transmission system                             8 distribution system operators ( DSOs)
                                                operator is to permanently                      ~ 1,200 wind farm operators
                                                maintain the grid frequency                     Various CHP plants and industrial power plants
                                                at a steady 50 hertz. We                        141 Redistributors-DSO / local utilities
    Consumers             Producers             balance generation and                          ~ 200 wind farm operators
                                                consumption and hold                            Various CHP plants and industrial power plants
                                                reserves in order to be able
                                                to equalise differences at
                                                all times.
                                                                                             group customers and those under the scope of the EEG
System stability – our core responsibility : maintenance of frequency and voltage
within permitted tolerances, continual availability of electricity, sufficient electricity
                                                                                             and the Law on the Conservation, Modernisation and
volumes at all times, low-cost electricity transport                                         Development of Combined Heat and Power ( KWKG ).
                                                                                             The ‘waterfall principle’ – contractually agreed with the
Our foremost task is to carry out the energy transition in                                   distribution system operators and the downstream grid
such a way that the security of supply and European elec-                                    operators – enables a rapid, coordinated and appropriate
tricity trading can be guaranteed while simultaneously in-                                   response to the adjustments we require to ensure system
tegrating renewable energies. The inauguration of our new                                    security in our control area.
Transmission Control Center ( TCC ) in Neuenhagen near
Berlin constitutes a vital condition for doing so. From here                                 In addition, we play an active role in the TSC ( TSO Security
we control some 9,840 kilometres of transmission network,                                    Cooperation ) and Coreso security initiatives and are a
ensuring that precisely as much power is produced and                                        member of the ENTSO-E Regional Group Continental
fed into the grid as consumers need at any given time.                                       Europe and the System Operation Committee.

This primarily takes place in close contact with German
and European transmission system operators in the
ENTSO-E Regional Group Continental Europe as well as                                         TSC security initiative
with distribution system operators and producers in our                                      The TSO Security Cooperation ( TSC ) is a joint initiative
control area.                                                                                by 12 European transmission system operators of which
                                                                                             50 Hertz is a founding member. TSC aims to intensify the
At the centre of our operations are our customers, who are                                   coordination and cooperation between the transmission
situated in our control area and whose facilities are directly                               system operators in order to improve the security of the
connected to the transmission network. They include the                                      system in Central Europe. The partners in the TSC initiative
distribution system operators at the regional energy utilities,                              are responsible for supplying energy to 180 million Euro-
the operators of power plants connected to the transmis-                                     peans. The initiative includes a standing panel of experts
sion grid, pumped storage facilities, wind farms and large-                                  ( SPE ) and has developed a real-time awareness and alarm
scale industrial customers as well as transit and balancing                                  system ( RAAS ) and an IT platform which runs joint secu-
                                                                                             rity calculations. All participants have equal access rights to
                                                                                             the results the platform delivers for the region. This enables
                                                                                             the system operators to identify critical situations in Central
                                                                                             Europe in advance, to coordinate timely and appropriate
                                                                                             countermeasures with one another and to effectively put
                                                                                             them into action.
36 · Annual report 2011 Our contribution to the energy transition




Coreso                                                              The challenges
We also have a ten per cent interest in Coreso, a Brussels-         Wind energy
based independent security centre for Central and Western           Maintaining system security in our control area presents us
Europe. Coreso is an independent company that guaran-               with ever greater challenges. At the end of 2011 there were
tees system security and network stability in the European          wind turbines with an installed capacity of about 11,520
market region Central West Europe and promotes the                  megawatts in our control area. This represents 40.3 per
development of renewable energies – topics that are of              cent of total installed capacity in Germany. When the wind
great importance for us. The other shareholders are the             farm EnBW Baltic 1 went online in May 2011 the installed
grid operators Elia System Operator S.A., National Grid             capacity of offshore wind turbines in our control area
Electricity Transmission PLC., RTE EDF Transport S.A. and           came to some 50 megawatts. The share of total installed
Terna S.p.A.                                                        capacity from German offshore wind farms also comes to
                                                                    around 41 per cent.

New Transmission Control Center                                     On a very windy day in February 2011, the power simul-
                                                                    taneously fed into the 50 Hertz grid from wind turbines
Some 150 guests from the world of politics, the energy              peaked at 9,591 megawatts.
industry, public authorities, trade associations and the
media attended the inauguration of our new Transmission             Photovoltaics
Control Center ( TCC ) on 27 June 2011. Special guests              Installed photovoltaic capacity in our control area rose
were EU Energy Commissioner Günther H. Oettinger and                by around 60 per cent compared with year-end 2010 to
Jochen Homann, secretary of state at the German Federal             3,540 megawatts. The power fed in must be collected
Ministry of Economics and Technology.                               safely, and as north and east Germany consume relatively
                                                                    little electricity and therefore have massive generation
The new TCC, built between May 2009 and November                    surpluses, most of it has to be transported to the centres
2010 at a cost of around € 30 million, replaces the                 of consumption in west and south Germany. Feed-in to the
previous control centre in Berlin-Marzahn. At the new site          grid in our control area peaked on 19 January 2011 ( 6 to
in Neuenhagen near Berlin, the TCC is equipped with the             6.15 p.m. ) at 14,715 megawatts.
latest technology so that its operating staff can optimise
the energy supply system in our control area and thereby            Nuclear energy phase-out
continue to guarantee a high level of system security.              The moratorium on nuclear energy declared by the federal
                                                                    government was a further challenge for our system
                                                                    management. The shutdown of eight nuclear power plants
                                                                    ahead of schedule altered the parameters for secure
                                                                    system operations in Germany. The definitive closure also
                                                                    applied to the two nuclear power plants in the 50 Hertz
                                                                    control area in Brunsbüttel and Krümmel, as well as to the
                                                                    Unterweser plant, also situated in north Germany. As the
                                                                    power plants in Brunsbüttel and Krümmel were offline for
                                                                    maintenance when the moratorium took effect, the closure
                                                                    of the remaining plants mainly affected the feed-in situation
                                                                    outside the 50 Hertz control area.
                                                                              Annual report 2011 Our contribution to the energy transition · 37




The direct effects in our control area were higher north-        The decision to speed up the energy transition required
south and east-west load flows, which led to a higher            much greater coordination in our everyday operations and
base load in the transmission grid and very high tension         meant that we had to carry out more redispatching to
in the Hamburg region, especially at periods of low load         uphold the security of the system. The ensuing expenses
( weekends / public holidays ). Special precautions had to be    of over € 100 million were more than twice as high as
taken for winter 2011 / 12 in Hamburg in order to guarantee      planned and approved by the Federal Network Agency.
a secure supply even during extreme weather conditions.          Immediately after the nuclear power moratorium was
                                                                 announced, we and the other German transmission system
In June 2011 the federal government decided that all             operators carried out extensive investigations into the
nuclear power stations in Germany are to be decommis-            effects it would have on summer and particularly on winter
sioned by 2022. On the basis of investigations and its own       operations.
research, the Federal Network Agency subsequently ruled
that none of the nuclear power plants shut down during           For winter 2011 / 12 for example, we forecast that available
the moratorium was allowed to remain online temporarily to       generation capacity in Germany would be used in full,
bolster overall output during winter 2011 / 12, but that other   imports from neighbouring countries on cold days would
generation capacities had to be activated in Germany or in       not be secure, and that in south Germany, load and
neighbouring states.                                             voltage levels could become critical. In the Hamburg area,
                                                                 the tension could fall to a very low level on cold winter
                                                                 days ( high consumption ), which would pose the threat of
The countermeasures                                              a voltage collapse should the last large power plant in the
                                                                 region ( Brokdorf ) break down. Altogether it can be said
To avoid what are known as ( n-1 ) infringements in our          that the system is being operated close to the limit and that
transmission system, we had to order countermeasures             the safety reserves are being increasingly used up.
to be taken pursuant to section 13 EnWG on 213 days
since the beginning of 2011. On 45 days in the reporting         We have prepared for this situation and have agreed on a
period it was necessary to order both global measures            binding emergency plan with the neighbouring operators
by all distribution system operators and local measures          of transmission and distribution networks TenneT TSO,
in accordance with section 13, paragraph 2 EnWG by               Vattenfall Europe Distribution Hamburg and E.ON Netz, in
the distribution system operators E.ON edis and WEMAG            order to deal with critical grid situations in the Hamburg
Netz. These orders were executed on the basis of the             area. These measures include the coordinated starting and
waterfall contracts in place. The number of days on which        stopping of operating equipment ( shim coils, transformers
measures pursuant to section 13, paragraph 1 EnWG were           and cables ) by the system operators and large industrial
necessary rose by 53 compared with the number in 2010.           customers, direct instructions to certain power plants in the
This is remarkable, because as the weather stayed calm           Hamburg area to generate reactive power, the addition and
for a long time in the autumn, the wind turbines installed in    removal of contractually agreed loads, intervention in the
our control area only fed a moderate amount of electricity       conventional generation process and as a last resort the
into the grid.                                                   feed-in of renewable energies. These and other measures
                                                                 that make up the winter strategy for the Greater Hamburg
                                                                 area enabled operating staff to overcome the critical
                                                                 situations forecast for the grid. Preparations for winter
                                                                 operations were rounded off by a communications strategy
                                                                 in the event of significant disruptions to supplies.
38 · Annual report 2011 Our contribution to the energy transition




                                                                    The main items on the agenda were the demands to be
The measures to prevent or alleviate disruption to the              made of future conventional and renewable generating
electricity system include ‘redispatch’ and ‘countertrading’,       facilities to maintain system security, additional and deduct-
but also intervention in the control area to adjust electricity     ible loads and steps to be taken following the nuclear phase-
feed-in. If a threat or disruption cannot be averted by these       out. The conference again made it clear how important it
activities in good time, the network operator is entitled and       is for network operators and other system partners such
obliged to adjust or require the adjustment of all the electric-    as power generators and large consumers to work closely
ity volumes that are fed in, in transit and collected to bring      together to develop the energy information systems of the
them into line with the standards of safe and dependable op-        future, particularly with regard to coordinated measures in
erations ( section 13, paragraph 2 EnWG ).                          grid operations, joint training to cope with potentially critical
                                                                    grid situations and real-time data exchange between all the
Redispatch is a method of intervening more stringently              partners in the electrical system.
in the operations of generation facilities in order to avert
or alleviate short-term congestion in the grid. By reducing
the feed-in capacity of one or more power plants and                European training and
simultaneously increasing the feed-in capacity of one or            research centre GridLab
more power plants in another region, the total feed-in
capacity remains unchanged.                                         The European training and research centre GridLab that we
                                                                    set up with Brandenburg Technical University in Cottbus
                                                                    enables us to prepare our staff for extreme situations in the
Thanks to this sound preparation, the implementation                grid and to practise interactions with other system partners
of additional steps to secure the system and moderate               under actual conditions in real time, somewhat like a flight
weather conditions ( high photovoltaic feed-in ), it was pos-       simulator. It is becoming ever more important to avert criti-
sible to ensure secure system operations in the summer              cal situations in the grid, because the network expansion
and autumn periods even on days of low consumption                  is going too slowly and large volumes of renewable ener-
( e.g. Easter and Whit public holidays ). The Federal Network       gies are now generated. The training and research centre
Agency and the Federal Economics Ministry were system-              in Cottbus is operated and marketed by GridLab GmbH,
atically and regularly notified of the investigations and anal-     which was established in 2011. Since 2010 the centre has
yses carried out by the German transmission system oper-            been in training mode and can work with voltages of 20 to
ators and of their activities and requirements. Among other         380 kilovolts. It can simulate any imaginable situation in
things, we were able to raise the awareness of the Federal          the grid, from a windstorm in the control area to isolated
Network Agency for the additional costs incurred by trans-          operations. These capabilities make the centre unique in
mission system operators ( e.g. for redispatch ) in connec-         Germany.
tion with adjustments to the revenue cap.
                                                                    In November 2011 GridLab successfully completed the
                                                                    quality management certification process DIN EN ISO 9001
Fourth security conference                                          for the provision of services to ‘develop standards to
The fourth 50 Hertz security conference was also dominat-           prevent and resolve crises in the electricity supply industry
ed by the energy transition and the related challenges for          and to plan, devise and carry out training courses and
system security. Nearly 200 representatives of the power            seminars on the standards developed’. This is an important
generation, transmission and distribution industries as well        step on the company’s way to becoming a recognised
as delegates from universities, trade associations, authori-        accreditation body that can issue its own certificates on the
ties and consultancies met on 31 August 2011 in Cottbus.            knowledge and capabilities it conveys.
                                                                                 Annual report 2011 Our contribution to the energy transition · 39




ENTSO-E compliance monitoring
                                                                     Control energy : The market for control energy ensures that
audit                                                                control energy can be purchased efficiently and transparently.
                                                                     Control energy is necessary for supplying consumers with exactly
During a two-day conformity review, the 50 Hertz Transmis-           the required amount of electrical energy in sufficient quality,
sion Control Center ( TCC ) was put through a compliance             i.e. at a frequency of 50 hertz ( within strict tolerances ), despite
monitoring audit by the ENTSO-E Regional Group Conti-                unforeseen events in the electricity grid. Balancing power is the
nental Europe. All the audited standards in the ENTSO-E              electrical energy in a balancing group that differs from forecast
Operation Handbook were met in full. The audit commis-               consumption. Balancing power is the counterpart of control energy.
sion stated that the preparation and performance of the
50 Hertz operating experts was excellent. This was the               Grid frequency : This is a term for the frequency of the current in
second successful audit for 50 Hertz since the company               the power grid used to supply electricity in the form of alternating
became the first candidate to undergo the European audit             current. The frequency is measured in hertz ( Hz ), named after
procedure in 2008.                                                   the German physicist Heinrich Hertz ( 1857 – 1894 ). One hertz is
                                                                     equivalent to one full cycle per second. A grid frequency of
                                                                     50 hertz is used for the transmission network in Europe. It is
System balancing using control                                       allowed to vary between 49.8 and 50.2 hertz.

energy
The amount of wind and solar power available fluctuates
due to the forces of nature. This makes high demands of           German grid balancing alliance
balancing group management, as managers must keep
their groups balanced at all times. Other unforeseen differ-      goes international
ences in the power fed in or withdrawn, due to lost pro-
duction or changes in consumer behaviour for example,             In October 2011 Energinet.dk became the first foreign
lead to balancing mismatches. In aggregate, the state of          transmission system operator to join the German grid
the individual balancing groups makes up the condition of         balancing alliance, which we played a major role in
system. Here, too, the amount of energy produced must             setting up. The grid balancing alliance optimises the use
always be precisely equal to consumption, or else frequen-        of control energy, for instance by reducing the extent to
cy stability is not guaranteed, resulting in differences in the   which the control areas ‘balance against each other’. As
power exchanged with other control areas.                         the experience in Germany has been positive, this is now
                                                                  possible across national borders as well. Expanding the
Any residual imbalances are equalised by means of control         number of partners in the balancing alliance saves around
energy. Control energy is mainly sourced from power               € 300 million a year in control energy to the benefit of
plants that keep special reserves for this purpose. A             grid users. By extending the alliance abroad, the German
distinction is made between primary reserve, secondary            transmission system operators have made an important
reserve and tertiary reserve, which differ in the way they are    contribution to the inner-European market.
called up and the time it takes to activate them. 50 Hertz
purchases control energy in an open, transparent and
non-discriminatory market. Purchases are made by way of
tenders on the German control energy market. Since 1 May
2010 all four German transmission system operators have
worked together in an alliance in which the individual
control areas are managed. This saves on control energy
and makes the electricity supply in Germany even more
secure.
‘We are putting our energy
into expanding the network.
We are particularly proud of
the connection to Germany’s
first commercial offshore wind
farm, EnBW Baltic 1, in the
Baltic Sea, because the
power from offshore wind
turbines will also make a
major contribution to the
energy transition.’
Dr Frank Golletz, Chief Technology Officer
                                                                            Annual report 2011 Our contribution to the energy transition · 41




Core responsibility – Infrastructure

The expansion of the power transmission networks is one        In the next ten years 50 Hertz will be investing several
of the fundamental conditions for meeting German and           billion euros in its transmission network. 50 Hertz will be
European climate protection targets. By the year 2020,         committing capital for grid connections to offshore wind
at least 30 per cent of power generation must come from        farms in the Baltic Sea and for substations and overhead
renewable sources. By 2050, renewables should account          lines on land. To ensure a secure electricity supply, we are
for 60 per cent of total energy consumption and 80 per         currently planning to build four new 380-kilovolt extra-high
cent of electricity consumption. Offshore wind energy is       voltage overhead power lines :
meant to grow to 25 gigawatts by 2030.
                                                               – the ‘wind bus bar’ between Schwerin in Mecklenburg-
Whereas electricity was hitherto generated in proximity          West Pomerania and Hamburg,
to consumers, now and increasingly in future it has to be      – the ‘Uckermark power line’ that will in future transport
transported to the consumption centres over long distances       electricity from around Prenzlau in Brandenburg to
from regions with low consumption. The construction of           Neuenhagen near Berlin,
new, extra-high voltage overhead power lines is therefore      – the ‘Thuringia power bridge’ from Halle to Schweinfurt
mainly required for transporting wind power from windy           in Bavaria, and
areas to the centres of consumption in central and south       – the ‘380 kV Northern Ring Berlin’.
Germany. According to the Deutsche Energie-Agentur
GmbH ( dena ), 850 kilometres of new lines must be built       Infrastructure projects can cause concern and unease in
nationwide by 2015 in order to meet the climate protection     the population. The main desire is often for more informa-
targets for Germany and Europe ( dena-Netzstudie I ). These    tion and greater involvement in the planning and approv-
connections have been included in the requirement plan         al process. We see it as our responsibility to find solutions
drawn up in line with the EnLAG. In addition, electrical       that do justice both to the overarching aims of climate pro-
energy cannot be stored in large quantities. It is therefore   tection and security of supply and to local considerations.
necessary to generate as much power as is needed at any        We attach great importance to informing residents in the
given time. This means the grids have to be designed in        areas affected from the very beginning about grid develop-
such a way that the highest forecast energy requirement        ment projects, the need for them and the possible varia-
can be met safely and dependably.                              tions. That is why we are present on the ground, answer
                                                               questions and are open for a constructive and also a criti-
                                                               cal dialogue. When we award contracts for work, we in-
                                                               clude local companies in order to give a boost to econom-
                                                               ic development in the respective regions. A total of 10 to
                                                               15 per cent of the amount invested in each case gener-
                                                               ally benefits the region directly. Excavation and founda-
                                                               tion work, forestry, landscaping, road and water works and
                                                               other activities are usually contracted out to companies in
                                                               the region.
42 · Annual report 2011 Our contribution to the energy transition




Key projects                                                        South-West Interconnector
                                                                    In Saxony-Anhalt and Thuringia we are building a 210-
Wind bus bar                                                        kilometre extra-high voltage power line known as the
The so-called wind bus bar is necessary for collecting the          South-West Interconnector. It will run from Halle an der
electricity mostly generated by wind power in the low-              Saale ( Saxony-Anhalt ) to Schweinfurt ( Bavaria ). Based on
consumption coastal region and transporting it over scarce          the figures for 2011, we are expecting the installed capacity
north-south power lines to the high-consumption regions             of renewable energy plants in our control area to double
in the centre of the country. We are therefore enabling the         over the next ten years. The South-West Interconnector
continued expansion of wind power onshore and offshore.             will mainly serve to export rapidly rising electricity volumes
The wind bus bar also provides the necessary network                from renewable energies and will strengthen European
capacity for other renewable sources of energy, however.            electricity trading.
These include biomass, the importance of which is growing
steadily in the broad agricultural expanses of Mecklenburg-         The first section between Lauchstädt and Vieselbach
West Pomerania. In Mecklenburg-West Pomerania, the                  went into operation in December 2008. We are expecting
wind bus bar will also make a considerable improvement to           clearance for the second section between Vieselbach and
the 380 kV infrastructure. Connecting the 380 / 110-kilovolt        Altenfeld from the plan approval authority by 31 January
substation in Görries via what will then be two independent         2012. Our assumption is that building permission will be
overhead lines not only improves the security of supply             obtained in 2012. In March 2011 the regional planning pro-
for the capital Schwerin, the infrastructure also increases         cedure was completed for the third section between Alten-
the security of supply in the north-west of the state at the        feld and the state border. The plan approval procedure is
same time. The line is also very important for Hamburg’s            expected to commence in 2012.
security of supply. The Hamburg region has become
more dependent on supplies from other regions since the             The South-West Interconnector is a core project for the
moratorium on nuclear power. The section in Mecklenburg-            lasting integration of renewable energies, both for the re-
West Pomerania was completed in July 2010, and the joint            gion and for Germany as a whole, as well as for the Euro-
110-kilovolt line is in operation. In the Schleswig-Holstein        pean development of the electricity system. The construc-
section, the public hearing on the second amendment to              tion of another power connection between south and west
the plan has been completed. We responded in due time               Germany also opens up potential for economic value crea-
to the objections made. The plan approval document has              tion in the entire region. Renewable energy generated in
not yet been issued.                                                Thuringia also benefits from the new transport capacities,
                                                                    especially in terms of electricity export to the regions of
                                                                    high consumption in south-west Germany – network ex-
                                                                    pansion therefore also acts as a catalyst for further growth
                                                                    in this industry.

                                                                    380 kV Northern Ring Berlin
                                                                    The 380 kV Northern Ring Berlin carries EEG power
                                                                    around the north-east of Berlin, between the substation in
                                                                    Neuenhagen and that in Wustermark in Brandenburg. It
                                                                    also increases the security of supply in the greater Berlin
                                                                    area and reinforces the grid connection for the steel found-
                                                                    ry in Hennigsdorf, Brandenburg. The regional planning pro-
                                                                    cedure was successfully completed in 2011 following the
                                                                    impact assessment by the local state. The plan approval
                                                                    procedure is expected to begin in 2012.
                                                                              Annual report 2011 Our contribution to the energy transition · 43




                                                                 Günther H. Oettinger,
                                                                 European Commissioner for Energy




                                     ‘The development of the
                                     network infrastructure must
have priority in order to carry out the energy transition in such
a way that security of supply and European energy trading can
be guaranteed at the same time as integrating energy from
renewable sources.’


Uckermark power line                                             Renewables Grid Initiative
The Uckermark power line will supply Berlin with electricity
from biomass and wind power plants in Brandenburg. Its           Our commitment to developing the power transmission
main effect is to strengthen the infrastructure for the energy   network in consensus with society at large is reflected in
region Uckermark-Barnim. Companies from the region will          our involvement with the Renewables Grid Initiative ( RGI ),
also benefit from the construction of the Uckermark power        which promotes the expansion of transport networks in
line, as they will be involved in individual work segments.      order to achieve the full integration of renewable energy.
The regional planning procedure examined a number of             The initiative brings together important non-governmental
different options for the route. In line with the principle of   organisations and transmission system operators for a joint
bundling routes, the route finally adopted will mostly follow    cause. On 10 November 2011 the RGI presented the Euro-
existing 110-kilovolt and 220-kilovolt overhead lines. The       pean Grid Declaration on Electricity Network Development
plan approval procedure is expected to be completed in           and Nature Conservation in Europe to the EU Energy Com-
2012. The national significance of the Uckermark power           missioner Günther Oettinger in Brussels. In the declaration,
line was confirmed by the federal parliament in the 2009         both non-governmental organisations such as WWF, Ger-
Energy Line Expansion Act ( EnLAG ). It will transport power     manwatch and Greenpeace and transmission system op-
from renewable sources in the thinly populated north-east        erators jointly undertake to advance the grid development
towards Berlin. The energy transition and the indispensable      required for the energy transition. A total of 24 companies
expansion of renewable energies have increased the line’s        and organisations signed the declaration in the debating
importance for the security of supply in Germany.                chamber of the European parliament in Brussels.

Extra-high voltage power line from Bärwalde
to Schmölln
The existing 45.9-kilometre, 380-kilovolt line from
Bärwalde ( Saxony ) to Schmölln ( Thuringia ) is to be
replaced by a modern, extra-high voltage power line to
improve performance and enhance the grid. We have
completed the relevant route planning documentation and
environmental plan. We expect to make the application for
plan approval in the second quarter of 2012.
44 · Annual report 2011 Our contribution to the energy transition




Regional planning procedure : This phase of the approval
process generally begins with an ‘application conference’ held at
the planning authority. The project and plans are presented to the
authorities and other guardians of the public interest. The result of
the conference is defined in the minutes drawn up by the regional
planning authority, which lay down the specifications for the
planning documentation to be provided by the project applicant.
The official procedure begins when the documentation provided
by the applicant ( including the environmental impact assessment,
maps and project description ) are displayed to the public at the       Framework set for the third
local council offices in the areas concerned. It is concluded by
the impact assessment, in which the regional planning authority         interconnector between Poland
recommends a corridor within which the precise route of the future
power line is to be planned. The aim of the regional planning           and Germany
procedure is to choose from several potential routes for the            50 Hertz and the Polish transmission system operator
overhead line the planning corridor which has the least impact          PSE Operator are planning a third extra-high voltage
on people, nature and the environment, whose interests are all          connection between Germany and Poland. On 11 March
protected.                                                              2011 the management of 50 Hertz and PSE Operator
                                                                        signed the framework agreement on the third interconnec-
Plan approval procedure : The so-called plan approval procedure         tor between Poland and Germany in the presence of the
follows the regional planning procedure. The plan with the line’s       EU coordinator for the integration of offshore wind farms
precise route is displayed to the public. During the display period     with the transmission network, representatives of the
people can lodge written objections with the planning authority,        European Commission, ministries and the respective
which then tries to resolve the problems. To do so it collects the      German and Polish regulatory authorities. The agreement
objections and sends them to the applicant, which in turn issues        defines the rules of the collaboration between 50 Hertz and
a written statement. At the end of the procedure, the authority         PSE Operator, in order to form a joint project structure for
weighs all the objections and statements, defines the conditions        the preparatory and construction work on the third inter-
to which the project is subject and finally issues the plan approval    connector, also known as the Ger-Pol Power Bridge. The
notice. The power line can then be built.                               signing was another step towards a more intense working
                                                                        relationship between the two transmission system opera-
Grid connection of German offshore wind farms : Since 17                tors. The new line is intended to improve the transport of
December 2006 the German transmission system operators have             electricity between the two countries. There are already
been legally obliged to provide grid connections to the planned         two lines between 50 Hertz and PSE Operator : one in Vier-
German offshore wind farms by the time they enter service and           raden in the north of Brandenburg and one in east Saxony.
subsequently to operate them. This obligation has been valid
since 1 January 2009. The Energy Economy Act defines which
transmission system operator is responsible for connecting the
offshore wind farms.
                                                                             Annual report 2011 Our contribution to the energy transition · 45




Grid development plan increases                                 First commercial German offshore
transparency                                                    wind farm online
We and the other German transmission system operators           Electricity from offshore wind turbines will make a major
began work on the National Grid Development Plan                contribution to the energy transition. Our task is to con-
on 19 July 2011. The grid development plan is a vital           nect all offshore wind turbines off the German Baltic coast
document on our way towards the new energy era. It will         to our grid, to bring the electricity on shore and to carry it
reflect the expected development of the German power            from the generating facilities to the transmission network.
infrastructure in the next ten years and also give concrete     EnBW Baltic 1, the first commercial offshore wind farm in
recommendations for expansion and new building work on          the Baltic Sea, has officially been in operation since 2 May
the electricity transmission networks in Germany. These         2011. It is located 15 kilometres north of the Fischland-
include steps to optimise, strengthen and expand the            Darss-Zingst peninsula and is connected to the closest
networks as well as to consider technological alternatives.     substation, Bentwisch near Rostock. Twenty-one wind tur-
The statutory framework for the preparation of a joint          bines of 2.3 megawatts each produce some 50 megawatts
German grid development plan by the transmission                of power. This is enough to supply around 50,000 house-
system operators is defined in sections 12a to 12d of the       holds with electricity.
Energy Industry Act ( EnWG ). The grid development plan
mirrors our principles of bringing the greatest possible        We began the building work for the grid connection to
transparency and openness to the planning process, of           the offshore wind farm EnBW Baltic 1 in July 2009. The
continuously, rapidly and adequately informing the public,      cables in the sea and on the land are particularly robust
and of involving all relevant sections of society by means of   and powerful to ensure the transport of electricity from the
consultation procedures.                                        substation platform out at sea. To enable more efficient
                                                                transmission, the substation transforms the electrical
The first stage was to define generation scenarios. This        energy produced by all offshore wind turbines from 33
process and the accompanying consultation procedure             kilovolts to 150 kilovolts. These additional 75 kilometres
by the Federal Network Agency was completed in late             take the total length of our grid to some 9,840 kilometres.
August 2011. The next step is for the four transmission
system operators to draw up the grid development plan           Altogether, 19 offshore wind farms applied to 50 Hertz for
on the basis of the scenario framework approved by the          a grid connection in 2011. They will be able to deliver a
Federal Network Agency. The calculations and drafting           capacity of more than 5,000 megawatts – the equivalent
of the grid development plan have been scheduled for            of around five large conventional power plants. We have
winter 2011 and spring 2012. This will be followed in June      divided the projects into the West Region with the 380-
2012 by the public consultation on the resulting draft.         kilovolt connection point in Bentwisch and the East Region
The grid development plan is being jointly prepared by all      with the 380-kilovolt connection point in Lubmin. Prelimi-
four German transmission system operators and will be           nary work is under way at both connection points to inte-
presented to the Federal Network Agency, the regulator          grate the wind power into our transmission network.
responsible for Germany, for the first time in 2012.
46 · Annual report 2011 Our contribution to the energy transition




Environmental protection                                            In large stretches of forests, the aisles cut for our overhead
                                                                    lines are places of considerable biodiversity, giving refuge
Our infrastructure projects mostly relate to the develop-           to rare animal and plant species. In this way, they contrib-
ment of energy from renewable sources. They therefore               ute to the emergence of valuable biotopes and habitats
make a major contribution to climate protection, but also           for insects, reptiles, birds and mammals that are worthy
represent an intrusion into the region where they are situ-         of protection. The newly created habitats are colonised by
ated. Our aims are thus to optimise the routes by weighing          fragile plants that depend on extensive cultivation and reg-
up all the common goods and to keep the disturbances to             ular clearance, such as many of the native orchids. There
people and the natural environment to a minimum. To do              are generally far fewer species of flora and fauna in the sur-
so, we work closely with the local environmental and for-           rounding forest areas and adjacent arable land. We have
estry authorities. In planning the corridor, we avoid densely       therefore turned the clearance of the power line routes into
populated areas and give high priority to protecting the            long-term biotope management. The areas under our poles
landscape. Wherever possible, route bundles are therefore           are home to overgrowth of indigenous grasses, perennials
planned with existing overhead power line routes. Similar-          and sometimes shrubs or trees, forming islands where
ly, during the planning process we try to bundle the power          animals can retreat to or use as stepping stone biotopes
line routes with other infrastructures, such as railways and        among the surrounding farmland. We respect this natural
motorways. To avoid unnecessary impact on the natural               growth to the greatest extent technically possible. We also
scenery, we plan the lines in such a way as to fit the char-        offer compensation areas to offset the considerable impact
acteristics of the landscape.                                       of the construction of new overhead lines on nature and
                                                                    landscapes.
We support a variety of measures aiming at improving the
protection of birds. The great insulation distance on the           This high standard of environmental protection is upheld
planned 380-kilovolt power lines will make it impossible            by ongoing training for our staff, which aims to raise their
for birds to be electrocuted. Furthermore, the conductor            awareness of these important topics.
bundles that we use consist of several conductor cables.
Birds can see these better than single conductor cables.            One of the compensation measures is our involvement
In addition, markings are made on earthing cables located           in the conservation project to protect natterjack toads
in areas that are particularly ecologically sensitive, such         in Schleswig-Holstein. A total of 9,500 of the strictly
as water crossings or river valleys. The visibility of these        protected natterjack toads have been released over the
cables is significantly improved by these markings.                 past three years in a 45-hectare meadow on donated land
                                                                    in Glasmoor. Scientists from the University of Kiel bred the
Moreover, electricity poles represent additional nesting            toads before releasing them in Glasmoor. This conservation
sites for birds. In the north-east of Germany, ospreys nest         project is a pre-emptive measure to compensate for the
even more frequently on poles than on trees. Hawks and              planned loss of land in Kampmoor due to the expansion
crows as well as other birds also use the poles.                    of the Hamburg North substation. 50 Hertz is funding this
                                                                    project for five years.
                                                                 Annual report 2011 Our contribution to the energy transition · 47




Ecological management of
overhead lines
In 2010 we published the ‘Ecological Management of Over-
head Lines’ study, funded by the European Union. The
study was conducted in collaboration with local partners
in order to gain knowledge about regionally differentiated
forest cutting management. The study was prompted by
the planned construction of the South-West Interconnec-
tor between Halle and Schweinfurt. The results of the study
show how to minimise impacts on the landscape by devel-
oping landscape protection measures, and how valuable
cultural and natural resources can be preserved as much as
possible. Ecological management of overhead lines is to be
put into practice as a condition of the impact assessment
by the authorities in Thuringia for the third section of the
South-West Interconnector. It will also form part of the doc-
umentation to be provided for the plan approval procedure.



ACCR – the latest generation of
high-temperature cables
In mid-June 2011 we began testing the latest generation
of high-temperature cables ( ACCR – aluminium conductor
composite reinforced – with aluminium oxide matrix )
in a pilot project at the substation in Güstrow ( Mecklen-
burg-West Pomerania ). The pilot is being used to test the
new technology during operations – in a secure setting
on a section of the line that is not system-critical. The test
section runs for around 200 metres and is also part of the
overall grid, so that the new cables are being tested under
the real operating conditions of the extra-high voltage net-
work. The pilot site will deliver valuable operating informa-
tion about future deployment within the 50 Hertz grid to
temporarily increase capacity on individual line segments.
‘We are intently advancing
the European internal
market in electricity and
doing everything in our
power to integrate
renewable energies.’
Dr Dirk Biermann, Head of Energy Management
                                                                              Annual report 2011 Our contribution to the energy transition · 49




Core responsibility – Market development

The location of our grid in the centre of Europe means we        Cross-border electricity trading
have a key role to play in European electricity exchange.
We connect the grids in Denmark, Poland and the Czech            Since the late 1990s electricity has increasingly been trad-
Republic with Germany. For all players in society to benefit     ed across national borders. The transmission capacities at
from free competition, we are committed to transparent           the border connecting points to our European neighbours
and non-discriminatory access to the grid, as well as to         are limited, however, for historical reasons. In many places,
the development of coordinated and harmonised market             demand therefore exceeds transmission capacity, resulting
mechanisms at the European level. As part of the European        in congestion. Congestion management is intended to pre-
Elia Group and in cooperation with our neighbours, we            vent this. The aim of congestion management is to use lim-
are developing the market mechanisms in the European             ited transmission capacities to prevent and alleviate con-
market regions in order to facilitate cross-border electricity   gestion while adhering to technical security standards such
trading and create competition. Poised at the intersection       as the maintenance of stable frequencies and voltages.
between the central western, northern and central eastern
European regions, we are making a significant contribution       Cross-border transmission capacities are sold to the
to the convergence of the electricity markets towards a          highest bidder using market-based methods like explicit
single European market.                                          auctions or market coupling in conjunction with electricity
                                                                 exchanges. The same criteria and conditions apply to all
As a European transmission system operator, we are a             companies. On the interconnectors to our neighbours that
member of the European Network of Transmission System            are subject to congestion, we use both explicit auctions
Operators for Electricity ( ENTSO-E ). Our work in this trade    and market coupling.
association involves enhancing the European market by
defining standardised methods, which simplify cross-
border trading.                                                  Market coupling
                                                                 In the northern European region, with which we are
                                                                 connected via the Kontek DC cable, the electricity markets
                                                                 in Germany and Scandinavia are coupled with one another.
50 · Annual report 2011 Our contribution to the energy transition




                                                                         The market coupling between northern Europe and cen-
Cross-border electricity trading : In accordance with section 15         tral western Europe will be carried out by European Mar-
of the regulation on access to electricity supply networks               ket Coupling Company GmbH ( EMCC ), which is based in
( StromNZV ) dated 25 July 2005 and Regulation 714 / 2009 / EC           Hamburg. EMCC is a joint venture between the transmis-
on conditions of grid access for cross-border electricity trade, in      sion system operators 50 Hertz ( 20 per cent ), Energinet.dk
the event of network congestion, the operators of transmission           and TenneT TSO GmbH as well as the electricity exchang-
systems are obliged to manage the available transmission                 es European Energy Exchange AG ( EEX ) and Nord Pool
capacities by means of market-based, transparent and non-                Spot AS. EMCC carries out implicit auctions between
discriminatory methods, to the extent that the congestion cannot         northern Europe and central western Europe by way of
be avoided by means of economically reasonable network and               so-called interim tight volume couplings ( ITVC ) via the inter-
market-based solutions.                                                  connectors between the regions. Its ITVC is based on the
                                                                         tight volume coupling model already in place at the border
Market coupling : A method for efficiently managing cross-               between Sweden, Denmark and Germany.
border congestion, in which an electricity trading transaction takes
place at the same time as cross-border capacities for electricity        With EMCC we are fostering an efficient, pan-regional
transport are purchased. This procedure is therefore dubbed an           electricity market and promoting the integration of a pan-
‘implicit auction’, in which transmission capacities are arranged        European wholesale electricity market.
independently of one another via electricity exchanges – in
contrast to an ‘explicit auction’. It facilitates electricity trading,   In the central eastern Europe region ( CEE ), with seven
enables the optimal use of international connections and promotes        other transmission system operators, we have developed
the integration of European electricity markets.                         a common procedure for allocating limited transmission
                                                                         capacities by means of coordinated explicit auctions. Here
                                                                         the auctions are carried out by Central Allocation Office
                                                                         GmbH ( CAO ), based in Freising, in which we hold a stake
                                                                         of 12.5 per cent. The introduction of load-flow-based
                                                                         explicit auctions in the CEE region has been provisionally
                                                                         suspended. They represent an interim stage on the way
                                                                         towards load-flow-based implicit auctions, which are the
                                                                         target model for the European internal market. The reason
                                                                         for the suspension is that this model has been rejected
                                                                         by three of the transmission system operators in the CEE
                                                                         region.
                                                                  Annual report 2011 Our contribution to the energy transition · 51




Security and transparency
We are co-founders of the TSC security initiative ( TSO
Security Cooperation ). Its joint IT platform gives the Euro-
pean transmission system operators involved an overview
of system performance and impending congestion on the
basis of regionally centralised data sets. This enables the
cooperation between the control centres to be optimised in
real time and means that action in critical situations can be
better coordinated. It therefore strengthens both regional
and European system security.

We publish market-relevant data on generation and con-
sumption on a central and neutral site : the EEX platform
Transparency in Energy Markets ( www.transparency.eex.
com ). We founded the platform in October 2009 together
with the other three German transmission system opera-
tors and with European Energy Exchange AG ( EEX ) and
in close cooperation with the German energy and water
association, the association of local utilities, the industrial
energy and power association, the Federal Network Agen-
cy and the Federal Ministry of Economics and Technology.
This enables us to meet our statutory and voluntary disclo-
sure obligations and contributes to increasing transparen-
cy on the wholesale electricity market. The interactions and
the importance of the various energy sources in the Ger-
man energy mix, in particular wind power and photovolta-
ics, are transparently presented on an hourly basis. Since
December 2010 the Austrian transmission system operator
Austrian Power Grid AG has also taken part in the trans-
parency platform.

The new market rules for balancing group accounting for
electricity ( MaBiS ) were implemented as of the accounting
month of June 2011. MaBiS defines new market rules
for balancing group accounting for electricity, including
changes to balancing group and data management, to
IT systems and to balancing group accounting.
‘The front office ensures our
independent access to the electricity
exchange. Electricity is bought and
sold on the exchange around the
clock – solely on the basis of
economic criteria and existing
technical network conditions and
therefore without any discrimination.’
Reiner Ciesiolka, Head of Front Office
                                                                                Annual report 2011 Our contribution to the energy transition · 53




Core responsibility – EEG and KWKG processes
and management of system services

Our responsibilities under the fiduciary role for the imple-
mentation of the Renewable Energy Act ( EEG ) and for               Regulation on the nationwide equalisation scheme
the Conservation, Modernisation and Expansion of the                ( AusglMechV ) : It governs the sale of electricity from renewable
Combined Heat and Power Act ( KWKG ) include :                      sources ( EEG electricity ). Since 1 January 2010 the German trans-
                                                                    mission system operators have sold 100 per cent of EEG power via
– providing forecasts for the calculation of uniform                the electricity exchange in accordance with AusglMechV. There, the
  nationwide EEG levies and KWKG premiums,                          transmission system operators sell all the EEG electricity forecast
– collecting EEG electricity from operators of generation           the day before in an auction on the day-ahead market. Any differ-
  facilities and distribution networks,                             ences between the forecast and actual figures are equalised after
– implementing horizontal equalisation payments with                the auction in intraday trading ( sales and purchases ).
  other German transmission system operators,
– selling the remaining electricity on the electricity
  exchange,
– processing cash flows, including collecting the EEG levy
  from sales organisations and end consumers,                    As with the equalisation payments for wind, we and the
– processing KWKG premiums from distribution system              other German transmission system operators have also
  operators,                                                     created the technical and contractual conditions for
– ensuring that statutory disclosure obligations are met,        launching an ongoing system of expense equalisation for
  and                                                            electricity from photovoltaic power. This measure serves
– acting as an interface with the other German                   to further develop nationwide equalisation of expenses.
  transmission system operators, trade associations and          Routine operations were set to begin in early January 2012.
  the Federal Network Agency.

As the transmission system operator responsible for our          Marketing of EEG power on the
control area, we give priority to collecting all the energy
from renewable resources under the scope of the EEG,             electricity exchange
carry out horizontal equalisation payments for the electricity
collected ‘provisionally without delay’ among the four           At 50 Hertz the front office is responsible for direct access
German transmission system operators, and sell the               to the day-ahead and intraday markets on the electricity
electricity left for us on the exchange in accordance with       exchange. The European Energy Exchange ( EEX ) in Leipzig
statutory provisions.                                            is an important trading place for Germany. By using the
                                                                 standardised EEX market we create transparency and
The horizontal equalisation of expenses for the generation       promote competition on the electricity market by providing
of wind energy is done by extrapolating from reference           additional liquidity.
measurements for each control area. The electricity ex-
pected to be generated by wind power plants is forecast          We have been trading on the EEX and EPEX Spot, a
by each transmission system operator for their control area      subsidiary of EEX and the French company Powernext SA,
one day in advance and several times in the course of the        since 2008 and carry out day-ahead transactions there.
current day.                                                     The organisational separation of system management and
                                                                 energy management made it possible to extend this to
                                                                 intraday trading.
54 · Annual report 2011 Our contribution to the energy transition




                                                                        We were then able to guarantee the anonymity of coun-
Electricity exchange : The European Energy Exchange AG ( EEX )          terparties required by the exchange. Here, too, we were
is based in Leipzig. It was created in 2002 following the merger        ahead of the pack in carrying out the tasks assigned to
of the German electricity exchanges in Frankfurt am Main and            us by parliament, especially in terms of collecting, refining
Leipzig. Since 2008 the EEX has worked closely in electricity           and transporting power fed in from renewable sources in
trading with Powernext SA, a French company. As part of this            accordance with the EEG.
cooperation agreement, the two companies merged their spot
and futures markets for electricity. EEX holds 50 per cent of the       We also provide market access to other network opera-
joint venture EPEX Spot SE, based in Paris, and operates the spot       tors as a service. Particularly notable is the cooperation
markets for Germany, France, Austria and Switzerland. German            with TenneT TSO – especially in terms of buying and sell-
and French trading in electricity futures takes place at EEX Power      ing electricity positions on the EPEX spot market. In 2011
Derivatives GmbH, a Leipzig-based company in which EEX holds            we extended the scope of cooperation by adding other
a majority stake. ‘Clearing and settlement’ of all spot and futures     electricity positions. From January 2012 the plan is also
transactions is carried out by European Commodity Clearing AG           to make use of the ¼h-intraday trading on the EPEX spot
( ECC ).                                                                market. All the organisational requirements for doing so
                                                                        were completed in 2011.
Electricity market : There are various ways of trading electricity.
The spot market is used to trade power due for delivery in the near
future ( short-term electricity trading ). The spot market consists     EEG levy
of the day-ahead market and the intraday market. The day-               The income from marketing EEG power only covers a small
ahead market accepts trades for the 24 hours of the following           fraction of the costs incurred by the advancement of feeding
day. By comparison, the intraday market is for electricity trades       renewable energy sources into the grid. Since 1 January
that require settlement by the next day-ahead trading day, i.e.         2010 the electricity supply companies have therefore had
those that relate to the same day or the following day in the case      to pay an EEG levy to the transmission system operators
of transactions completed after the close of day-ahead trading.         for every kilowatt-hour of electricity supplied to end con-
Market participants either offer surplus electricity for sale or        sumers in accordance with the equalisation scheme regu-
purchase additional volumes. In intraday trading, electricity can       lation ( AusglMechV ) that came into force on 25 July 2009.
be traded up to one hour before delivery. Intraday trading allows       These payments are intended to cover the shortfall between
the equalisation of short-term load variations compared with            the transmission system operators’ income and their ex-
consumption forecasts. This reduces operating differentials and         penses for implementing the EEG.
therefore the costs of balancing and control energy. The futures
market is the market for electricity to be delivered further into the   The transmission system operators publish the EEG levy
future.                                                                 by 15 October of each calendar year. The EEG levy is
                                                                        calculated on behalf of the government and is based on
Calculation of the EEG levy : As defined in the regulations, the        forecasts by independent experts and in coordination with
EEG levy is calculated by reference to the difference between           the Federal Network Agency.
forecast income and expenses for the following calendar year and
the difference between actual income and expenses at the time
the levy is determined ( as of 14 October 2011 ).
                                                                             Annual report 2011 Our contribution to the energy transition · 55




In 2012 consumers will contribute 3.592 euro cents per          model ( with a forecast production volume of 58 terawatt-
kilowatt-hour to subsidise energy from renewable sources.       hours ). Another 7.5 terawatt-hours are expected to be sold
The EEG levy for 2012 is therefore only 0.062 euro cents        in 2016 via the ‘green power privilege’.
per kilowatt-hour higher, a marginal increase on the previ-
ous year ( 3.530 euro cents per kilowatt-hour ). This EEG       The data needed to calculate the medium-term EEG
levy is payable as of 1 January 2012 for every kilowatt-hour    forecast and the final consumption on which the levy
used by end consumers.                                          is based are collected on behalf of the four German
                                                                transmission system operators by independent experts.
Thanks to new legislation, the levy now includes a liquidity
reserve of three per cent for the first time. The liquidity
reserve, which under the regulation may be up to ten per        EEG conference
cent, is intended to prevent high payment obligations to        The third conference on the Renewable Energy Act organ-
operators of generation facilities resulting in cash flow       ised by 50 Hertz was again dedicated to discussing the
difficulties for transmission system operators.                 market integration of renewable energy. Around 260 people
                                                                attended the event. In-depth talks were held on forthcom-
The EEG levy withheld from customers is paid into a spe-        ing changes to the legislative framework and their effec-
cial EEG account, which the transmission system opera-          tive implementation – particularly relating to EEG settlement
tors keep separate from their core business. The income         and administrating the new section 19 of the regulation on
that the transmission system operators receive from sell-       access charges for electricity supply networks ( StromNEV )
ing EEG power on the exchange is also paid into this ac-        from 1 January 2012. The conference focused on topics
count. The EEG subsidy for the power fed into the grid is       relating to the market integration of renewable energies,
paid from the account. Interest is received or paid on the      on direct marketing and the EEG levy, as well as on imple-
balance.                                                        menting cost equalisation. In addition to providing informa-
                                                                tion about upcoming changes, the discussions concen-
Forecasts                                                       trated on the practical effects for all market participants.
                                                                The conference took place in Berlin and was attended by
On 15 November 2011 we and the other German transmis-           the Federal Network Agency as well as network operators,
sion system operators published our medium-term EEG             electricity traders, electricity sales organisations, power
forecast and our estimate of a realistic range for the EEG      plant operators, IT experts and auditors from Germany,
levy for 2013. It puts the EEG levy for 2013 between 3.66       Austria and Switzerland.
and 4.74 euro cents per kilowatt-hour.
                                                                We have been organising the EEG conference since 2009
Forecasts for the next five years are also published along      as a platform for dialogue, information and transparency
with the data on feed-in from renewable power generation        between market players and as a contribution to the
facilities under the EEG. In line with statutory obligations,   smooth functioning of electricity markets.
the data we publish includes forecasts for installed capac-
ity, annual feed-in, payments to be made to operators and
sales to end consumers. For the year 2016 we are expect-
ing an installed capacity of around 94 gigawatts from re-
newable sources, of which over 91 per cent will come from
solar and wind power ( solar around 44 gigawatts and wind
around 42 gigawatts ). With a forecast annual feed-in of
101 terawatt-hours, payments of around € 19 billion will be
payable to operators in 2016 after deducting direct market-
ing. In addition, premium payments of around € 4.6 billion
are projected in 2016 for facilities in the market premium
56 · Annual report 2011 Our contribution to the energy transition




                                                                     KWKG premium
Combined heat and power ( KWK ) : Combined heat and power
makes use of the heat produced by the electricity generation pro-    The Combined Heat and Power Act ( KWKG ) provides for
cess, to heat premises and warm water, for example. This results     expenses to be equalised between transmission system
in a very high aggregate performance ratio, which saves on prima-    operators. The Act was completely revised as of 1 January
ry energy and reduces carbon emissions compared with the sepa-       2009. After receiving reports from the downstream network
rate production of heat and power.                                   operators, the four German transmission system operators
                                                                     compile the data for the nationwide equalisation of sub-
Law on the Conservation, Modernisation and Expansion of              sidy payments under KWKG. The expenses expected in
Combined Heat and Power ( KWKG ) : The Combined Heat and             accordance with KWKG are identified on the basis of the
Power Law ( KWKG ) came into force on 1 April 2002. Since then       reported forecasts and the premiums calculated and pub-
the expenses incurred have been equalised between transmission       lished.
system operators. Once they meet the relevant criteria, operators
of CHP plants are entitled to the statutory subsidies for the CHP    Based on the forecast data for 2012 available to the trans-
power fed into the general supply grid.                              mission system operators in mid-September 2011 on
                                                                     qualifying KWKG electricity volumes, subsidies for heating
Energy losses : This is the amount of energy lost for physical       networks and electricity supplied to final consumers from
reasons when power is transmitted in electrical systems – for        the general supply networks, on which the expenses are
example, in the form of heat losses. The Energy Industry Act and     levied, the advance payment for 2012 for the final consum-
the regulation on access to electricity supply networks oblige       er category A ( annual consumption of up to 100,000 kilo-
operators of energy supply networks to purchase the energy to        watt-hours per supply point ) is set at 0.064 euro cents per
cover the losses in their networks in a market-based, transparent    kilowatt-hour. To sum up, as of 1 January 2012 the nation-
and non-discriminatory process and to record the transactions in a   wide average premium on transmission charges for all final
separate balancing group.                                            consumption in the final consumption category A comes to
                                                                     0.002 euro cents per kilowatt-hour.
                                                                             Annual report 2011 Our contribution to the energy transition · 57




Joint website for EEG and KWKG                                  The high feed-in, especially of wind power, in our control
                                                                area – more than 40 per cent of Germany’s total installed
settlement                                                      wind power capacity is situated here – presents us with
                                                                considerable challenges. Photovoltaics now plays a
We and the three other transmission system operators            significant role here, too. Its feed-in rose by a factor of
Amprion GmbH, EnBW Transportnetze AG and TenneT                 2.5 compared with 2010. Altogether the amount of EEG
TSO GmbH ensure greater data transparency in the                electricity in our control area increased year-on-year by
administration of subsidies for renewable energy and            around 9 per cent.
combined heat and power plants. To do so we have set
up a joint website, www.eeg-kwk.net, which contains             The increase in electricity trading, the expansion of
extensive information on the administration of EEG and          renewable energies and the growth in CHP generation
KWKG, the methodology and the remuneration rates.               all extend the range of activities for transmission system
                                                                operators. The financial settlement of the feed-in volumes
Since September 2011 we have used it to publish the             therefore has to be ensured.
day-ahead forecasts of feed-in from wind and solar power
plants as well as an effective daily feed-in for Germany
based on an extrapolation of the actual figures. In addition,   Greater transparency in the
users can look up charts on the electricity bought and
sold on the intraday spot market and the power used to          equalisation of energy losses
balance the respective EEG balancing group. The data are
presented in a user-friendly, standardised format to comply     On 1 November 2011 we began trading on the futures
with instructions from the Federal Network Agency ( section     market of the EEX in Leipzig. Having successfully made
2 AusglMechAV ).                                                the daily adjustments to our loss profile on the EPEX spot
                                                                market for many years, we now also use the exchange-
The wind and solar forecasts and projections published on       traded futures market as a platform for equalising our
the website contain the electricity fed in from renewable       long-term energy losses. This gives 50 Hertz a further
energy facilities less electricity sold directly.               option in addition to the previous tenders, which increases
                                                                the transparency of sourcing energy to cover losses and
In the period January to December 2011 the EEG power            delivers cost advantages to the benefit of all grid users.
collected ‘vertically’ by 50 Hertz came to 28.2 terawatt-
hours and was therefore 14 per cent lower than in the
previous year. As of 31 December 2011 the balance of the
50 Hertz EEG account came to € 43.8 million.
‘The ambitious 50 Hertz investment programme picked up
speed in 2011. However, the substantial capital expenditure
necessary for the structural shift towards a climate-neutral
energy supply is only possible with a sustainable regulatory
framework, clear rules on liability
and adequate incentives to invest.’
Udo Giegerich, Chief Financial Officer
                                                                                      Annual report 2011 Our contribution to the energy transition · 59




Financing

50 Hertz Transmission GmbH is a wholly owned subsidiary           After-tax earnings under German commercial law ( HGB )
of Eurogrid GmbH ( Eurogrid ). As Eurogrid mainly serves to       sank in the year 2011 to € 47 million 1 ) ( 2010 : € 57.4 mil-
finance 50 Hertz, the following financial information refers to   lion2 ) ), largely due to the sharp rise in redispatch activities
the consolidated figures for Eurogrid GmbH.                       to stabilise the electricity system, especially on windy days.
                                                                  In accordance with HGB accounting principles these an-
On 14 June 2011 our parent company, Eurogrid GmbH,                nual earnings do not include income from regulatory receiv-
agreed a new credit line of € 350 million for a period of         ables that are only recognised via the transmission charges
five years to secure the funding of the Group’s network           after a two-year deferment. The system therefore results
expansion and strengthen its financial profile. The longer-       in the accumulation of unrecognised assets representing
term credit line replaces an existing credit arrangement          income for the future use of the grid, which distort the cur-
from the acquisition phase of 50 Hertz and makes the              rent earnings situation.
contract more flexible while considerably reducing its costs.
The syndicate of eleven banks comprises BNP Paribas               Capital expenditure rose year-on-year by 39 per cent to
Fortis, Commerzbank Aktiengesellschaft, HSBC Trinkaus &           € 245.4 million ( 2010 : € 176.6 million ). The amount for
Burkhardt AG, ING Bank N.V. ( Frankfurt branch ), KBC Bank        connecting the offshore wind farms to the grid rose sharply
N.V., Landesbank Hessen-Thüringen Girozentrale, Morgan            by around € 130 million.
Stanley Bank International Ltd, Rabobank International,
The Royal Bank of Scotland, Investitionsbank Berlin and                                2010                                        2011
Investitionsbank des Landes Brandenburg.
                                                                                 € 5,496 million                               € 6,884 million


In 2011 50 Hertz increased its revenue as defined by
                                                                         EEG                         Revenue         EEG                          Revenue
International Financial Reporting Standards ( IFRS ) from               3,585                          cap          4,416                           cap
                                                                                                       570                                          575
€ 5.496 billion to € 6.884 billion. The main drivers were the
                                                                                                                                                 Other
revenues from the renewable energies business, which                                               Other                                         1,893
                                                                                                   1,341
despite the EEG remuneration and allocation mechanisms
is a transit item without effect on profit or loss.
                                                                  EEG – Income under Renewable Energy Act (non-pro t)
                                                                  Revenue cap – Revenue from recognised transmission charges, including metering and billing
                                                                  Other – mainly services for third parties (non-pro t), EEG balancing power and balancing
                                                                          group management



                                                                  Revenue ( gross ) The increase in EEG business
                                                                  is the main driver of the revenue increase.




                                                                  1)
                                                                     For the Eurogrid Group consisting of Eurogrid GmbH, 50 Hertz Transmission GmbH
                                                                     and 50 Hertz Offshore GmbH adjusted for consolidation effects in 2010
                                                                  2)
                                                                     Pro forma figure for the audited, combined short financial year 2010
60 · Annual report 2011 Our contribution to the energy transition




in € million
   600
   500
   400
                                                                     Average 375
   300
                                                                                                           +/– 284
   200
                                                                                   Average 165
   100
                                                               +/– 223
      0
 –100
 –200
 –300
                    06.2010               09.2010                    12.2010          03.2011             06.2011             09.2011             12.2011

               Actual     Average 2010       Average 2011           EEG


Liquidity for Eurogrid GmbH, 50 Hertz Transmission, 50 Hertz Offshore ( total – including EEG )
Wide fluctuations over time due to EEG business. By contrast, the EEG account was heavily overdrawn in 2011.



Our extensive investment programme serves to expand our                                 However, in 2011 we had to instruct renewable energy
transmission network and thereby to lay the foundations                                 facilities to scale back their production on 45 days
for a successful energy transition. Its main purpose is to                              ( compared with just six days in 2010 ), in order not to
collect and transport energy generated from renewable                                   overload the grid. This instrument is always the last resort
sources, but also to ensure the security of supply. It also                             to stabilise the system. It not only illustrates the very tight
strengthens the European internal market for electricity.                               situation that regularly occurs in the electrical system,
Since 2011 there has for the first time been more                                       but highlights the urgency of rapidly expanding the grid
renewable than conventional generating capacity in the                                  towards the centres of consumption in south and west
50 Hertz control area. Facilities for generating renewable                              Germany in order to integrate more renewable energy.
energy continue to grow rapidly, reaching an installed
capacity of some 16,700 MW at the end of 2011.                                          Important improvements were reported in 2011, which
                                                                                        enable the substantial investments to be made that are
In 2011 we achieved our key commercial milestones.                                      necessary for the structural shift towards a climate-neutral
We connected the first commercial offshore wind farm in                                 energy supply. There are nonetheless some aspects of
Germany, EnBW Baltic 1 in the Baltic Sea, and opened                                    the regulatory and legal environment which need to be
the new Transmission Control Center in Neuenhagen                                       clarified if the permitted return is to be achieved in practice.
near Berlin. Further progress was made in the approval                                  The problem of accounting distortions caused by German
procedures for some important network development                                       commercial law has a particularly detrimental effect on
projects.                                                                               investment, because HGB does not allow adequate
                                                                                        recognition in the 50 Hertz balance sheet of regulatory
                                                                                        receivables such as the deferred reimbursement of
                                                                                        redispatch costs, which is only paid two years later.
                                                                                                          Annual report 2011 Our contribution to the energy transition · 61




    in € million
    350

    300
                                                                              51
    250
                                                                  43          131
    200
                                                38                72
    150                           37
                                                46
    100                          114                                          114
                                                107             105
     50
                   ø 40
      0
            ø 2002–2007          2008          2009             2010      2011
             Maintenance            Offshore          Onshore




   Investment volume 2011
   ( total )                                   € 245.4 million

   Onshore :                                   € 114.5 million
   Offshore :                                  € 130.9 million




 Non-electricity                                            Replacement, 7%         in € million
investment, 8%
                                                                                    350

                                                                                    300
                                                                                                                                                             51
                                               As a result of                       250
                                               changes in                                                                                                    131
                                               consumption, 17%                                                                                  43
                                                                                    200
                                                                                                                                  38             72
                                                                                    150                             37
                                                                                                                                  46
                   As a result of developing renewable energies                     100                            114                                       114
                                                                                                                                 107             105
                   and other generation capacity, 68%
                                                                                     50
                                                                                                   ø 40
                                                                                      0
                                                                                            ø 2002–2007           2008          2009             2010       2011
                                                                                             Maintenance             Offshore          Onshore



The investment volume for 50 Hertz is mainly rising as a result of
offshore investment.
50 Hertz’s investment programme – especially for the integration of renewable
energies and the development of the European electricity market – is rising
steadily.
‘50 Hertz is shaping the
future, and personnel
management has the
opportunity to significantly
contribute to this.’
Cora Tellmann, personnel management
                                                                            Annual report 2011 Our contribution to the energy transition · 63




Our staff

At 50 Hertz more than 650 people work at a total of eight      50 Hertz wants its managers to treat employees with
sites for a secure and dependable electricity supply. Equal    respect, trust and encouragement and to make them more
opportunities and working partnerships between various         autonomous, for example by delegating responsibility
nationalities are the hallmark of our corporate culture. As    within existing or widened parameters. For the staff,
of 31 December 2011 50 Hertz had 669 employees and             empowerment means the desire and the ability to take on
20 apprentices.3 ) The average age of the workforce at         responsibility for their work and to develop ways of using
year-end was 43, and women made up 22 per cent of all          the greater freedom that they are given. Ideas for ‘more
employees. Part-time workers represented 0.9 per cent          empowerment’ in an employee’s own area of responsibility
of the total, and disabled staff and those with equivalent     are therefore not only welcome, but specifically required.
status made up 3.3 per cent.
                                                               As part of the 50 Hertz development project, we and our
                                                               parent company Elia have defined instruments to facilitate
50 Hertz corporate                                             the working relationship between the two companies and
                                                               to strengthen the cohesion of the Group. For instance, in
development project                                            the area of purchasing we have defined and implemented
                                                               activities for joint sourcing.
In November 2010 we launched a project to refine the
strategic orientation of 50 Hertz in order to prepare it for
the forthcoming programme of growth as a transmission          Competence model
system operator with two shareholders and as part of the
Elia Group. The focus was on changes in the shareholder        It is important for us to create a working environment that
structure, the investment programme and an analysis            attracts highly qualified and committed people and to
of the organisational culture. Phase one, the analytic         provide them with development opportunities.
and conceptual phase of the project, was successfully
completed in early February 2011. This entailed analysing      We enable our staff to keep developing their skills and
the organisational culture and structure of 50 Hertz using     knowledge, thereby making full use of their development
a variety of methods and transferring the findings into a      potential. We have introduced a ‘4 × 4 competence’ model
road map for the next two years. The road map is to be         that describes the main competences that employees
implemented in phase two.                                      and managers should have and that forms the foundation
                                                               for targeted personnel development in terms of fostering
The implementation of projects in phase two will lead to a     desired conduct, transparency, creating corporate culture
medium- and long-term improvement in performance and           and standardising human resources work. This also
in company earnings. This will set up 50 Hertz for further     enables us to confront the challenges of demographic and
growth.                                                        social change.

In December 2011 50 Hertz organised an HR information          The 4 × 4 competence model describes the four dimen-
market for staff. The main topics were empowerment and         sions of management and methodological competence,
development opportunities for employees. We are very           focus on results, personal competences, and leadership
keen to make hierarchies flatter and decision-making           competence, whereby the latter is only applied to employ-
faster. This is intended to reduce the workload on the         ees with leadership responsibilities.
organisation and its staff members and instil a feeling of
empowerment.




3)
     Figures include employees at Eurogrid GmbH
64 · Annual report 2011 Our contribution to the energy transition




Employee survey                                                     Collective bargaining
After the spin-out from the Vattenfall Group we carried out         We have begun an independent collective bargaining
an employee survey for the first time as an independent             policy for 50 Hertz. Wages were increased by 4.4 per cent
transmission system operator and part of the Elia Group.            retroactively as of 1 January 2011 and frozen for a period
The survey was entitled ‘Say it’ and started on 13 Septem-          of 18 months. Employer and employee representatives
ber 2011. An impressive 80 per cent of staff members took           agreed on the wage settlement on 16 February 2011 in the
part. For every questionnaire completed, we donated one             third round of negotiations. In cooperation with the Mining,
euro to a children’s helpline in Erfurt. For every online ques-     Chemical and Energy Industrial trade union ( IG BCE ) and
tionnaire, we donated a further euro. The results of the em-        the employers’ federation we also revised the wording of
ployee survey are to be analysed within the company at the          the wage agreements applicable to 50 Hertz. On 15 August
departmental level and discussed with staff. Ways of doing          2011 the collective bargaining partners signed the neces-
things better will then be defined and pursued systemati-           sary amendments to the wage agreements. This means
cally.                                                              that a separate wage agreement now applies to 50 Hertz.

                                                                    The principle of co-determination gives our employees the
Recruitment programme                                               opportunity of contributing to the decision-making process
                                                                    at 50 Hertz. As part of the Elia Group, we and Elia also plan
Our trainee programme is intended to enable university              to set up a European Works Council for the benefit of the
graduates to start work in all relevant functions of the            entire workforce.
company at our various sites. The programme lasts for 18
months. During this period the candidates work in sever-
al jobs and are also introduced to related disciplines that
are closely linked to their specialist subject. We also offer
a work placement of at least three months to graduates
of universities or universities of applied sciences whose
grades in intermediate exams were above average. Future
specialists also have the opportunity to write their bache-
lor’s or master’s dissertation at 50 Hertz. Student trainees
can work part-time during the term and full-time in the
holidays in order to gain practical experience alongside
their studies. For law students who have passed their first
state examination we provide an opportunity to apply their
knowledge of energy law in real-life cases.
                                                                Annual report 2011 Our contribution to the energy transition · 65




Health and safety
Health and safety have a high priority at 50 Hertz and are
an integral component of our corporate culture. In 2011
we recorded one reportable occupational accident and
eight accidents that occurred during business travel. This
continues a positive trend of low accident rates for our
company. Nineteen employees of subcontractors working
for 50 Hertz sustained minor injuries in the course of their
work. As part of the continuous improvement in health and
safety processes, 50 Hertz’s work and safety committee
decided to register and evaluate incidents at the regional
sites that could have resulted in an accident ( near misses )
in order to establish ways of preventing them. A service
agreement with a qualified external company ensures that
our workers and managers continue to receive medical
advice and assistance for the purposes of their work. In
future, health and safety aspects will play a greater role
when subcontracting work to external companies. We are
making the corresponding amendments to the terms and
conditions for subcontracting.

A wide range of preventive measures is on offer to protect
our employees’ health. The health fund made it possible
to offer massages and yoga courses as well as exercises
based on the Feldenkrais method and seminars on eye
health. The traditional Health and Safety Day to improve
preventive health care and ergonomics took place again
at headquarters and in all the regional sites in 2011. On
8 September 2011 50 Hertz also organised its first Sport
and Fitness Day. Around 350 participants, including 40
colleagues from Elia, came to Neuenhagen to take part
in the sports activities. The emphasis was on sport-for-all
and staff fitness. As part of the international Elia Group,
ten teams of four 50 Hertz employees participated in the
Elia Trophy 2011 event in Koksijde on the North Sea.
50 Hertz almanac
Key data for 50 Hertz    68

Capacity / Generation    69

EEG costs                74

Load / Consumption       76

System operations        78

Exchange and transport   79

Wholesale market         82
68 · Annual report 2011 50 Hertz almanac




Key data for 50 Hertz

The aim of this special section is to explain 50 Hertz’s business
within the context of the energy industry.

50 Hertz is responsible for the operation, maintenance,                Length of lines
planning and expansion of the transmission system in the
                                                                       Total ( km )                       9,840 ( ~28.5%* )
German states of Berlin, Brandenburg, Hamburg, Mecklen-
burg-West Pomerania, Saxony, Saxony-Anhalt and Thurin-                 380 kV AC overhead lines                 6,830 km
gia. Our transmission network provides the technical foun-             220 kV AC overhead lines                 2,862 km
dation for integrating energy from renewable sources and
                                                                       380 kV AC cable                              55 km
ensuring energy supplies to more than 18 million people.
                                                                       220 kV AC cable                                3 km
We carry out our responsibilities to society in a transparent,         400 kV DC cable ( HVDC )                     15 km
non-discriminatory manner, above and beyond statutory
                                                                       Offshore connection cable                    75 km
requirements.

In this special section, we provide a succinct overview of             Number of
the main data and facts on 50 Hertz’s transmission network
                                                                       Substations                                       59
and control area in a pan-German and European context.
                                                                       Switching stations                                 6

                                                                       Third-party substations and
                                                                                                                          4
                                                                       switching stations

  Conversion table
  kV ( kilovolt )                          1,000 volts, tension        Transformer capacity
  kW ( kilowatt )                          1,000 watts, power          Total ( MVA )                          42,590 MVA
  MW ( megawatt )                          1,000 kilowatts             EHV / EHV                              10,200 MVA
                                                                       EHV / HV                               32,390 MVA
  kWh ( kilowatt-hour )                    1,000 watt-hours ( work )

  MWh ( megawatt-hours )                   1,000 kilowatt-hours        General information
  GWh ( gigawatt-hour )                    1 million kilowatt-hours    Geographic area               109,360 km² ( ~31%* )
  TWh ( terawatt-hour )                    1 billion kilowatt-hours    Inhabitants                   18.2 million ( ~22%* )
                                                                                                             * Share in Germany
                                                                                                                          Annual report 2011 50 Hertz almanac · 69




Capacity / Generation

Gross installed capacity and generating structure in the
50 Hertz control area, as of year-end 2011 ( in MW )
                                                                                                                    Network connection
                                                                                      total                   380 / 220 kV                           ≤ 110 kV
  Energy sources
  Thermal                                                                          17,750                            10,650                            7,100**
      of which lignite                                                              9,240                              9,240                                   -
      of which hard coal                                                             1,155                             1,155                                   -
      of which oil                                                                     255                               255                                   -
  Pumped storage / hydro                                                            2,930                              2,430                             500**


  Renewable energies*
  Geothermal                                                                            0.2                               0.0                               0.2
  Landfill, sewer and mine gas                                                           81                                  0                               81
  Water                                                                                155                                   4                              151
  Biomass                                                                            1,382                                 21                            1,361
  Photovoltaics                                                                     3,568                                    4                           3,564
  Wind, offshore                                                                         48                                48                                  0
  Wind, onshore                                                                    11,509                              1,049                           10,460
  Total                                                                            37,423                            14,206                            23,217


                                        * Source : EEG plant master data from 50 Hertz, provisional figures; audited figures for 2011 will be available in June 2012
                                                                                                                                                ** Figures estimated




Development of feed-in from conventional energies in the
50 Hertz control area
TWh
 80
             81
                         79
 75
 70
                                         71            70
                                 69
 65
 60
            2007         2008    2009   2010          2011
70 · Annual report 2011 50 Hertz almanac




Installed capacity of EEG generating facilities in the 50 Hertz control area,
as of year-end 2011 ( in MW )

Development of installed capacity in EEG generating facilities in the 50 Hertz control area (in figures)


  Energy sources                                                                          2007              2008                  2009                2010              2011*
  Geothermal                                                                               0.2                 0.2                  0.2                0.2                  0.2
  Landfill, sewer and mine gas                                                            107                 100                   97                  94                  81
  Water                                                                                   152                 154                  154                155                   155
  Biomass                                                                                 922              1,038                  1,224             1,295               1,382
  Photovoltaics                                                                           293                 518                 1,054             2,251               3,568
  Wind, offshore                                                                             0                   0                   0                    0                 48
  Wind, onshore                                                                          9,091             9,493              10,866              11,306               11,509
  Total                                                                                 10,565            11,303              13,395               15,101              16,744


                                                        Source : EEG plant master data from 50 Hertz * provisional figures; audited figures for 2011 will be available in June 2012




Development of installed capacity in EEG generating
facilities in the 50 Hertz control area (as a graph)

  MW
18,000                                                                                           Development of feed-in
16,000
14,000
                                                                                                 from renewable energies in
12,000                                                                                           the 50 Hertz control area
10,000
 8,000                                                                                            TWh
 6,000                                                                                             30
 4,000                                                                                             20                                                   25            28
                                                                                                               22            23            24
 2,000                                                                                             10
     0                                                                                              0
             2007           2008           2009           2010          2011*                                 2007          2008          2009         2010          2011

          Biomass            Wind, offshore
          Photovoltaics      Water
          Wind, onshore
                                         Source: EEG plant master data from 50Hertz,
                        shown without geothermal energy, land ll, sewer and mine gas
           * provisional gures, audited gures for 2011 will be available in June 2012
                                                                                                                                                            Annual report 2011 50 Hertz almanac · 71




                  MW 0             1,000      2,000      3,000        4,000    5,000    6,000
                                                                                                             Geographic distribution of
        Lower Saxony                                                                          6,951


         Brandenburg                                                   4,574
                                                                                                             installed wind power capacity
     Saxony-Anhalt                                            3,566                                          in Germany, 2011
 Schleswig-Holstein                                     3,234

         North Rhine-
                                                      3,063
          Westphalia
Rhineland Palatinate                  1,692
                                                                                                             50 Hertz’s share of installed
     Mecklenburg-
    West Pomerania
                                     1,565                                                                   EEG generation capacity in
              Saxony           993
                                                                                                             Germany, 2011
            Thuringia        795


              Bavaria    665
                                                                                                                  50Hertz’s share of total EEG installed          50Hertz’s share of total installed
               Hesse     661                  2010     2011                                                       generation capacity in Germany                  wind power capacity in Germany
                                              Germany: +1,788 MW
Baden-Wuerttemberg             485


             Saarland    127


              Bremen     127                                                                                             31 %                                           41 %*

            Hamburg      49


                Berlin   2



         Federal state                       Source: Fraunhofer IWES (latest update 30.1.2012)
                                                                                                                      50Hertz
                                                                                                                      * includes 0.2% offshore wind power




Forecast development of EEG generation capacity
in the 50 Hertz control area
  MW
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
 5,000
    0
             2010            2011             2012            2013        2014         2015           2016     2017         2018         2019         2020         2021         2022          2023

            Biomass                 Wind, offshore                                                                                       Source: Forecast gures provided by downstream grid users,
            Photovoltaics           Water                                                                    including distribution network operators, local utilities and directly connected wind farms
            Wind, onshore                                                                                                              Shown without geothermal energy, land ll, sewer and mine gas
72 · Annual report 2011 50 Hertz almanac




Extrapolation, forecast and actual feed-in of wind power

Wind power feed-in for the week                                                        Wind power feed-in from
4.4.2011 – 10.4.2011                                                                   6.4.2011 (6 a.m.) to 7.4.2011 (6 a.m.)

  MW                                                                                     MW
 9,000                                                                                  6,500
 8,000                                                                                  6,000
 7,000                                                                                  5,500
 6,000                                                                                  5,000
 5,000                                                                                  4,500
 4,000                                                                                  4,000
 3,000                                                                                  3,500
 2,000                                                                                  3,000
 1,000                                                                                  2,500
     0                                                                                  2,000
         0       20       40        60         80       100        120   140     160            0        3         6        9          12       15          18    21    24
                                            Time in h                                                                               Time in h
             Forecast       Extrapolation         Actual feed-in                                    Forecast        Extrapolation          Actual feed-in
             Segment shown in adjacent chart
             Source: Figures based on extrapolation of actual gures
             (¼ hour power - mean values) including direct sales



Outline figures for wind power 2011 (in MW)                                            Cumulative actual feed-in of wind and photovoltaic
                                                                                       power for the week 4.4.2011 – 10.4.2011
  Maximum feed-in from wind turbines                                           9,883
  Minimum feed-in from wind turbines                                             13      MW
                                                                                       10,000
                                                                               +865
  Biggest quarter-hour leap from wind turbines                                          9,000
                                                                               –826
                                                                                        8,000
                                                                                        7,000
                                                                           +2,132
  Biggest hourly leap from wind turbines                                                6,000
                                                                           –2,101
                                                                                        5,000
  Biggest daily leap from wind turbines                                    –9,186       4,000
                                                                                        3,000
                                                                                        2,000
The forecast for wind power feed-in is produced by                                      1,000
weighting the forecasts from energy & meteo systems,                                       0
                                                                                                0       20        40        60         80       100         120   140   160
EuroWind, Fraunhofer IWES, meteomedia and WEPROG.                                                                                   Time in h
The extrapolation is carried out using the measurement
                                                                                                    Actual feed-in (wind)                  Actual feed-in (PV)
data from representative sites and an algorithm developed
by Fraunhofer IWES. The actual feed-in is based on data
sent to 50Hertz by the distribution system operators at
month end for the settlement of EEG feed-in.
                                                                                                                                Annual report 2011 50 Hertz almanac · 73




Extrapolation, forecast and actual feed-in of photovoltaic power

Photovoltaic power feed-in for the week                                               Photovoltaic power feed-in from
4.4.2011 – 10.4.2011                                                                  6.4.2011 (6 a.m.) to 7.4.2011 (6 a.m.)

  MW                                                                                    MW
1,800                                                                                 1,200
1,600
                                                                                      1,000
1,400
1,200                                                                                   800
1,000
                                                                                        600
  800
  600                                                                                   400
  400
                                                                                        200
  200
    0                                                                                     0
        0       20       40        60         80       100        120   140     160           0        3     6       9          12       15          18   21      24
                                           Time in h                                                                         Time in h
            Forecast       Extrapolation         Actual feed-in                                   Forecast   Extrapolation          Actual feed-in
            Segment shown in adjacent chart
            Source: Figures based on extrapolation of actual gures
            (¼ hour power - mean values) including direct sales



Outline figures for photovoltaic power 2011 (in MW)


  Max. feed-in from photovoltaic power plants (PPP)                           1,831   All our providers of forecast data can now draw on many
  Minimum feed-in from PPP                                                       0    years of experience in producing energy forecasts. Changes
                                                                                      in the weather nevertheless often result in complex situa-
                                                                              +291    tions which are difficult to forecast using weather models.
  Biggest quarter-hour leap from PPP
                                                                              –184    They are one reason for the sometimes substantial vari-
                                                                                      ations in day-ahead forecasts, which subsequently have
                                                                              +555
  Biggest hourly leap from PPP                                                        to be equalised in intraday trading. These variations are a
                                                                              –499
                                                                                      challenge for system management as well. If the forecast
                                                                                      and the extrapolation widely differ, the security of the sys-
The forecast for the feed-in of photovoltaic power is pro-                            tem must be maintained at all times by carrying out meas-
duced by weighting two forecasts – from Meteocontrol and                              ures in the network.
energy & meteo systems. The extrapolation is also pro-
duced by extrapolating the figures from Meteocontrol and                              The week selected for the charts shows the high volatility
energy & meteo systems using a weighted mean. The data                                of wind and photovoltaic power. In exceptional cases it can
providers obtain the data set (online measurements) for                               even happen that high feed-in from wind around midday
the extrapolation for selected sites from their own genera-                           is increased by high feed-in from solar power plants. The
tion facilities or from SMA Solar Technology AG. The actual                           resulting feed-in, in connection with high gradients, repre-
feed-in is based on data sent to 50Hertz by the distribution                          sents a particularly severe challenge for the stability of the
system operators at month end for the settlement of EEG                               system.
feed-in.
74 · Annual report 2011 50 Hertz almanac




EEG costs

Change in EEG account
Monthly balance of income and expenses                                                                 Change in EEG account between January 2010
on EEG account                                                                                         and December 2011

in € million                                                                                           in € million

 1,000                                                                                                  1,500
   800
                                                                                                        1,000
   600
   400                                                                                                    500
   200
                                                                                                             0
      0
 –200                                                                                                   –500
 –400
                                                                                                       –1,000
 –600
 –800                                                                                                  –1,500
            Jan     Feb   Mar       Apr   May     Jun     Jul     Aug      Sep     Oct   Nov     Dec                        Mar          Jun      Sep                 Mar         Jun      Sep
          Income and expenses are de ned in Section 3 AusglMechV (equalisation scheme)                                      2010                 2011                              Source: eeg-kwk.net
            2010             2011                                                Source: eeg-kwk.net




Weighted average                                                                                       Total EEG remuneration* for plants in
remuneration for renewables                                                                            Germany and in the 50Hertz control
in the 50Hertz control area                                                                            area
€/MWh                                                                                                  € billion
   400                                                                                                     16
                                                                          385.5
   350                                                                                                     14                                                                           14.4
   300                                                                                                     12                                                    12.8
   250                                                                                                     10
                                                                                                                                               10.5
   200                                                                                                       8        8.7
                                          190.0
   150                          172.2                                                                        6
                                                                150.0               136.2
   100                                                                                                       4
            95.6                                   90.5                                                                                                                                          3.7
    50                75.4                                                                                   2                                           2.6                2.9
                                                                                               51.6                                2.2
      0                                                                                                      0
           Water          Biomass     Wind, onshore Photovoltaics                                                           2008                   2009              2010                  2011
                      Gas       Geothermal    Wind, offshore
                                                                                                                      Germany                  50Hertz         Source: Data for Germany, eeg-kwk.net
               average payment per energy source                        average price for EPEX Spot
               weighted average payment for                                                                   * Less avoided transmission charges,
                                                                        hourly contracts in Germany
               all energy sources                                                                               data as of 31 December in each case, data for 2011 are provisional

                               Source: Basic data for average EPEX Spot price EPEX Spot SE



The weighted average remuneration represents the EEG
remuneration paid in 2011 in relation to the EEG power fed
into the 50Hertz control area by energy source in 2011 as
of the measurement date 31.12.2011 (provisional figures).
                                                                                                                                               Annual report 2011 50 Hertz almanac · 75




Calculation and composition of the EEG levy* for 2012

 ct /kWh                    4.48                            0.09                        0.10                    0.18                      1.26                        3.592


                                                                                                        Account balance 2011
                                                                                  Liquidity reserve
                                                       various costs                                                                   Forecast
                                                                                                                                     sales revenue




                      Feed-in tarifs


                                                                                                                                                                     EEG levy




€ million                 17,608                            357                         390                     711                      4,957                       14,109
                                                                       Expenses                                                                         Income
* the EEG levy corresponds to the difference between total expenditure and forecast sales revenue in accordance with the equalisation scheme                       Source: eeg-kwk.net




Change in the EEG levy*
€ billion                                                                                             Details of the calculations for the EEG levy for 2010, 2011
                                                                         3.592        ct/kWh
    16                                                                                                and 2012 as well as information on the forecast EEG levy
                                       3.530                                               3.5
    14
                                                                         14.11                        for 2013 can be found on the TSO Internet platform
    12                                         13.53                                       3.0        www.eeg-kwk.net under the menu item EEG levy and
    10
              2.047                                                                                   annual/medium-term forecasts.
                                                                                           2.0
      8            8.33
      6                                                                                    1.5
      4
                                                                                           1.0
      2
      0                                                                                    0
                   2010                        2011**                   2012**
              Costs (in € billion)         EEG levy per kWh (in ct/kWh)
      ** the EEG levy corresponds to the difference between total expenditure and
         forecast sales revenue in accordance with the equalisation scheme
      ** Forecast gures for total subsidy
            Sources: 50Hertz (2010), eeg-kwk.net (2011, 2012)
76 · Annual report 2011 50 Hertz almanac




Load / Consumption

Change in electricity consumption in the 50Hertz control area, 2003 – 2011

  TWh                                                                                              Electricity consumption is based on the definition of elec-
  100                                                                                              tricity supplied to end consumers in accordance with the
    98
                                                                       97.96    98.00*
                                                                                                   Renewable Energy Act (EEG).
    96
    94                                       94.61   94.97                                         The sharp rise from 2009 to 2010 is due to the economic
                                                              93.25
    92                             92.62                                                           recovery after the recession and to the reporting of end
                         91.8
    90           91.16                                                                             consumers in non-public networks.
    88   88.87
    86
    84
         2003    2004    2005      2006      2007    2008     2009     2010     2011
                                                             * provisional forecast gure




Monthly maximum and minimum end consumer load in the 50Hertz control
area in 2011
   MW
    16
    14
    12
    10
     8
     6
     4
     2
     0
           02 Jan.       27 Feb.           13 Mar.      24 Apr.        01 May            13 June    17 July   28 Aug.    11 Sep.   31 Oct.   27 Nov.    25 Dec.
            06.15         07.00             06.30        06.15          06.30             05.00      05.45     06.30      04.30     01.45     06.30      06.30
           11. Jan.      01 Feb.           09 Mar.      13 Apr.        17 May            24 June    08 July   26 Aug.    05 Sep.   12 Oct.   24 Nov.    07 Dec.
            18.00         19.00             19.00        11.30          11.45             11.45      11.45     18.00      11.30     19.00     17.45      17.30

          Minimum nal consumer load              Maximum nal consumer load




  Maximum and minimum end consumer load 2011                                                       The end consumer load is made up of total confirmed
                                                                                                   data for the vertical network load (total with correct alge-
  Maximum                                     15,390 MW on 7.12.2011 at                            braic signs of all deliveries from the transmission system
                                              5.30 p.m.                                            via directly connected transformers and lines to distribu-
                                                                                                   tion networks and final consumers), EEG power fed into
  Minimum                                     7,292 MW on 17.7.2011 at
                                                                                                   the distribution networks in the 50Hertz control area and
                                              5.45 a.m.
                                                                                                   interpolated CHP and other feed-in on the basis of histori-
                                                                                                   cal data.
                                                                                                       Annual report 2011 50 Hertz almanac · 77




End consumer load in the 50Hertz control area on two selected days in
2011 in comparison with Germany as a whole
15 June 2011

  GW
  90
  80
  70
  60
  50
  40
  30
  20
  10
   0
       1.00          3.00             5.00            7.00   9.00   11.00   13.00   15.00   17.00          19.00         21.00         23.00
          Final consumer load in Germany
          Final consumer load in the 50Hertz control area                                           Source: 50Hertz, gures for Germany: ENTSO-E




21 December 2011

  GW
  90
  80
  70
  60
  50
  40
  30
  20
  10
   0
       1.00          3.00            5.00             7.00   9.00   11.00   13.00   15.00   17.00          19.00         21.00         23.00
          Final consumer load in Germany
          Final consumer load in the 50Hertz control area                                           Source: 50Hertz, gures for Germany: ENTSO-E
78 · Annual report 2011 50 Hertz almanac




Operation

Comparison between the fault ratio for 50Hertz and German TSOs in the
years 2000 – 2010
                                3.0                                                                                                       The fault ratio shown here refers to faults on or in the
Faults per 100 km line length




                                                                                                                                          50Hertz high-voltage network. Faults include disruptions
                                2.0                                                                                                       to the grid and to equipment which restrict transmission
                                                                                                                                          abilities or undermine system conditions. Grid disruptions
                                1.0                                                                                                       include those due to electrical short circuits caused by
                                                                                                                                          storms. Disruptions to equipment are only included if grid
                                0.0                                                                                                       elements are triggered or have to be switched off. Grid
                                       2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
                                                                                                                                          elements are power lines, transformers, inductors and
                                         Fault ratio for 50Hertz                   Mean fault ratio for 50Hertz                           bus bars.
                                         Fault ratio for all German TSOs*          Mean fault ratio for all German TSOs*
                                                       * Figure for 2011 will be published in the second half of 2012



Days with steps to ensure system security (section 13 EnWG), redispatch costs
and postponed GWh in the 50Hertz control area
Days with steps defined in section 13.1 EnWG (mainly                                                                                      Days with steps defined in section 13.2 EnWG (mainly
redispatch)                                                                                                                               reduction in EEG generation)
Days                                                                                                                                      Days
          250                                                                                                                              45
                                                                                                                                                                                              45
                                                                                                                                           40
          200                                                                                            213
                                                                                                                                           35
                                                                        195
                                                         175                                                                               30
          150                                                                             160                                  of which
                                          155                                                                                              25
                                                                                                                                           20
          100
                                                                                                                                           15

                      50                                                                                                                   10
                                                                                                                                                              3         4          6
                                                                                                                                            5
                                0                                                                                                           0
                                          2007           2008           2009             2010            2011                                      2007      2008      2009       2010     2011


                                                                                                                           Energy                                                                   Energy
Costs                                                                                            3,846                     volumes                                                                 volumes
          100                                                                                                                                                                                          50
                                                                                                         101
                                                                                                                           3,500                                                         45

                      80                                                                                                   3,000                                                                       40

                                                                                                                           2,500
                      60                                                                                                                                                                               30
                                         1,833                                                                             2,000
                                                                                 1,783
                      40                                                                                                   1,500                                                                       20
                                                                            36                                             1,000                     11
                      20                                                                                                                                                                               10
                                                 19                                                                        500
                                                                                                                                                                              4
                                0                                                                                          0                                                                            0
                                                2009                        2010                         2011                                         2009              2010               2011


                                      Redispatch costs (in € million)              Energy volumes postponed by action taken (in GWh)
                                                                                                                           Annual report 2011 50 Hertz almanac · 79




Exchange and transport




                                                                                                                     2,086.6
Annual import and export at the borders




                                                                                                                     1,237.5
                                                                                                      Energinet.dk


of the 50Hertz control area                                                                                                        PSE
                                                                                                                                5,135.6
                                                                                                                                   432.1
Altogether, in 2011, 34,402.6 GWh were exported and
16,336.9 GWh were imported in the 50Hertz control area.                                           TenneT         50Hertz
This represents a total net export from the 50Hertz control                                      26,179.9      control area
                                                                                                 12,113.3                                                Imports in GWh
area of 18,065.7 GWh.                                                                                                                                    Exports in GWh



                                                                                                                                ČEPS
                                                                                                                           1,8 4
                                                                                                                                 9.
                                                                                                                           1,70 6
                                                                                                                                4. 9




Monthly import and export at the borders of the control area in 2011
Control area border with PSE (Poland)                                           Control area border with Energinet.dk (Denmark)

 GWh                                                                             GWh
1,500                                                                           1,500
1,000                                                                           1,000
  500                                                                            500
    0                                                                              0
  500                                                                            500
1,000                                                                           1,000
1,500                                                                           1,500
2,000                                                                           2,000
2,500                                                                           2,500
3,000                                                                           3,000
        Jan   Feb   Mar   Apr   May   Jun   Jul   Aug   Sep   Oct   Nov   Dec           Jan   Feb   Mar     Apr   May     Jun   Jul    Aug   Sep   Oct     Nov   Dec
        Import       Export                                                             Import        Export



Control area border ČEPS (Czech Republic)                                       Control area border TenneT
                                                                                (German states of Lower Saxony, Hesse and Bavaria)
 GWh                                                                             GWh
1,500                                                                           1,500
1,000                                                                           1,000
  500                                                                            500
    0                                                                              0
  500                                                                            500
1,000                                                                           1,000
1,500                                                                           1,500
2,000                                                                           2,000
2,500                                                                           2,500
3,000                                                                           3,000
        Jan   Feb   Mar   Apr   May   Jun   Jul   Aug   Sep   Oct   Nov   Dec           Jan   Feb   Mar     Apr   May     Jun   Jul    Aug   Sep   Oct     Nov   Dec
        Import       Export                                                             Import        Export
80 · Annual report 2011 50 Hertz almanac




Load flows at the interconnectors at the control area’s borders on the
third Monday of the month at 3 a.m. and 11 a.m. in 2011
Control area border with PSE (Poland)                                              Control area border with Energinet.dk (Denmark)

  MW                                                                                MW
1,500                                                                               800
                                                                                    600
 1,000
                                                                                    400
  500
                                                                                    200
     0                                                                                0
                                                                                    200
  500
                                                                                    400
1,000
                                                                                    600
1,500                                                                               800
         19/01 16/02 16/03 20/04 18/05 15/06 20/07 17/08 21/09 19/10 16/11 21/12           19/01 16/02 16/03 20/04 18/05 15/06 20/07 17/08 21/09 19/10 16/11 21/12
           Import 3.OO           Import 11.OO                                                Import 3.OO           Import 11.OO
           Export 3.OO           Export 11.OO                                                Export 3.OO           Export 11.OO



Control area border ČEPS (Czech Republic)                                          Control area border TenneT
                                                                                   (German states of Lower Saxony, Hesse and Bavaria)
  MW                                                                                MW
1,000                                                                               500
  800                                                                                 0
  600                                                                               500
  400
                                                                                   1,000
  200
                                                                                   1,500
     0
                                                                                   2,000
  200
  400                                                                              2,500

  600                                                                              3,000
  800                                                                              3,500
         19/01 16/02 16/03 20/04 18/05 15/06 20/07 17/08 21/09 19/10 16/11 21/12           19/01 16/02 16/03 20/04 18/05 15/06 20/07 17/08 21/09 19/10 16/11 21/12
           Import 3.OO           Import 11.OO                                                Import 3.OO           Import 11.OO
           Export 3.OO           Export 11.OO                                                Export 3.OO           Export 11.OO
                                                                                                Annual report 2011 50 Hertz almanac · 81




Load factor for interconnectors in 2011
                                                                The pie charts show how long an interconnector had a
                                     Duration
                                                                given percentage load factor during 2011. The divisions
                                                                illustrate the load on the line in per cent and indicate how it
                                                                behaves in the event of a fault. A fault means that a tech-
                                     8,760 h = 100 %
                                                                nical element stops working (due to a lightning strike, for
                                                                instance), and one or more of the other elements have to
                 50Hertz                                        take up the additional transmission capacity.
                                     Load
               control area             below 50 %
                                        between 50 % and 70 %   The grey area means there would be no problems in the
                                        over 70 %
                                                                event of a fault. Light orange means the line would be
                                                                close to capacity in the event of a fault, and red means
                                                                the line would be at the limits of its capacity if there were
                                                                a fault.




Annual electricity volumes transported by 50Hertz
 TWh                                                            The transported electricity volume is the total energy fed
 110                                                            into the 50Hertz transmission system directly from gen-
 100   103.0                                                    erating facilities (power plants, wind turbines), distribution
                97.3                                   95.1
  90                   94.1   91.2        93.9                  networks (recovery) and alliance supply terminals in TWh in
  80                                                            one year.
  70
  60
  50
  40
  30
  20
  10
   0
       2006     2007   2008   2009        2010         2011
82 · Annual report 2011 50 Hertz almanac




Wholesale market

Opening, closing, high and low futures prices (weekly chart)
€/MWh                                                                                     F1BY 2013
    62



    60



    58



    56



    54



    52
         1      3        5   7      9       11    13     15   17     19    21       23   25      27   29    31     33       35   37   39   41   43   45   47   49    51



  GWh                                                               Total trading volume for the F1BY 2013 product on EEX
 8,000
 6,000
 4,000
 2,000
     0
         1      3        5   7      9      11     13     15   17    19     21       23   25     27    29    31    33        35   37   39   41   43   45   47   49    51
                                                                                              Weeks

         Candle chart and trading volume for the product “Calender year Base 2013 (F1BY 2013)” in 2011 from EEX
         50Hertz buys this product to hedge the price of some of its energy losses                                                                              Source: EEX




                                                                            high                 The upper shadow and lower shadow of the candlestick
                    Upper                                                                        mark the highest and lowest prices. What is known as the
                    shadow                       close                      open                 ‘real body’ shows the opening and closing prices. An
                                                                                                 orange candlestick means that the opening price is lower
                                        open < close               open > close                  than the closing price, so the market rose over the obser-
             Real body                  orange body                grey body
                                                                                                 vation period. A grey candle represents the opposite case.

                                                 open                       close                The observation period here is one candlestick per week.
                    Lower                                                                        Taken together, the chart gives an impression of price
                    shadow                                                  low
                                                                                                 movements, but also of the degree of price volatility. Trad-
                                                                                                 ing volume is in turn an indicator of price significance.
                                                                                                                                 Annual report 2011 50 Hertz almanac · 83




50Hertz intraday trading volume in 2011

 GWh
  100
   50
    0
   50
  100
  150
  200
  250
  300
  350
            1       3      5     7      9    11      13   15   17   19      21   23   25     27    29   31   33   35   37   39     41    43    45     47    49    51
                                                                                           Weeks
                Volume bought        Volume sold



                                                                                              The graph shows weekly trading volumes divided by
                                                                                              amounts purchased and sold. Trading volumes are made
                                                                                              up of the company’s own transactions and those carried
                                                                                              out for third parties on the basis of service contracts.




Number of intraday trading transactions by 50Hertz

120,000                                                                                       In 2009 exchange trading began in February, so there are
100,000
                                                                                              no transactions for the month of January.
                                                                    98,255
 80,000
                                                                                              The increase in transactions is due to the extremely rapid
 60,000
                                               61,546
                                                                                              rise in installed wind power capacity.
 40,000

 20,000
                        21,118
        0
                        2009                       2010              2011
Management
report
Course of business and
economic environment          86

Financial statements         102

 Balance sheet               102

 Profit and loss statement   104

 Cash flow statement         105

 Fixed asset schedule        106

Notes                        109

 Auditor’s report            124
86 · Annual report 2011 Management report




Course of business and economic environment

50 Hertz is the collective name for 50 Hertz Transmission        This did not have an adverse effect on the network busi-
GmbH ( 50 Hertz Transmission ) and 50 Hertz Offshore             ness in the 50 Hertz control area. Even the fallout from the
GmbH ( 50 Hertz Offshore ); both companies are subsidiar-        considerable turmoil on financial markets and the growing
ies, directly and indirectly, of Eurogrid GmbH ( Eurogrid ),     uncertainty about the future of the eurozone was limited.
Berlin, and are also based in Berlin. Eurogrid’s sharehold-      50 Hertz carried out its investments and maintenance work
ers are the transmission system operator ( TSO ) Elia Sys-       as planned on the basis of its long-term funding.
tem Operator NV / SA ( Elia ) and the infrastructure fund In-
dustry Funds Management ( IFM ) Luxembourg No. 2 S.à.r.l.        The catastrophe in Fukushima, Japan, prompted a
which holds its interest indirectly via Eurogrid International   decision to accelerate the energy transition in Germany.
CVBA / SCRL, Brussels, Belgium.                                  On 14 March 2011 the German government imposed a
                                                                 moratorium on nuclear energy at short notice, following
                                                                 which eight of Germany’s nuclear power plants were shut
Economic and political environment                               down. The early closure also applied to the two nuclear
                                                                 power plants in the 50 Hertz control area in Brunsbüttel and
The general economic trend again pointed upwards in Ger-         Krümmel, as well as to the Unterweser plant, also situated
many in 2011, as can be seen from the increase of three          in the greater Hamburg area. For the 50 Hertz control area,
per cent in gross domestic product. The economic recov-          this had the effect of increasing load flows from north to
ery, predominately export-driven, led to a strengthening of      south and from east to west. As a result of the accelerated
the domestic economy. This was reflected in both increased       energy transition, 50 Hertz had to resort to redispatching
company investments and in the slight increase in public         to ensure system stability much more often and at a much
consumption. Medium-sized companies particularly con-            greater scale. This was accompanied by a corresponding
tributed to the increase in employment. Towards the end          rise in costs and cash outflows.
of the year, the German economy showed the first signs
of slowing down, however, due to the diminished growth
prospects for the global economy and above all for the           Overview of
European Union.
                                                                 50 Hertz Transmission
Despite the positive overall performance over the course
of the year, the particularly mild 2011 / 2012 winter resulted   In its role as a TSO, 50 Hertz Transmission operates the
in lower consumption in the energy sector. At the end of         transmission grid which, with a voltage of 220 kV and
2011, total energy consumption in Germany was at its             380 kV, extends over an electrical circuit length of rough-
lowest level since 1990.                                         ly 9,840 km in the German states of Berlin, Branden-
                                                                 burg, Hamburg, Mecklenburg-West Pomerania, Saxony,
                                                                 Saxony-Anhalt and Thuringia, as well as in some parts
                                                                 of Schleswig-Holstein and Lower Saxony. The clients of
                                                                 50 Hertz Transmission are companies located in the con-
                                                                 trol area whose installations are directly connected to the
                                                                 transmission grid, such as distribution system operators
                                                                 ( DSOs ) of the local utility companies, operators of the
                                                                 power plants connected to the transmission grid, pumped
                                                                 storage stations, wind farms, large industrial users, as well
                                                                 as transit clients, balancing group clients and clients falling
                                                                 under the scope of the EEG ( Renewable Energy Act ) and
                                                                 of the KWKG ( Combined Heat and Power Act ).
                                                                                           Annual report 2011 Management report · 87




On the one hand, 50 Hertz Transmission, as a TSO respon-       Legal environment
sible for a control area, is responsible for secure, cost-
effective, consumer-friendly, efficient and environmentally    European law
friendly provision of the transmission grid covering all op-   The strategic objectives of European energy policy ( a
eration, maintenance and expansion activities as needed.       functioning energy market, security of the energy supply,
On the other hand, we are in charge of maintaining the         support for energy efficiency, development of renewable
balance between production and consumption within the          sources of energy and the interconnection of national
overall electricity supply system. In accordance with the      energy networks ) have been realised by means of various
European and national regulations, our company ensures         European Commission initiatives since the comprehensive
free access to and non-discriminatory use of our transmis-     energy strategy for Europe in the period 2011 to 2020
sion grid.                                                     was published in October 2010.

In accordance with the Renewable Energy Act ( EEG ),           On 19 October 2011 the European Commission published
50 Hertz Transmission guarantees the integration and           a draft regulation with guidelines for pan-European energy
transport of renewable energies in the control area, as well   networks ( EU Energy Infrastructure Package ). The regula-
as their nationwide distribution, marketing and, if neces-     tion aims at identifying and supporting electricity and gas
sary, the equalisation of feed-in variations. As the grid is   network development projects of European interest and at
located in the centre of Europe, our company makes an          improving the legal framework for pan-European network
important contribution to European power trading. Our grid     development by simplifying and speeding up approval pro-
connects the grids in Denmark, Poland, the Czech Repub-        cedures and laying down rules for allocating costs in cross-
lic and Germany. 50 Hertz Transmission’s core activities are   border projects. To finance network development projects,
therefore the enhancement and expansion of the 380 kV          the European Commission has proposed to set up an in-
transmission system and the development of the European        frastructure fund to be known as the Connecting Europe
energy market in order to complete the integration of          Facility, which is intended to be funded with some € 9 bil-
renewable energies into the German and European trans-         lion for the period 2014 to 2020.
mission grids.
                                                               In the energy market the European Network of Transmis-
Since December 2006 – when the Act to Expedite Infra-          sion System Operators for Electricity ( ENTSO-E ) started
structure Planning came into force – 50 Hertz Transmission     work on various network codes on the basis of non-
has been responsible for connecting offshore wind farms        binding guidelines from the European regulatory agency
( OWFs ) in the Baltic Sea. In response, we established        ACER ( Agency for the Cooperation of European Regula-
50 Hertz Offshore as a wholly owned subsidiary of 50 Hertz     tors ). These deal with capacity and congestion manage-
Transmission and assigned to it the task of building and       ment, grid connection and operational security. The net-
operating these grid connections. The company’s first pro-     work codes are to be issued as EU regulations and and will
ject was the connection of the OWF EnBW Baltic 1, which        therefore be mandatory for all market participants directly.
began operations in the second quarter of 2011. The pro-
ject EnBW Baltic 2, the second OWF grid connection by
50 Hertz, is currently under way.
88 · Annual report 2011 Management report




National law                                                     – Grid connection to offshore wind turbines: Grid
On 15 April 2011 the German federal government decided             connections to OWFs are generally to be carried out as
to draw up extensive legislation to expedite the energy            joint connections in future. For this purpose, the Federal
transition towards energy from renewable sources, to               Maritime and Hydrographic Agency is to prepare an
phase out nuclear energy in Germany definitively and               annual offshore grid plan for the exclusive economic
to transpose the third EU internal market package into             area in which offshore wind farms suitable for a joint
national law. On 6 June 2011 the cabinet adopted the               connection are identified. The relationship between
legislative package, which contains the nuclear phaseout           this offshore grid plan and the new grid development
as well as extensive revisions of the Energy Industry Act          plan is as yet unclear. The obligation to provide grid
( EnWG ) and the Renewable Energy Act ( EEG ), a New               connections to OWFs no longer expires in 2015; this
Grid Expansion Acceleration Act ( NABEG ) and many other           gives 50 Hertz unlimited long-term responsibility for
new regulations in the field of energy law. Some of these          offshore connections in the German Baltic Sea.
provisions still need to be refined and put into practice in
the form of regulations. The revised EnWG and NABEG              – Grid development: The TSOs are to draw up a joint Na-
came into force when they were published in August 2011;           tional Grid Development Plan and carry out broad con-
the amendments to the EEG and its regulations came into            sultations. The new NABEG accelerates and simplifies
effect on 1 January 2012. The most important changes for           the approval procedures for the construction of impor-
50 Hertz include:                                                  tant extra-high voltage power lines. Responsibility for
                                                                   planning these power lines will be transferred from the
– Certification: In order to comply with the requirements          regional planning authorities in the individual states to
  of the Third EU Energy Package, TSOs must apply                  the Federal Network Agency ( FNA ).
  for a licence confirming that they are organised as a
  transmission system operator in line with statutory            – System security: Energy producers, including producers
  regulations. 50 Hertz is aiming for certification as a fully     of energy from renewable sources, are required to do
  independent TSO.                                                 more for the security of the system. For example, plants
                                                                   must offer redispatch if they are technically capable
– Renewable energies: The calculation of the EEG levy              of doing so. TSOs must accept these services if they
  may in future include a liquidity reserve of up to ten           are offered at market rates. When applying emergency
  per cent of the difference between forecast income               measures to ensure system stability, the TSOs must
  and expenses. In the EEG levy for 2012, all four TSOs            first carry out measures requiring compensation in
  included a liquidity cushion. The maintenance of the             accordance with section 11 EEG before those defined
  EEG plant register can also be transferred to the                in section 13, paragraph 2 EnWG and will therefore
  German TSOs. This would give them faster and better              only be able to control the EEG facilities connected to
  information about installed EEG facilities.                      their network indirectly. If they carry out the measures
                                                                   correctly, the TSOs may pass on the ensuing additional
                                                                   costs via the transmission charges. The Act also obliges
                                                                   DSOs, energy producers and industrial customers to
                                                                   create the conditions for real-time data transmission.
                                                                   A large proportion of EEG plant operators must now fit
                                                                   their facilities with remote access equipment.
                                                                                               Annual report 2011 Management report · 89




– Transmission charges / Regulation: Following an                Maintenance and grid expansion
  amendment to section 19 StromNEV, as of 1 January
  2011, power intensive end consumers, as well as                The 65 switching stations and substations with their 149
  atypical end consumers under existing individual rules,        transformers owned by 50 Hertz Transmission are kept run-
  are exempt from the obligation to pay transmission             ning by maintenance work in line with technical, economic
  charges. All in all, this will result in considerably higher   and ecological requirements ( inspection, routine mainte-
  expenses for all other network customers. Further efforts      nance and repair ). Whereas maintenance and repairs are
  were made to tackle the recognition of planning costs          mostly ( approx. 80 per cent ) performed by external staff,
  in investment budgets and to obtain a court order              inspections and monitoring of the quality and safety of the
  suspending the ‘double recognition avoidance amount’,          contracted services are always carried out by highly quali-
  both of which are linked to vital improvements in the          fied in-house staff. A standby duty system again ensured
  regulatory framework.                                          an adequate response to any incidents, in cooperation with
                                                                 other system operators and network users.
In January 2011 the German parliament passed
amendments to some legislation affecting 50 Hertz:               As the transmission system is subject to growing require-
                                                                 ments, in particular with regard to the nationwide high-
On 27 January 2011 the parliament passed an amendment            performance transmission of power from renewable sources
to the Energy Line Expansion Act ( EnLAG ). In the four pilot    and to pan-European electricity trading, investment activi-
projects involving underground cables mentioned in               ties in the reporting period were focused on construction
section 2, paragraph 2 EnLAG, a high-voltage power               work and preparatory steps to strengthen and expand the
line must be laid and operated underground or buried             grid. The plan approval notice for the 380 kV overhead line
over a technically and economically efficient section if so      from Schwerin to Hamburg has still not been issued for the
required by the authority responsible for approving the          section to be situated in Schleswig-Holstein. Plan approval
project. In accordance with section 2, paragraph 2, sen-         procedures for further overhead line projects, in particular
tence 2 EnLAG, this also applies to the section crossing         for the European priority project of a South-West Intercon-
the Rennsteig ridge in Thuringia. This means the previously      nector from Halle ( Saxony-Anhalt ) to Schweinfurt ( Bavaria )
optional underground cable will become a contingent obli-        were delayed due to further plan change requirements,
gation.                                                          which are intended to lead to broader public acceptance
                                                                 of the project.
As the development of the electricity grid is a central ele-
ment of energy policy, the Federal Ministry of Economics         Environmental protection is very important in technical in-
and Technology launched a permanent platform for Sus-            stallations. To this end, further oil catchers were refurbished
tainable Energy Networks in February 2011. 50 Hertz, the         at transformer stations, noise abatement measures were
other network operators, federal and state authorities and       implemented and residual pollution was removed during
industry associations are using the platform to discuss so-      the development of new sites. The high standard of envi-
lutions for expanding and modernising the electricity grid.      ronmental protection is achieved through frequent training,
                                                                 further education and raising awareness amongst the em-
                                                                 ployees. To make up for the considerable interference in
                                                                 nature and landscapes caused by the building of new over-
                                                                 head lines, further compensation areas were presented
                                                                 to the relevant authorities to increase the total amount of
                                                                 planned compensation.
90 · Annual report 2011 Management report




System control                                                 As soon as the moratorium on nuclear power was
                                                               announced, 50 Hertz Transmission and the other German
As of 31 December 2011 there were onshore wind turbines        TSOs carried out extensive investigations into the effects
with an installed capacity of some 11,520 MW in the 50Hertz    it would have on summer and particularly on winter
control area. This represents around 40.3 per cent of in-      operations. For winter 2011 / 12 they showed that available
stalled capacity in Germany and an increase of two per         generation capacity in Germany would be used in full,
cent compared with the figure at year-end 2010. When the       imports from neighbouring countries on cold days would
wind farm EnBW Baltic 1 went online, it took the current       not be secure, and that in south Germany, load and voltage
installed capacity of offshore wind turbines in our control    levels could therefore become critical. In the Hamburg
area to some 50 MW. Our share of total installed capac-        area, the tension could fall to a very low level on cold
ity from German offshore wind farms therefore comes to         winter days ( high consumption ) with no wind or PV feed-in,
around 24 per cent.                                            which increases the risk of a voltage collapse. Altogether
                                                               it can be said that the system is being operated close to
Installed photovoltaic (PV) capacity in the 50 Hertz control   the limit and that the safety reserves are being increasingly
area rose by around 60 per cent to 3,540 MW compared           used up. As a result of these internal investigations and the
with year-end 2010.                                            information received from other control areas, a number
                                                               of steps have been defined and in some cases already
In the reporting period, the maximum simultaneous feed-in      implemented to avert such critical situations. They include
from wind turbines in the 50 Hertz control area was reached    higher redispatching, additional inductors, the support of
on 5 February 2011 at 9,591 MW. The maximum feed-in to         DSOs and power plant operators as well as the use of
the 50 Hertz transmission system occurred on 19 January        equalisation facilities at industrial customers in Hamburg
2011 at 14,715 MW ( momentary figure ).                        and contractual agreements on deductible loads.

To avoid overloading network elements in the 50 Hertz          On 16 August 2011 and on 8 November 2011 50 Hertz
transmission system as a result of faults, it was necessary    and the other German TSOs notified the neighbouring
to order measures in accordance with section 13 EnWG           European TSOs in workshops of their activities so far and
on 213 days in 2011 ( of which 45 days involved reducing       other joint steps to cope with the effects of the nuclear
power from renewable sources ). This resulted in a redis-      phase-out in winter 2011 / 2012. For the 50 Hertz control
patch volume of 3.85 TWh and a reduced EEG power               area this generally confirms prior statements on higher load
offering of 45 GWh.                                            flows from north to south and from east to west, a high-
                                                               er base load on the transmission system overall and the
On 27 June 2011 the new Transmission Control Center            possibility of acute difficulties in maintaining tension in the
( TCC ) was officially inaugurated in the presence of the      Hamburg area. In cooperation with TenneT TSO, VE Distri-
European Energy Commissioner Günther H. Oettinger and          bution Hamburg and E.ON Netz, 50 Hertz Transmission has
many guests from politics, the industry and the general        prepared and adopted a plan of concerted action should
public.                                                        voltage rise too high or fall too low. Additional internal
                                                               measures have also been prepared to enable the operating
Following the moratorium on nuclear power imposed by           staff at the TCC to deal with critical situations in winter.
the German government in March 2011, the situation in
the 50 Hertz control area has been characterised by higher
north-south and east-west load flows. In addition, the
Hamburg area experiences very high tension, especially at
times of weak load, and very low tension when the load is
high and the level of feed-in from wind is low.
                                                                                             Annual report 2011 Management report · 91




Grid use and grid connection                                    Regulatory matters
In September 2011 the FNA published a so-called pooling         The revenue cap for 2011 was determined as of 1 January
decision for grid use that came into effect on 1 January        2011 by reference to ARegV – regulation by incentive. It
2012. 50 Hertz Transmission had to factor the decision into     was raised by about three per cent compared with the
the price calculation carried out in autumn 2011 for grid       previous year. By contrast, the revenue cap for 2012 is
use in 2012. The pooling decision changes the allocation of     around 15 per cent higher and forms the basis of the price
income from the vertical use of the grid to the customers.      sheet applicable as of 1 January 2012.


50 Hertz is currently processing ten applications under         In the period up to 31 December 2011, 50 Hertz Transmis-
the regulation on connecting power stations to the grid         sion received clearance for 44 investment budgets out of a
( KraftNAV ) for connecting conventional power plants and       total of 75 active applications since 2008. In terms of total
storage stations to the transmission system as well as one      application volume, this means that € 2.5 billion out of a
for a compressed air storage station outside the scope of       total of € 6.1 billion had been approved by the FNA as of
the KraftNAV. The projects relate to 11 sites and have an       the reporting date.
aggregate gross nominal capacity of around 8,800 MW,
of which 50 Hertz has made agreements to connect some           50 Hertz was able to score one important victory in the
5,200 MW.                                                       test case brought before the Higher Regional Court in
                                                                Düsseldorf on the procedure used by the FNA to approve
In the course of 2011 two new applications for a grid con-      investment budgets. In its ruling dated 23 March 2011,
nection were made to 50 Hertz for storage projects of some      the Higher Regional Court in Düsseldorf concurred with
1,100 MW. At the same time, four applications were with-        the arguments advanced by 50 Hertz and deemed the
drawn to connect coal-fired and combined cycle power            ‘double recognition avoidance amount’ and the non-
plants ( CCPPs ) and one storage project with an aggregate      recognition of changes in interest expenses to be unlawful.
capacity of around 4,450 MW. In the reporting period, the       Talks on a settlement are still being held with the FNA,
gross capacity of conventional power plants and storage         also on retroactive changes to the approval procedure for
stations applying to 50 Hertz for a grid connection therefore   investment budgets, which are expected to be concluded
fell by roughly 3,350 MW to 8,800 MW.                           in the first quarter of 2012. Talks were also held in the
                                                                context of the ‘grid platform’ on the possibility of using a
In terms of grid connections under the EEG, 50 Hertz has        t-0 approach to planning costs instead of the current t-2
19 applications for OWFs in the Baltic Seat with a final        delay for recouping the costs of capital. This would enable
projected capacity of up to 5,900 MW ( five of which were       a faster return of capital for new investments and improve
new applications received in 2011 for a total of around         the regulatory framework for expanding the grid.
1,700 MW ). There are seven applications for onshore
wind farms of up to 1,100 MW, taking total applications for     50 Hertz is playing an active role within ENTSO-E on pre-
offshore and onshore wind farms to more than 7,000 MW.          paring the network codes required under EU law, which
Then there are three applications from PV farms of around       will be applicable directly in member states once the EU
500 MW. Although some projects have been abandoned,             legislative process has been completed.
this means that the volume of applications to 50 Hertz
for connecting wind and PV farms to the grid went up by
around 2,300 MW to 7,500 MW in the reporting period.
92 · Annual report 2011 Management report




Energy management                                               To improve the nationwide equalisation scheme, we and
                                                                the other German TSOs have created the technical and
Balancing group management                                      contractual conditions for launching an ongoing system
The new market rules for balancing group accounting for         of expense equalisation for photovoltaic power, similar
electricity were implemented as of the accounting month of      to the equalisation of expenses for wind power. This is
June 2011. In connection with the decision by the FNA on        set to commence routine operations on 1 January 2012.
a standard Germany-wide balancing group contract, new           Following intense debate in the media on the amount of the
contracts were sent to the 459 balancing group managers         EEG levy for 2011, the levy of 3.53 euro cents / kWh was
( BGMs ) together with the old contracts. All were accepted     shown to be justified and had the overall effect of mitigating
in accordance with the terms of the contract.                   the reported deficit. In the context of revising the EEG
                                                                as part of the energy transition package, it was therefore
50 Hertz Transmission performs the accounting of the            possible to convince political decision-makers of the need
continuous balancing of the control area on a monthly           for a liquidity reserve in subsequent years. The intention
basis, and thus of all balancing groups ( including its own )   here is to prevent high payment obligations to operators
on a monthly basis. At the end of 2011, 50 Hertz Transmis-      of generation facilities resulting in cash flow difficulties for
sion was performing the management and accounting for           TSOs. The levy for 2012 of 3.592 euro cents / kWh was
approximately 1,140 balancing groups and for 459 traders,       published on schedule.
electricity sales organisations and network operators oper-
ating in its control area. The high quality of the balancing    International grid control cooperation
group accounting performed by 50 Hertz Transmission             The year 2011 was dedicated to preparing the international
is acknowledged by its market partners. It is reflected in      expansion of the alliance of German TSOs. A cooperation
the small number of queried invoices and in customers’          agreement was drawn up, and the first contracts were
prompt payments.                                                signed with Energinet.dk, TenneT Netherlands and CEPS.
                                                                The benefits of the expansion were then presented to the
In December 2011 the number of active balancing groups          FNA and the other regulators concerned, to obtain their
went up by about 150 in connection with the preparations        approval and to involve the European TSOs that would be
for implementing the provisions of the EEG 2011 on sepa-        indirectly affected. By extending the alliance abroad, the
rate accounting for electricity from the market premium         German TSOs are making an important contribution to the
model and the green power privilege.                            European internal market.

EEG / KWKG administration
In the reporting period the total volume of EEG electricity
in the control area increased by approximately 13 per cent
compared to the previous year. This is mainly due to a
further increase in feed-in from PV facilities by a factor of
2.5 compared with 2010.
                                                                                                        Annual report 2011 Management report · 93




Profit and loss statement ( in million euros )

                                                                                                      pro forma
                                        1.1. – 31.12. 2011         1.6. – 31.12. 2010      1.1. – 31.12. 2010*          Change 2010/2011
  Revenue and other income                       7,033.7                     3,306.6                  5,666.1                       1,367.6
  Operating expenses                            –6,963.7                   –3,251.2                 –5,543.0                       –1,420.7
  Financial result                                 –13.3                        –4.5                    –18.6                             5.3

  Result of ordinary
  operations                                         56.7                       50.9                    104.5                          –47.8




Coverage of network losses                                                Financial situation of 50 Hertz
In 2011 50 Hertz established the organisational and tech-
nical conditions for using the futures market of European                 Transmission
Energy Exchange AG to purchase the ‘long-term compo-
nent’ of energy required to cover network losses. Since                   Earnings situation
1 November 2011, 50 per cent of the monthly energy re-                    The financial year 2010 was divided into two short financial
quirement has been purchased on the futures market. The                   years ( 1.1. to 31.5.2010 and 1.6. to 31.12.2010 ). The figures
analysis of the remaining volumes purchased by means of                   from 50 Hertz Transmission’s second short financial year
tenders is intended to produce a refined model for further                from 1 June to 31 December 2010 are presented as the
improving purchasing in the future.                                       figures for the previous year for the profit and loss account
                                                                          and the cash flow statement, and the figures for 50 Hertz
Cooperation with TenneT TSO                                               Transmission on 31 December 2010 for the balance sheet.
The scope of cooperation with TenneT TSO was extended                     Pro forma figures for 12 months are also shown to facilitate
in 2011, particularly in terms of buying and selling electricity          comparison with the financial year 2011. In the following
positions on the spot market of the European Power Ener-                  comments, the figures for the previous year are assumed
gy Exchange ( EPEX ). This includes adding other electricity              to be the 12 months of 2010.
positions and preparing to use the quarter-hourly intraday
trading on the EPEX spot market as of January 2012. All                   Profit and loss statement
the necessary organisational steps were completed in 2011.                Income and expenses for 50 Hertz Transmission are
                                                                          dominated by processing EEG and KWKG payments,
                                                                          which have no effect on profit and loss. As the accounting
                                                                          mechanism was restructured at the beginning of 2010,
                                                                          TSOs now sell the power fed into the grid by upstream
                                                                          electricity network operators and directly connected
                                                                          generators on an electricity stock exchange. Besides
                                                                          the revenue generated from the sale of EEG electricity,
                                                                          TSOs levy a charge on all trading companies and sales
                                                                          organisations within the control area which are intended
                                                                          to cover the costs arising from the feed-ins and sale of
                                                                          renewable energy not covered by the sale proceeds.
94 · Annual report 2011 Management report




Revenue from the EEG management amounted to                        Negative net interest included in the financial result
€ 4,415.7 million ( previous year € 3,585.8 million ), while the   was € 21.6 million in the reporting period ( previous year
management of the KWKG-generated revenue amounted                  € 22.2 million ). 50 Hertz Transmission received income of
to € 45.6 million ( previous year € 25.6 million ). The income     € 8.3 million ( previous year € 3.6 million ) from a profit and
reported in this context is matched by expenses of the             loss transfer agreement with 50 Hertz Offshore.
same amount.
                                                                   The result of normal operating activities was € 56.7 million
Services billed to third parties accounted for € 1,783.6 mil-      ( previous year € 104.5 million ). After deducting income tax-
lion of both revenue and the cost of materials and services        es ( € 4.6 million ) and other taxes ( € 0.5 million ), this result-
( previous year € 1,267.5 million ).                               ed in net income of € 51.6 million for the 2011 financial year.
                                                                   These earnings are largely the result of the enormous rise
Staff expenses came to € 57.8 million ( previous year              in energy costs required to maintain system stability
€ 51.5 million ); the increase compared with 2010 reflects         due to weather conditions. The year 2011 was also affected
adjustments to the wage settlement and also the larger             by the expenses incurred or deferred for connecting OWFs
workforce needed to handle the broader range of                    to the grid. Under the existing regulatory regime, both the
responsibilities.                                                  energy expenses and the offshore expenses will only be
                                                                   reimbursed with effect on profit and loss via the revenue
Depreciation and amortisation came to € 57.9 million               cap in the second year after they were incurred.
( previous year € 69.9 million ). Assets’ useful lives were
adjusted to comply with regulatory provisions, which were          To comply with the dividend restriction in section 268,
generally longer. Depreciation and amortisation are lower          paragraph 8 German Commercial Code ( HGB ), an amount
as a result.                                                       of € 1.3 million was transferred to other retained earnings
                                                                   reserves, and the remaining net income of € 50.3 million
Other operating expenses amounted to € 110.8 million               was distributed to Eurogrid.
( previous year € 95.0 million ). This includes the costs of
the KWKG expense equalisation scheme of € 45.6 million             In the full financial year 2010, aggregate net income for
( previous year € 25.6 million ) and additions to provisions       the two short financial years came to € 124.7 million.
for contingent contracts to cover energy losses of € 4.5           This followed the reversal of an item for deferred taxes
million ( previous year € 5.5 million ) as the market price for    ( € 38.2 million ) as a tax group was formed with Eurogrid
electricity remains low.                                           for the second short financial year as of 1 June 2010. In the
                                                                   first short financial year, tax expenses came to € 15.7 million,
                                                                   other taxes to € 0.4 million and extraordinary expenses to
                                                                   € 1.9 million.
                                                                                                   Annual report 2011 Management report · 95




Assets and financial position                                       Equity went up by € 200.0 million as a result of the addition
                                                                    to capital reserves by way of a debt-equity swap. It was
Balance sheet                                                       reduced by the distribution to Eurogrid from other retained
Fixed assets consist of intangible assets ( € 35.7 million ),       earnings reserves ( € 19.4 million ) and profits carried forward
technical network equipment at 50 Hertz Transmission                ( € 42.5 million ). Borrowing fell sharply as debt was convert-
( € 1,254.3 million ) and financial investments ( € 243.2           ed into equity following the addition to capital reserves.
million ). The latter item mainly consists of the equity
investment ( € 109.0 million ) in and a loan ( € 133.3 million )    Non-current debt includes the shareholder loan of
to 50 Hertz Offshore.                                               € 300.0 million from Eurogrid ( previous year € 500.0 million ).
                                                                    Other items are mainly various provisions of € 96.1 million
Of current assets, € 620.3 million ( previous year € 551.2          ( previous year € 93.9 million ) and deferred income of
million ) represents trade receivables; they underline the high     € 128.0 million ( previous year € 134.0 million ), all with long
accounting volumes that arise from managing the network,            maturities.
also in relation to the Group’s earnings, but which mostly
have no effect on profit or loss. A receivable from affiliated      Medium- and short-term debt mainly consists of
companies of € 230.6 million ( previous year € 110.0 ) relates      miscellaneous provisions of € 909.0 million ( previous year
to the cash pooling arrangement with Eurogrid.                      € 539.8 million ), primarily in relation to the EEG and KWKG.
Other assets of € 273.1 million ( previous year € 384.9             Trade liabilities accounted for € 184.0 million ( previous year
million ) stem mainly from input VAT from purchasing EEG            € 103.7 million ).
feed-in and equalisation receivables from the EEG process.




Balance sheet ( in million euros )

                                                                   31.12. 2011              31.12. 2010                        Change
  Assets
  Fixed assets                                                        1,533.2                   1,350.5                           182.7
  Current assets (including prepaid expenses)                          1,141.4                  1,067.5                            73.9
                                                                      2,674.6                   2,418.0                          256.6


  Liabilities
  Equity                                                                857.2                     717.9                           139.3
  Long-term borrowings                                                  573.6                     770.7                          –197.1
  Mid-term and short-term borrowings                                  1,243.8                     929.4                           314.4
                                                                      2,674.6                   2,418.0                          256.6
96 · Annual report 2011 Management report




Cash flow statement ( condensed )                                       Cash flow from investing activities includes additions
Cash flow from operating activities improved sharply com-               to property, plant and equipment as well as a loan of € 80.0
pared with the second short financial year and compared                 million and the contribution to the capital reserve of € 60.0
with 2010 as a whole, which is the perspective adopted for              million made at 50 Hertz Offshore. Cash flow from financing
the following comments. The seasonal effect on cash flow                activities is made up of cash outflows for the profit transfer
mainly depends on the weather and the resulting increase                ( € 50.3 million ) and dividend payments ( € 61.9 million ), each
or decrease in feed-in payments and energy costs. It also               to Eurogrid.
reflects the cash flow effect of the debt-equity swap for
€ 200.0 million, which came about by offsetting the loan                The financing of 50 Hertz was ensured for the entire
liability against the payment to increase the capital reserve.          financial year. The cash pooling arrangement with Eurogrid
                                                                        was in place for the full year. Following its bond issue
                                                                        on 22 October 2010, Eurogrid made a shareholder loan
                                                                        totalling € 500.0 million to 50 Hertz Transmission. As of
                                                                        29 December 2011, this shareholder loan was reduced by
                                                                        € 200 million; this amount was paid into the capital
                                                                        reserves of 50 Hertz Transmission by Eurogrid to bolster
                                                                        the company’s equity by offsetting an equivalent amount
                                                                        of the loan liability.




Cash flow statement (condensed) ( in million euros )

                                                                                                     pro forma                  Change
                                            1.1. – 31.12. 2011   1.6. – 31.12. 2010        1.1. – 31.12. 2010        2011 / 2010 pro forma


  Cash flow from operating
  activities                                           458.9                 –67.8                     125.9                      333.0

  Cash flow from
  investing activities                                –229.7               –139.4                    –181.5                       –48.2

  Cash flow from
  financing activities                                –112.2                  61.2                      87.2                     –199.4

  Change in cash and cash
  equivalents                                           117.0              –146.0                       31.6                        85.4

  Cash funds at the end of the
  period                                               230.7                 113.7                     113.7                       117.0
                                                                                               Annual report 2011 Management report · 97




In the 2011 financial year the company formed an income          50 Hertz Transmission holds an interest of 10.1 per cent in
tax group with Eurogrid. 50 Hertz Transmission also forms        CORESO SA, registered in Brussels, Belgium. CORESO is
a tax group for income tax and VAT purposes with 50 Hertz        the coordination and service centre for load forecasts and
Offshore.                                                        flows in the CWE region ( central western Europe ).

Overall assessment of the financial situation                    Human resources
The change in the result of ordinary operations compared         The number of staff employed by 50 Hertz Transmission
with the previous year ( pro forma ) is a direct reflection of   increased from 622 on 31 December 2010 to 664 on
the company’s dependence on energy costs, which were             31 December 2011, an increase of somewhat less than
higher due to the weather, and on connecting OWFs to the         7 per cent. At year-end 2011 the company again had
grid. Under the current regulatory regime, the correspond-       20 apprentices.
ing revenue is only recognised in profit and loss via the
revenue cap in the second year after connection. The             Health and safety
financial liabilities that fell due in the 2011 financial year   The primary goal is to create safe working conditions and
were covered by available funds and the shareholder loan.        a work environment that meets occupational health and
                                                                 safety requirements at all times. In the reporting year, there
Equity investments                                               was one notifiable occupational accident, eight accidents
50 Hertz Transmission holds a 12.5 per cent stake in CAO         during business travel and 17 commuting accidents, which
( Central Allocation Office GmbH ), a company with its           resulted in a total of nine days of lost time.
registered office in Freising. The company was established
on 17 July 2008 for the purpose of supplying congestion
management services to electrical transmission systems.

50 Hertz Transmission holds a 20 per cent stake in EMCC
( European Market Coupling Company GmbH ), a company
registered in Hamburg. This company was founded on
28 August 2008 for the purpose of providing congestion
management services to electrical transmission grids
via market coupling, in particular by means of electricity
exchanges.
98 · Annual report 2011 Management report




Risk report                                                      There is some remaining uncertainty about the return
                                                                 on investment. Insufficient returns on capital employed
Risk management system                                           represent a considerable economic risk for investments
The objectives of risk management are to avoid risks             – whether previously made or planned for the future –
which could threaten the existence of 50 Hertz Transmis-         necessary to guarantee security of supply. The rate of
sion, to reduce existing risk positions and to optimise the      return on equity as defined by the Federal Network Agency
opportunity and risk profile. Risks are identified, recorded,    has not even been close to being achieved on a regular
assessed and monitored using existing standardised risk          and systematic basis due to restrictive interpretation of the
guidelines. The assessment of the potential extent of dam-       regulatory stipulations. The delay and the reduction in the
ages and probability of occurrence is based on scenarios.        basis for interest calculation in the approved investment
In this regard, continuous monitoring of the risk situation      budgets, which is netted off against depreciation on past
must be guaranteed, in particular to detect at an early          investments ( so-called BVD ), significantly reduce the return
stage any risks endangering the company’s existence and          that can effectively be earned. The full recognition of the
to provide support in selecting and implementing risk man-       submitted investment budget is essential for guaranteeing
agement measures. The focus of the further development           50 Hertz’s investment security. The negotiations towards
of the risk management system is the systematic prepara-         a settlement with the FNA that began following a ruling
tion and general implementation of action plans to manage        by the Higher Regional Court in Düsseldorf may result in
these significant corporate risks. Relevant individual risks     improvements to the regulatory regime. The results of the
and the overall risk position are regularly reported to the      cost review for the base year and the efficiency comparison
managing directors, the Supervisory Board and the share-         by the FNA are also uncertain. The approved costs and the
holders. In the event of major changes, the relevant decision-   efficiency score are important components in the revenue
makers are informed on an ad hoc basis. The smooth               cap for the second regulatory period. As no one has much
functioning and effectiveness of the risk management sys-        experience with cost reviews and efficiency comparisons,
tem are subject to regular reviews.                              the related opportunities and risks are difficult to estimate.

Opportunities and risks                                          Risks in the energy business result from cost increases
The opportunities for 50 Hertz Transmission mainly reside        and volatility, in particular in procuring control energy and
in achieving a firmly established market standing as an          energy volumes to cover network losses as well as the
independent TSO in a European business environment,              costs of redispatching. Such cost increases may result
and in being a strong and dependable partner to the              from volume effects, and / or from unforeseen increases
customers supplied in the control area.                          in market prices. A model with synchronous incentive
                                                                 mechanisms ( bonuses and penalties in the so-called
                                                                 corridor model ) limits the long-term effects on earnings
                                                                 for 50 Hertz Transmission, but the delay of two years can
                                                                 restrict the ability to distribute dividends on the basis of
                                                                 HGB profit. This concerns both risks and opportunities.
                                                                                                Annual report 2011 Management report · 99




In order to mitigate its dependency on short-term price            One important aspect of 50 Hertz’s operating business
fluctuations and to be as close as possible to the timescale       concerns the legal obligation to assume system responsi-
for the price calculation in order to determine the zero           bility for electricity transmission as the TSO’s contribution
point set in the corridor model, 50 Hertz Transmission             to a safe and dependable energy supply system. Liability
purchases the energy expected to be required to cover              for interruptions and disruptions to the power supply is
network losses by means of public tenders and exchange-            mostly covered by insurance. Given the considerable and
traded futures. However, purchasing operations cannot              increasing influence of fluctuating wind power feed-ins,
all be hedged on a long-term basis, because mandatory              50 Hertz Transmission focuses on ensuring that the system
procurement methods ( especially for control energy ) have         is balanced in terms of generation and consumption at all
to be used.                                                        times. This also means that the primary objective of all par-
                                                                   ties involved in the process must be to considerably speed
Based on the price peaks occurring in previous years,              up approval procedures, not least to allow the networks
especially in the market for minute reserve, 50 Hertz              to keep up with the continuing rapid expansion of genera-
Transmission has largely automated short-term monitoring           tion capacities, principally from wind power. The risks aris-
of all electricity-price-related risks since 2006. All decision-   ing from delays or extra costs of the extra-high voltage grid
makers and departments concerned are informed about                expansion are managed by 50 Hertz Transmission through
the current situation and the anticipated development in           early and targeted public relations work, including frank
the energy business by means of regular status reports.            discussions with authorities, nature conservation organi-
                                                                   sations and local residents living close to overhead line
In principle, the EEG equalisation scheme in place since           routes.
1 January 2010 intends EEG management to have no
effect on profit and loss for the TSOs. The new procedure          One main focus is the South-West Interconnector. In com-
applied to the sale of EEG electricity feed-in in accordance       pliance with European regulations, under which all delays
with the regulations on the equalisation scheme does,              are notifiable, an annual report is presented to the German
however, result in significant liquidity risks for 50 Hertz        federal government and the responsible EU coordinator.
Transmission. Thus, in the event that the fixed EEG levy           The shortage of line capacity in this segment of our control
for a given year based on forecast figures as well as              area creates the risk of faults in the system. A number of
marketing revenues is insufficient to close the gap between        temporary steps are being taken to limit this risk. Thorough
the costs of feed-in remuneration and the sales proceeds,          remedial action is only possible if a maximum acceleration
this will result in an interim financing requirement, which        of approvals, construction and commissioning, including
can be substantial, as observed in the last two years. The         compensation measures, takes place.
opportunity now provided by the regulations of including a
liquidity reserve in the calculations will make it possible to
reduce this interim financing requirement in future.
100 · Annual report 2011 Management report




The situation in procurement markets continues to be           Forecast
characterised by high concentration on the supply side.
Besides higher prices, this may also lead to longer delivery   50 Hertz Transmission will continue to invest in grid ex-
periods of materials and services. Targeted monitoring of      pansion. In addition, the company is using its influence to
the procurement market and professional asset manage-          champion the unfettered use and development of capac-
ment are measures taken to contain this risk.                  ity for electricity storage. The practical implementation of
                                                               these projects will contribute to transporting the dispropor-
Key risks also result from the obligation to connect OWFs      tionately high volumes of EEG electricity fed into the sys-
to the grid. The area is still subject to considerable legal   tem in the 50 Hertz Transmission control area to the centres
and technical uncertainty. The law is not clear about who is   of consumption. The largest onshore projects for 50 Hertz
responsible for damages in the event of culpable delays in     Transmission are the construction of the northern line,
making the grid connection to the OWF or if the connection     the Uckermark line and the remaining sections of the
subsequently malfunctions.                                     South-West Interconnector. Offshore, the biggest project
                                                               is to connect the OWF EnBW Baltic 2. In addition, work
Besides monitoring the different connection projects,          to strengthen and expand the grid will be necessary,
separate project documentation has been established and        especially for the grid connections to the OWF. In the years
implemented to avoid risks. Nevertheless, delays cannot        ahead, investment activity is therefore likely to increase
be ruled out due to the submarine cable technology –           sharply. Due to the indispensable physical processes to
which is still under development – and related technical       balance generation and load in its control area, the com-
risks as well as the dependence of maritime processes on       pany is highly dependent on the costs of electrical energy
weather conditions and the state of the seabed.                and of redispatch, which will in turn have a decisive effect
                                                               on future earnings. The cost trends for actual grid opera-
50 Hertz Transmission has to seek refinancing on the           tion – i.e. maintenance, human resources, management
capital market itself, together with its parent company        and operation – essentially depend on energy policy as
Eurogrid. This can lead to funding shortfalls due to           well as on the regulatory framework. For instance, a look at
restrictions on money markets and capital markets.             the current situation shows higher administrative expenses
                                                               for the coordination of Federal Network Agency activities.
Overall risk position                                          For offshore grid costs, an increase can be expected within
Neither any individual risk nor the aggregated risks           the next few years due to the implementation of the Infra-
suggested any risk endangering the existence of 50 Hertz       structure Planning Acceleration Act. The costs for system
Transmission in the reporting period. Considering the          support services and network losses are also significantly
actions taken, no such risks are recognisable for the          influenced by the development of electricity prices. Further
following year ( 2012 ) either.                                network expansion and the ensuing increase in the number
                                                               of generation facilities will result in higher staff and mainte-
                                                               nance expenses.

                                                               Assuming that the existing framework remains in place, the
                                                               positive results are expected to continue over the next two
                                                               financial years, but sustaining the positive performance will
                                                               require improvements to the statutory regime, including in
                                                               particular the recognition of planning costs for investment
                                                               budgets and the abolition of the double recognition avoid-
                                                               ance amount ( also for past budgets ).
                                                                                                                 Annual report 2011 Management report · 101




From left to right: Dr Frank Golletz, Udo Giegerich, Boris Schucht, Hans-Jörg Dorny




Increasing investment activity and the pre-financing                                  Events after the reporting period
required for the EEG will push up financing volumes,
while the effects of market premiums and direct sales will                            No events of considerable importance occurred between
put further pressure on the liquidity situation in the EEG                            the reporting date and the time the annual financial
business. This requires further development of our financial                          statements for 50 Hertz Transmission were prepared.
instruments and stricter cash management. The financing
will continue to be provided by the parent company                                    Berlin, 15 February 2012
Eurogrid, whose Baa1 rating ( Moody’s ) was confirmed in
October 2011.                                                                         The management

In all events, 50 Hertz Transmission will carry out the mis-
sion it was legally assigned, which is to transport electric-                         Boris Schucht
ity in the control area and to promote the use of renewable
energies and the development of a European internal mar-
ket. This will be done in the best possible manner, and, in                           Udo Giegerich
particular, in the interest of all our customers and European
partners. Furthermore, it will contribute to a secure electric-                       Dr Frank Golletz
ity supply system. At the same time, 50 Hertz Transmission
contributes to climate protection and to the promotion of
the economy, especially in eastern Germany.                                           Hans-Jörg Dorny
102 · Annual report 2011 Financial statements




Annual financial statements



Balance sheet ( in million euros )


                                                          Notes   31.12. 2011   31.12. 2010

   Assets


   Fixed assets                                             (1)
   Intangible assets                                                    35.7          35.4
   Property, plant and equipment                                     1,254.3       1,211.8
   Financial assets                                                    243.2         103.3
                                                                     1,533.2       1,350.5


   Current assets
   Inventories                                              (2)          6.8           4.3
   Receivables and other assets                             (3)      1,125.8       1,051.1
   Cash and cash equivalents                                             0.0           3.7
                                                                     1,132.6       1,059.1


   Prepaid expenses and deferred income                                  3.3           4.0
   Separate loss account for the creation of provisions     (4)           4.1          4.2
   Funding surplus on plan assets                           (5)           1.4          0.2


                                                                     2,674.6       2,418.0
                                                     Annual report 2011 Financial statements · 103




                                       Notes     31.12. 2011                    31.12. 2010

Liabilities


Equity                                   (6)
Share capital                                         200.0                            200.0
Capital reserves                                      655.8                            455.8
Other revenue reserves                                   1.4                             19.7
Profit carried forward                                      –                            42.4
Net income                                                  –                             0.0
                                                      857.2                             717.9


Special items                            (7)             7.9                              8.4
Provisions                               (8)        1,005.1                            633.7
Liabilities                              (9)          583.8                            838.3
Prepaid expenses and deferred income    ( 10 )        220.6                            219.7
Deferred tax liabilities                ( 11 )              –                                –


                                                    2,674.6                          2,418.0
104 · Annual report 2011 Financial statements




Profit and loss statement ( in million euros )


                                                                 1.1. –        1.6. –            pro forma
                                                 Notes     31.12.2011     31.12.2010    1.1. – 31.12.2010

   Revenue                                        ( 12 )      6,948.5        3,276.0           5,595.3
   Change in inventories                                           2.5           0.8               –0.7
   Other own work capitalised                                      2.2           1.2                 2.0
   Other operating income                         ( 13 )          80.5          28.6               69.5
   Material costs                                 ( 14 )     –6,737.2       –3,136.7          –5,326.6
   Personnel expenses                             ( 15 )        –57.8          –28.6             –51.5
   Depreciation and amortisation                  ( 16 )        –57.9          –34.2             –69.9
   Other operating expenses                       ( 17 )       –110.8          –51.7             –95.0
   Net income from investments                    ( 18 )           8.3           3.6                 3.6
   Net interest                                   ( 19 )        –21.6           –8.1             –22.2
   Result of ordinary operations                                  56.7          50.9             104.5


   Extraordinary income                                            0.0           0.0               –1.9
   Taxes                                         ( 20 )           –5.1          37.9               22.1
   Result for the year                                            51.6          88.8              124.7


   Transferred to retained earnings                               –1.3           0.0                 0.0
   Profit and loss transfer                                     –50.3          –88.8            –124.7


   Net income                                                      0.0           0.0                 0.0
                                                                                                       Annual report 2011 Financial statements · 105




Cash flow statement ( in million euros )


                                                                                              1.1. –             1.6. –                 pro forma
                                                                                        31.12.2011          31.12.2010        1.1. – 31.12.2010

 Result for the year                                                                           51.6                  88.8                 124.7
 Depreciation and amortisation less reversal of impairments                                    57.9                  34.2                  69.9
 Increase in provisions                                                                      371.4                   30.0                134.6
 Other non-cash expenses less corresponding income                                            –0.6                    1.0                  –0.9
 Loss on the disposal of assets ( previous year: gain )                                       –0.2                    0.8                   0.9
 Increase in inventories                                                                       –2.5                  –1.4                  –0.1
 Decrease in receivables and other assets ( previous year: increase )                          45.6              –303.3                 –703.8
 Decrease in payables and other liabilities ( previous year: increase )                      –64.5                   82.1                500.5
 Cash flow from operating activities                                                         458.7                 –67.8                 125.8


 Cash payments for investments in property, plant and equipment and intangible assets       –100.5                 –62.0                –104.1
 Cash receipts from building cost subsidies                                                    11.0                   4.0                   4.0
 Cash payments for investments in financial assets                                          –140.1                 –81.4                 –81.4
 Cash flow from investing activities                                                        –229.6                –139.4                –181.5


 Cash receipts from the shareholder loan                                                        0.0                500.0                 850.0
 Cash payments for the reimbursement of the shareholders’ financial transactions                0.0                   0.0                  –4.0
 Cash payments to owners (distribution from reserves)                                        –61.9                    0.0                   0.0
 Cash payments for the repayment of the shareholder loan                                        0.0              –350.0                –670.0
 Cash payments relating to the profit and loss transfer                                      –50.3                 –88.8                 –88.8
 Cash flow from financing activities                                                        –112.2                   61.2                  87.2
 Change in cash and cash equivalents                                                         116.9                –146.0                   31.5


 Cash funds at the beginning of the period                                                    113.7                259.7                   82.1


 Cash funds at the end of the period                                                         230.6                 113.7                  113.6
106 · Annual report 2011 Financial statements




Fixed asset table ( in million euros )

                                                                        Acquisition and production costs

                                                                 1.1.                 Reclass-                 31.12.
                                                                2011     Additions   ifications   Disposals     2011

   Intangible assets
   Purchased software, licenses and other rights                48.1          2.8            –           –      50.9
   Payments in advance                                            –             –            –           –         –
                                                                48.1          2.8            –           –      50.9


   Property, plant and equipment

   Land, land rights and buildings, including buildings on
   third-party land                                            115.4          2.6          1.0         0.2      118.8
   Technical installations and equipment                     2,512.0         23.8         19.1         11.0   2,543.9
   Other assets, office furniture and equipment                58.7           4.5          1.0          1.3     62.9
   Advance payments and assets under construction               97.7         81.6       –21.1         12.9     145.3
                                                             2,783.8        112.5            –        25.4    2,870.9


   Financial assets
   Shares in affiliated companies                              49.0          60.0            –           –     109.0
   Loans to affiliated companies                               53.3          80.0            –           –     133.3
   Equity investments                                            0.3            –            –           –        0.3
   Other equity investments                                      0.1           0.1                       –        0.2
   Other loans                                                   0.5            –            –          0.1       0.4
                                                              103.2         140.1            –          0.1    243.2


   Fixed assets                                              2,935.1        255.4            –        25.5    3,165.0
                                                                                    Annual report 2011 Financial statements · 107




                                                                    Depreciation and amortisation

                                                             1.1.               Reclass-                              31.12.
                                                            2011    Additions   fications      Disposals               2011

Intangible assets
Purchased software, licenses and other rights                12.7        2.5            –                 –             15.2
Payments in advance                                            –           –            –                 –                 –
                                                             12.7        2.5            –                 –             15.2


Property, plant and equipment

Land, land rights and buildings, including buildings on
third-party land                                            39.2          1.6       –0.3               0.2              40.9
Technical installations and equipment                     1,490.5       49.5         0.3               9.3          1,530.4
Other assets, office furniture and equipment                42.3         4.3            –              1.3              45.3
Advance payments and assets under construction                 –           –            –                 –                 –
                                                          1,572.0       55.4            –             10.8          1,616.6


Financial assets                                                                                                            –
Shares in affiliated companies                                 –           –            –                 –                 –
Loans to affiliated companies                                  –           –            –                 –                 –
Equity investments                                             –           –            –                 –                 –
Other equity investments                                       –           –            –                 –                 –
Other loans                                                    –           –            –                 –                 –
                                                               –           –            –                 –                 –


Fixed assets                                              1,584.7       57.9            –             10.8          1,631.8
108 · Annual report 2011 Financial statements




                                                                                 Carrying amount

                                                                              31.12. 2011          31.12. 2010

   Intangible assets
   Purchased software, licenses and other rights                                    35.7                 35.4
   Payments in advance                                                                 –                    –
                                                                                    35.7                 35.4


   Property, plant and equipment


   Land, land rights and buildings, including buildings on third-party land         77.9                 76.2
   Technical installations and equipment                                         1,013.5              1,021.5
   Other assets, office furniture and equipment                                      17.6                16.4
   Advance payments and assets under construction                                  145.3                 97.7
                                                                                 1,254.3              1,211.8


   Financial assets
   Shares in affiliated companies                                                  109.0                 49.0
   Loans to affiliated companies                                                   133.3                 53.3
   Equity investments                                                                0.3                  0.3
   Other equity investments                                                          0.2                   0.1
   Other loans                                                                       0.4                  0.5
                                                                                   243.2                103.2


   Fixed assets                                                                  1,533.2              1,350.4
                                                                                                          Annual report 2011 Notes · 109




Notes

General preliminary remarks                                       On the basis of the control and profit and loss transfer
                                                                  agreement existing between 50 Hertz Transmission and
50 Hertz Transmission GmbH ( 50 Hertz Transmission ) is           50 Hertz Offshore GmbH ( 50 Hertz Offshore ), 50 Hertz
registered in the Commercial Register of Charlottenburg           Transmission has the role of tax group parent company
under the registration number HRB 84446.                          with respect to 50 Hertz Offshore. Both companies belong
                                                                  to the same tax group for income tax and VAT purposes.
The annual financial statements of 50 Hertz Transmission
were prepared in compliance with German accounting
rules, with supplementary provisions of the German Limited        Accounting and valuation methods
Liability Companies Act ( GmbHG ) and taking into consider-
ation the Energy Industry Act ( EnWG ). All figures are in mil-   ASSETS
lions of euros. To ensure clear presentation, the items are
summarised in the balance sheet and the profit and loss           Fixed assets
statement and presented and commented separately in the           Purchased intangible assets are recognised at acquisition
notes. The profit and loss statement is drawn up using the        cost and amortised on a straight-line basis according to
‘nature of expense’ method.                                       their estimated useful lives.

Based on the criteria in section 267, paragraph 3 German          Property, plant and equipment is held at acquisition and / or
Commercial Code ( HGB ), 50 Hertz Transmission is a               production cost, less depreciation. In addition to directly
large company and has therefore prepared its financial            attributable costs, the production costs of self-constructed
statements accordingly.                                           plant and equipment also include an appropriate allocation
                                                                  of overhead costs. Borrowing costs are not included.
50 Hertz Transmission is included in the consolidated finan-
cial statements of Eurogrid, with its registered office in        Depreciation and amortisation of assets acquired or
Berlin, and in the consolidated financial statements of Elia      produced before 1 January 2008 takes place using the
System Operator NV / SA, with its registered office in Brus-      declining balance method. A transition to the straight-
sels, Belgium. The consolidated financial statements of           line method takes place as soon as this method results in
Elia System Operator NV / SA, including the largest group         higher depreciation amounts. Items of property, plant and
of consolidated companies, are available at Elia System           equipment acquired or produced from 1 January 2008 are
Operator NV / SA, Boulevard de l’Empereur 20, 1000 Brus-          depreciated using the straight-line method.
sels, Belgium. The consolidated financial statements pre-
pared by Eurogrid include the smallest group of consolidat-       For the calculation of useful lives, the official depreciation
ed companies, and are available on the electronic Federal         and amortisation tables for commonly used assets and
Gazette ( www.ebundesanzeiger.de ). The company is reg-           those for specific economic sectors were used until 31 May
istered in the Commercial Register of Berlin-Charlottenburg       2010. As for the second short financial year starting on
under the number HRB 130427 B. Due to the inclusion               1 June 2010, the useful lives were all calculated using the
within the consolidated financial statements of Eurogrid,
there is no independent obligation to provide partial con-
solidated financial statements for 50 Hertz Transmission
and 50 Hertz Offshore GmbH ( 50 Hertz Offshore ).

A profit and loss transfer agreement has been in place
between Eurogrid and 50 Hertz Transmission GmbH since
1 June 2010. At the same time, a tax group with Eurogrid
as parent company was created for income tax purposes.
110 · Annual report 2011 Notes




figures from the Federal Network Agency ( FNA ), in order        Separate loss account for the creation of provisions
to reflect the increasing regulatory demands made of             Since initial recognition as of 1 July 1990, a separate loss
accounting and to make the annual financial statements           account for the creation of provisions has been shown
more informative in terms of the applicable regulatory           under assets pursuant to section 17, paragraph 4 of the
framework. The imputed useful lives correspond to the            Act on D-Mark Accounting ( DMBilG ) for the provisions
actual depreciation of the assets. Balance sheet figures         recognised in the D-Mark opening balance ( DMEB ) of
resulting from the D-Mark opening balance sheet ( DMEB )         50 Hertz Transmission due to the first-time application of
were not included in this change of valuation method,            section 249, paragraph 1, sentence 1 HGB. The separate
and are carried in the balance sheet based on their 1990         loss account is altered in accordance with the utilisation
revaluation.                                                     and reversal of the corresponding DMEB provisions, which
                                                                 consist solely of a provision for environmental remediation.
Impairment losses are only recognised if necessary to            The account will be carried at the amounts originally
reflect a decline in value.                                      recognised under DMBilG until the DMEB provisions have
                                                                 been utilised or reversed in full.
Financial investments are carried at the lower of acquisition
cost and fair value. Impairment losses are written back as       When calculating the economic equity, the separate loss
appropriate. No impairment losses are recognised if the          account is to be set as a corrective item in equity. The
impairment is temporary.                                         separate loss account is not broken down into an equity
                                                                 share and a deferred tax share.
Loans are recognised at nominal value or discounted to the
reporting date as necessary.                                     Funding surplus on plan assets
                                                                 Pursuant to section 246, paragraph 2, sentences 2 and 3
Current assets                                                   of the HGB, an asset is recognised for difference between
Inventories are valued at acquisition costs or production        the fair value of fund assets and the company’s existing
costs using admissible simplified valuation methods and          occupational pension obligations and other similar long-
respecting the lowest value principle. Inventory risks           term obligations. This amount results from the complete
resulting from a reduced usability are taken into account        insurance against insolvency of the provisions for employee
using appropriate write-downs.                                   entitlement to long-term working hours accounts. Pursuant
                                                                 to section 268, paragraph 8, sentence 3 HGB, a funding
Receivables, other assets and cash funds are carried at the      surplus on plan assets may not be distributed as a dividend.
lower of nominal value and fair value. Identifiable individual
risks and the general credit risk are accounted for using
appropriate write-downs.
                                                                                                       Annual report 2011 Notes · 111




EQUITY AND LIABILITIES                                          The obligations arising from early-retirement schemes
                                                                and from part-time work schemes for older staff recorded
Special items                                                   under the item ‘other provisions’ are based on actuarial
Received investment subsidies are shown under ‘special          expert opinions using an annual 4.09 per cent interest
items’. Their reversal is recognised in profit and loss         rate for an average duration of three years pursuant to the
according to the depreciation rate of the assets concerned.     regulation on the discounting of provisions ( RückAbzinsV ).
                                                                To do so, the actuarial present value of the future payment
Provisions                                                      obligations was calculated and valued. These calculations
In valuing the provisions, all identifiable risks and unknown   are also based on the 2005 G Guideline Tables by Dr Klaus
liabilities are taken into account to the necessary extent      Heubeck. Future wage and salary increases are calculated
using reasonable commercial judgement.                          based on an annual 3.5 per cent increase.

The projected unit credit method was chosen as the actu-        Other long-term provisions are discounted in accordance
arial method for the valuation of pension and anniversary       with the regulation on the discounting of provisions
obligations. For the discounting, an annual 5.13 per cent       ( RückAbzinsV ).
average market interest rate on a remaining useful life of
15 years was used, pursuant to the calculation and pub-         The interest on the addition to personnel provisions is
lication details set forth in the regulation on the discount-   recognised under net interest income.
ing of provisions ( RückAbzinsV ). A discount rate of 5.13
per cent p.a. was also used to measure obligations from         The provisions for impending losses resulting from pending
long-term working hours accounts. These calculations are        procurement transactions are valued on the basis of mar-
based on the 2005 G Guideline Tables by Dr Klaus Heu-           ket prices on the balance sheet date. The valuation as of
beck. Future wage and salary increases are calculated           the reporting date includes forecast revenue from the zero
based on an annual 3.5 per cent increase. Expected pen-         point set in the corridor model ( voluntary commitment for
sion increases are calculated on the basis of rates between     system services ) by the FNA.
1.0 and 3.0 per cent p.a.
                                                                Liabilities
The provisions made by the company for pension obliga-          Liabilities are recognised at their settlement amount.
tions are covered in a completely congruent manner. The
amount of the provisions corresponds to the amount of the       The item ‘payments received on account’ refers to pay-
fund assets. The fair value of the fund assets corresponds      ments made by customers in the context of testing and
in each case to the net asset value of the reinsurance as       preparing grid connections ( connection commitments )
disclosed on the balance sheet date. The provisions for         pursuant to section 4 of the German regulation on the con-
the employee entitlements arising from long-term working        nection of power plants to the grid ( KraftNAV ). This item
hours accounts are completely insured against insolvency.       also includes payments made by customers in the context
The provisions for old-age part-time obligations are only       of constructing jointly used installations. The subsidies
partially insured against insolvency, pursuant to the appli-    received are carried as payments received on account as
cable regulations. Pursuant to section 246, paragraph 2,        long as the funded project is not completed.
sentence 2 of the German Commercial Code, the fund
assets are netted against the provisions for occupational
pensions, long-term working hours accounts and old-age
part-time obligations in the annual financial statement.
Interest expenses arising from the accrued interest of the
provisions are netted against the interest income arising
from the increase of the fund assets.
112 · Annual report 2011 Notes




Prepaid expenses and deferred income                              EEG and balancing group accounting
Subsidies received for building costs are recognised as           To prepare the annual financial statements, expenses,
deferred income and reversed on a straight-line basis.            income and related receivables and payables within the
Subsidies for building costs received through 31 December         framework of the EEG management and the balancing
2002 are reversed over 20 years through profit or loss,           group accounting were calculated on the basis of provi-
unless a shorter duration was agreed. The subsidies for           sional data supplied by third parties and in part on the
building costs received as of 1 January 2003 are reversed         basis of forecasts.
over the asset’s useful life through profit or loss.
                                                                  A final statement on the actual expenses and income from
Since 2007, the income received by 50 Hertz Transmission          the EEG processes can only be made after the electricity
in previous years resulting from cross-border congestion          quantities fed-in from EEG installations have received an
management is recognised under the item ‘Prepaid ex-              auditor’s attestation. With regard to the balancing group
penses / deferred income’. These amounts are used for             accounting, 50 Hertz is dependent on complete data from
investments in preserving and expanding interconnection           all balancing groups. This data of course cannot be com-
capacities. 50 Hertz Transmission is obliged to provide a         pletely available at the time of preparing the financial state-
service in exchange for the received income and recog-            ments. There are therefore still uncertainties concerning
nises it as a liability, as with subsidies for building costs.    the amount of the expenses and income in these areas.
The horizontal grid revenue deferred in 2007 is collected         The items related to the EEG management in the finan-
over a period of 30 years via the transmission charges,           cial statements were determined on the basis of the avail-
in line with the decision of the Federal Network Agency.          able data and evaluations, and take into account the state
Income from the auction of congestions in subsequent is           of knowledge at the time of the preparation of the financial
also recognised as deferred income. The income is recog-          statements.
nised as a revenue reduction; it is recognised in profit and
loss in the year it is included in the transmission charges by    CURRENCY CONVERSION
the regulator. In addition to income from congestion man-
agement, other income in connection with other voluntary          Assets and liabilities denominated in foreign currencies are
commitments is shown as deferred income for the first time        converted at the spot-exchange rate on the balance sheet
this year. It is also recognised in profit and loss by means of   date.
a correction to transmission charges in subsequent years.

Other deferred income relates mainly to deferred income
from long-term contracts, which is only recognised in profit
and loss in subsequent periods.
                                                                                                                                            Annual report 2011 Notes · 113




Notes on the balance sheet
( 1) Fixed assets
The structure of the asset items summarised in the balance sheet and their development are presented in the fixed assets
table. The disposals of plant under construction ( € 12.9 million ) relate to assets which other than originally intended were sold
before entering service.

Shareholdings
The shareholdings of 50 Hertz Transmission as of the balance sheet date are as follows:

                                                                             Interest held (in %)        Equity (in million euros)        Result (in million euros)
  1. Affiliated companies
  50Hertz Offshore GmbH, Berlin1 )                                                             100.0                           109.0                              –   1)


  2. Equity investments
  European Market Coupling Company GmbH, Hamburg                                                20.0                            –0.1                           –0.53 )
  Central Allocation Office GmbH, Freising                                                      12.5                              1.1                            0.22 )
  CORESO SA, Brussels, Belgium                                                                  10.1                              1.3                            0.13 )

                 1) Profit and loss transfer agreement 2) Audited annual financial statements as of 31 December 2010 3) Annual financial statements as of 31 December 2011




( 2 ) Inventories ( in million euros )

                                                                                       31.12. 2011                      31.12. 2010                          Change
  Raw materials, consumables and supplies                                                        2.1                              2.1                              0.0
  Work and services in progress                                                                  4.7                              2.2                              2.5
                                                                                                 6.8                              4.3                             2.5




( 3 ) Receivables and other assets ( in million euros )

                                                                                                   of which due in                                   of which due in
                                                                               31.12. 2011                                      31.12. 2010
                                                                                                          > 1 year                                          > 1 year

  Trade receivables                                                                   620.3                      0.0                    551.2                      0.0
  Receivables from affiliated companies                                               230.8                      0.0                    112.2                      0.0
    of which from shareholder                                                         230.6                      0.0                    110.0                      0.0

  Receivables from associated companies                                                  1.6                     0.0                      2.8                      0.0

  Other assets                                                                        273.1                     10.1                    384.9                    30.0
                                                                                    1,125.8                     10.1                 1,051.1                     30.0
114 · Annual report 2011 Notes




The receivables towards related companies essentially            ( 6 ) Equity
comprise receivables from the cash pool with the share-          The share capital of the company amounting to € 200 mil-
holder Eurogrid. The other receivables are trade receiva-        lion is held in full by Eurogrid.
bles towards related companies.
                                                                 Following a shareholder resolution on 20 December 2011,
Other assets include tax receivables for input VAT of            the capital reserve was increased by € 200 million to
€ 162.6 million ( previous year € 217.0 million ), for which     € 655.8 million in the 2011 financial year. The shareholders’
no declaration had been made as of 31 December 2011.             contribution was made by waiving claims of the same
Equalisation claims from the EEG process came to                 amount against 50 Hertz Transmission for the repayment
€ 55.1 million on the reporting date ( previous year             of a shareholder loan.
€ 129.6 million ). In addition, this item includes restricted
subsidies of € 10.1 million ( previous year € 30.0 million )     The other retained earnings comprise amounts resulting
which are due in over one year and which will be used by         from the change to the BilMoG and amounts without effect
the consortium in the coming years.                              on profit or loss resulting from the asset allocation of prop-
                                                                 erties pursuant to section 36 DMBilG. In the 2011 finan-
( 4 ) Separate loss account for the creation of                  cial year, other retained earnings – less the restricted fund-
provisions                                                       ing surplus on plan assets of € 0.2 million – amounting to
The separate loss account is adjusted in parallel with           € 19.4 million were distributed to Eurogrid. Other complete-
changes in the nominal amount of the provision for               ly restricted retained earnings came to € 1.4 million as of
environmental remediation. As of the reporting date, this        the end of the financial year.
nominal amount came to € 4.1 million ( previous year
€ 4.2 million ).                                                 The profit carried forward from the previous year
                                                                 ( € 42.5 million ) was distributed in full to Eurogrid in the
( 5 ) Funding surplus on plan assets                             reporting year.
Offsetting the recognised provisions against the net
asset value of the reinsurance ( plan assets ) has resulted
in a funding surplus on plan assets of € 1.4 million as of
the balance sheet date ( previous year € 0.2 million ). As
the funding surplus is not covered by other unrestricted
reserves, it may not be distributed as a dividend ( section
268, paragraph 8 HGB ).




( 7 ) Special items ( in million euros )

                                                                31.12. 2011               31.12. 2010                     Change
   Special items for investment subsidies and allowances                7.9                        8.4                      –0.5
                                                                        7.9                        8.4                      –0.5
                                                                                                                  Annual report 2011 Notes · 115




( 8 ) Provisions ( in million euros )

                                                                       31.12. 2011               31.12. 2010                       Change
  Provisions for pensions and other employee benefits                           8.1                       6.9                            1.2
  Tax provisions                                                               5.0                       15.1                         –10.1
  Other provisions                                                           992.0                     611.7                         380.3
    of which
    outstanding receipts for the EEG and KWKG                                530.5                     338.8                          191.7
    easements for rights to use power lines                                   63.7                      62.2                             1.5
    remaining provisions                                                     397.8                     210.7                          187.1
                                                                           1,005.1                     633.7                         371.4




Pension provisions represent the amount required to settle liabilities of € 20.1 million ( previous year € 18.7 million ) less the fair
value of plan assets of € 12.0 million ( previous year € 11.8 million ).

Due to the profit and loss transfer agreement concluded in 2010 with Eurogrid, 50 Hertz Transmission has no longer been
liable for income taxes since 1 June 2010. The provisions for taxes recognised in 2011 related to periods before the tax group
was established.

The remaining other provisions are detailed below:




                                                                       31.12. 2011               31.12. 2010                       Change
  Transmission charges                                                       119.8                     106.3                           13.5
  Delivery obligations pursuant to the EEG                                   202.4                      49.3                         153.1
  Personnel related provisions                                                 11.4                     10.9                            0.5
  Provisions for contingent losses                                             4.5                        1.4                            3.1
  Provisions for litigation                                                    8.4                        8.1                           0.3
                                                                             346.5                     176.0                         170.5


  Remaining provisions                                                        51.3                      34.7                           16.6
                                                                             397.8                     210.7                          187.1




Provisions for partial early-retirement obligations of € 6.1 million ( previous year € 6.9 million ) were offset against the net asset
value of the reinsurance ( plan assets ) of € 4.0 million ( previous year € 4.2 million ).
116 · Annual report 2011 Notes




( 9 ) Liabilities ( in million euros )                                     31.12. 2011                                  31.12. 2010
                                                                   Total               Term                     Total              Term

                                                                                  <1            >5                             <1              >5
                                                                                 year         years                           year           years

   Received payments                                             50.8            50.8           0.0           56.5           56.5              0.0
   Trade and other payables                                     184.0           184.0           0.0          103.7          103.7              0.0
   Liabilities to related companies                             300.7              0.7          0.0          506.1             6.8          157.5
   of which to shareholder                                    ( 300.0 )          ( 0.0 )      ( 0.0 )      ( 506.1 )         ( 6.8 )      ( 157.5 )



   Liabilities to associated companies                             0.0             0.0          0.0             0.0            0.0             0.0

   Other liabilities                                             48.3            48.3           0.0          172.0          172.0              0.0
     of which for taxes                                          ( 1.2 )         ( 1.2 )      ( 0.0 )         ( 0.0 )        ( 0.0 )         ( 0.0 )
     of which social security payments                           ( 0.1 )         ( 0.1 )      ( 0.0 )         ( 0.1 )        ( 0.1 )         ( 0.0 )
                                                               583.8            283.8           0.0          838.3          339.0           157.5




Liabilities against affiliated companies relate almost exclusively ( € 300.0 million ) to the financing relationship with Eurogrid;
€ 0.7 million of the total are trade liabilities. The shareholder loan is € 200 million lower than the previous year; the capital
repayment was offset against the loan liability and recognised as a contribution to the company’s capital reserves.




( 10 ) Prepaid expenses and deferred income ( in million euros )

                                                                           31.12. 2011                  31.12. 2010                       Change
   Building cost subsidies relating to investments                               48.5                         42.3                             6.2

   Income from congestion management and amounts
                                                                                150.2                        153.4                           –3.2
   under voluntary commitments to be offset in future

   Other deferred income                                                         21.9                         24.0                           –2.1
                                                                                220.6                        219.7                             0.9




( 11 ) Deferred taxes
Since the profit and loss transfer agreement was signed, no deferred taxes have been recognised for 50 Hertz Transmission,
as it now forms part of a tax group with Eurogrid.
                                                                                                           Annual report 2011 Notes · 117




Notes on the profit and loss account
The financial year 2010 was divided into two short financial years from 1 January to 31 May 2010 and from 1 June to
31 December 2010. Pro forma figures for 2010 are also shown below to facilitate comparison.




( 12 ) Revenue ( in million euros )

                                                                 1.1. –           1.6. –            pro forma     Change 2011 / pro
                                                           31.12.2011        31.12.2010    1.1. – 31.12.2010              forma 2010

  EEG revenue                                                 4,415.7           2,066.3            3,585.8                    829.9
    of which EEG revenue pursuant to the national
                                                              4,415.7           2,048.2            3,545.5                    870.2
    equalisation scheme (AusgleichMechV)
  Services provided to third parties                          1,783.6             806.5             1,267.5                    516.1

  Revenue from system support services to other trans-
  mission system operators (TSOs)                                  0.0               1.7               22.1                   –22.1
  Revenue matched by equal expenses                           6,199.3           2,874.5            4,875.4                  1,323.9
  Transmission charges                                          656.7             360.4               621.5                     35.2
  EEG balancing energy                                             0.0               0.1                 0.4                    –0.4
  Balancing group management                                      28.7             24.6                58.7                   –30.0
  Other revenue                                                   63.8             16.4                39.2                     24.6
  Revenue from the grid business                                749.2             401.5               719.8                     29.4
                                                              6,948.5           3,276.0            5,595.2                  1,353.3




The EEG revenue comprises revenue generated from the sale of fed-in renewable energies on the electricity stock exchange
and deliveries to other transmission system operators ( TSOs ) in the framework of the equalisation scheme.
118 · Annual report 2011 Notes




( 13 ) Other operating income ( in million euros )


                                                                                1.1. –        1.6. –            pro forma   Change 2011 / pro
                                                                          31.12.2011     31.12.2010    1.1. – 31.12.2010           forma 2010

   KWKG levy*                                                                    45.6           4.7                25.6                 20.0
   Revenue from the reversal of provisions                                        1.1           2.9                  7.4               –6.3
   Income from provisions for impending losses                                    1.4            4.1               11.9               –10.5

   Revenue from the reversal of special items for
                                                                                  0.5           0.3                  0.6                –0.1
   investment purposes

   Revenue from the reversal of building cost subsidies                           9.2           5.7                  9.7               –0.5
   Other revenue                                                                 22.7          10.9                14.3                  8.4
                                                                                 80.5          28.6                69.5                 11.0
   * There are expenses corresponding to the income for the same amount




( 14 ) Cost of materials and services ( in million euros )

                                                                                1.1. –        1.6. –            pro forma   Change 2011 / pro
                                                                          31.12.2011     31.12.2010    1.1. – 31.12.2010           forma 2010


   Expenses for raw materials, consumables, supplies and
                                                                           –6,502.5       –2,988.8            –5,084.5             –1,418.0
   purchased goods

   Expenses for purchased services                                            –234.7         –147.9             –242.1                   7.4
                                                                            –6,737.2       –3,136.7           –5,326.6             –1,410.6




The cost of materials and services includes a large volume of items not recognised in profit and loss:

                                                                                1.1. –        1.6. –            pro forma   Change 2011/ pro
                                                                          31.12.2011     31.12.2010    1.1. –31.12.2010            forma 2010

   EEG electricity purchases                                                –4,415.7      –2,066.3            –3,585.8               –829.9
   Services provided to third parties                                       –1,783.6        –806.5            –1,267.5               –516.1
   System support services provided to other TSOs                                 0.0          –1.7               –22.1                 22.1
   Expenses matched by equal revenue                                        –6,199.3       –2,874.5           –4,875.4             –1,323.9
   Expenses for the grid business                                             –537.9        –262.2              –451.2                –86.7
                                                                            –6,737.2       –3,136.7           –5,326.6             –1,410.6
                                                                                                              Annual report 2011 Notes · 119




( 15 ) Personnel expenses ( in million euros )

                                                                   1.1. –            1.6. –            pro forma     Change 2011 / pro
                                                             31.12.2011         31.12.2010    1.1. – 31.12.2010              forma 2010

  Wages and salaries                                              –46.9              –23.8               –42.1                     –4.8
  Social security                                                   –7.0              –3.9                –6.8                     –0.2
  Expenses
    for pensions                                                    –3.9              –0.8                –2.5                     –1.4
    for similar benefits                                            –0.1              –0.1                –0.1                      0.0
                                                                  –57.9              –28.6              –51.5                      –6.4




Average number of employees during the year

                                                                   1.1. –            1.6. –            pro forma     Change 2011 / pro
                                                             31.12.2011         31.12.2010    1.1. – 31.12.2010              forma 2010

  Industrial workers                                                158                156                 158                      156
  Office workers                                                    462                449                 462                      449
                                                                    620                605                 620                     605




In addition, an average of 18 apprentices ( previous year 19 apprentices ) were employed in the financial year 2011.



( 16 ) Depreciation and amortisation ( in million euros )

                                                                   1.1. –            1.6. –            pro forma     Change 2011 / pro
                                                             31.12.2011         31.12.2010    1.1. – 31.12.2010              forma 2010

  Depreciation of assets                                          –57.9              –34.2              –69.9                      12.0
                                                                  –57.9              –34.2              –69.9                      12.0
120 · Annual report 2011 Notes




( 17 ) Other operating expenses ( in million euros )

                                                                                1.1. –        1.6. –            pro forma   Change 2011 / pro
                                                                          31.12.2011     31.12.2010    1.1. – 31.12.2010           forma 2010

   KWKG levy*                                                                  –45.6           –4.7              –25.6                –20.0
   Services                                                                    –30.0          –16.8              –25.3                 –4.7
   Other expenses                                                              –35.2          –30.2              –44.1                   8.9
                                                                              –110.8          –51.7              –95.0                –15.8
   * There are expenses corresponding to the income for the same amount




Other expenses include the onerous contracts for purchasing energy to cover losses, additions to the other provisions and
write-downs.



( 18 ) Net income from investments ( in million euros )

                                                                                1.1. –        1.6. –            pro forma   Change 2011 / pro
                                                                          31.12.2011     31.12.2010    1.1. – 31.12.2010           forma 2010


   Income from profit and loss transfer agreements
                                                                                  8.3           3.6                  3.6                 4.7
   with related companies

                                                                                  8.3           3.6                  3.6                 4.7




All the income from profit and loss transfer agreements with related companies relates to 50 Hertz Offshore.
                                                                                                                Annual report 2011 Notes · 121




( 19 ) Net interest ( in million euros )

                                                                     1.1. –            1.6. –            pro forma     Change 2011 / pro
                                                               31.12.2011         31.12.2010    1.1. – 31.12.2010              forma 2010

  Income from the loan of financial assets                             0.0                0.0                 0.0                     0.0
  Other interest and similar income                                    7.0                2.5                 3.2                     3.8
    of which from related companies                                    6.4                1.6                 2.0                     4.4
  Interest and similar expenses                                     –28.6               –10.6              –25.3                     –3.3
    of which to related companies                                    –21.4               –6.5              –18.9                     –2.5
                                                                     –21.6               –8.1              –22.1                      0.5




The fluctuations in the provision interest rates have resulted in interest expenses amounting to € 7.2 million ( previous year
€ 6.6 million ) and interest income amounting to € 0.5 million ( previous year € 0.4 million ). Pursuant to section 246, paragraph 2,
sentence 2 HGB, interest expenses were netted against interest income amounting to € 0.4 million ( previous year € 0.4 million ).



( 20 ) Taxes ( in million euros )

                                                                     1.1. –            1.6. –            pro forma     Change 2011 / pro
                                                               31.12.2011         31.12.2010    1.1. – 31.12.2010              forma 2010

  Taxes on income and earnings                                        –4.6               38.2               22.5                    –27.1
  Other taxes                                                         –0.5               –0.3               –0.4                     –0.1
                                                                      –5.1               37.9               22.1                   –27.2




50 Hertz Transmission does not recognise income taxes for periods since 1 June 2010 as it is part of a tax group with
Eurogrid. Provisions for taxes of € 4.6 million were required for periods before the tax group was established. The income from
income taxes of € 38.2 million in the second short financial year 2010 results from the reversal of deferred tax liabilities due to
the profit and loss transfer agreement and the tax group established as of 1 June 2010 with Eurogrid. For the full year 2010,
the reversal is reduced by € 15.7 million, which corresponds to the company’s income tax expense for the first short financial
year 2010.
122 · Annual report 2011 Notes




Notes on the cash flow statement                                      Contingent liabilities
Following the DRS 2 recommendations of the Accounting                 Within the framework of the Eurogrid bond issuance on
Standards Committee of Germany e.V., the cash flows                   22 October 2010, 50 Hertz Transmission and 50 Hertz
are broken down into operating, investing and financing               Offshore were set up as guarantors for an amount of
activities in the cash flow statement.                                € 500 million. The guarantors are irrevocably, jointly and
                                                                      severally liable without restrictions for the timely payment
Cash inflow from operating activities amounted to                     of all amounts to be paid by Eurogrid in the context of the
€ 6.5 million ( previous year € 2.2 million ) and resulted from       bond issuance.
interest payments received. Interest payments came to
€ 21.4 million ( previous year € 19.0 million ). Cash and cash        On 14 June 2011, 50 Hertz Transmission and 50 Hertz
equivalents at the end of the period were composed of                 Offshore also became party to a five-year loan agreement
interest-bearing short-term cash deposits at Eurogrid of              for € 350 million between Eurogrid and Commerzbank as
€ 230.6 million ( previous year € 110,0 million ) and bank            additional guarantors.
balances of € 0.015 million ( previous year € 3.7 million ).
                                                                      On 9 December 2011, 50 Hertz Transmission and 50 Hertz
Cash flows for income taxes of € 15.1 million in the financial        Offshore gave BNP Paribas S.A., Frankfurt am Main, a
year 2011 related to the second short financial year 2010.            guarantee capped at € 126 million as collateral for a short-
                                                                      term credit line for Eurogrid.


Other information                                                     On 25 October 2011, 50 Hertz Transmission in its capacity
                                                                      as a shareholder of EMCC gave a demand guarantee
Other financial obligations                                           capped at € 3.7 million to Nordea Bank Finland Plc,
On 31 December 2011 there was a purchase commitment                   German branch, as partial collateral for a loan to EMCC.
amounting to € 175.4 million for investment and mainte-
nance measures ( previous year € 167.6 million ). The pur-            50 Hertz Transmission is jointly and severally liable with
chase obligation exists only towards third parties.                   Vattenfall Europe Distribution Berlin GmbH, Vattenfall
                                                                      Europe Berlin AG & Co. KG and / or their legal successors
50 Hertz Transmission is legally obliged to use income from           for the liabilities arising from the concession contract
cross-border congestion management up to the year 2007                concluded with the German Federal State of Berlin.
for investment to prevent future congestion. Taking into ac-
count the allocation method used for tax reasons when this            50 Hertz Transmission is jointly and severally liable with
obligation was recognised for the first time, of the original         Vattenfall Europe Distribution Hamburg GmbH, Vattenfall
overall obligation of € 122.3 million, € 69.5 million had been        Europe Hamburg AG and / or their legal successors for the
repaid as of the reporting date and € 52.8 million was still          liabilities arising from the concession contract concluded
outstanding. As of the reporting date, the investment vol-            with the Free and Hanseatic City of Hamburg.
ume of the relevant priority projects already realised by
50 Hertz exceeded the amount of congestion management                 Within the framework of the completed division between
income received, so that the company no longer has any                Vattenfall Europe Distribution Berlin GmbH and Vattenfall
further obligations.                                                  Europe Berlin AG & Co. KG and / or their legal successors
                                                                      in 2006, the legal entities involved in the division are jointly
A guarantee was granted to 50 Hertz Offshore, which                   and severally liable for the liabilities which were established
results in a liability of € 4.2 million. Currently, the use of this   before the division took effect. The period of liability
guarantee is not expected.                                            pursuant to section 133 of the Reorganisation Act ( UmwG )
                                                                      for the transferring legal entity is five years for liabilities and
                                                                      ten years for pension obligations established under the
                                                                      German Employers’ Retirement Benefits Act ( BetrAVG )
                                                                      before the division took effect. Pursuant to section 133 of
                                                                                                          Annual report 2011 Notes · 123




the Reorganisation Act ( UmwG ), 50 Hertz Transmission is          Information on company officers
severally and jointly liable with Vattenfall Europe Distribution   The members of the Supervisory Board and of the
Hamburg GmbH, Vattenfall Europe Hamburg AG and / or                management of Eurogrid are presented in a separate
their legal successors for five years for liabilities which        annex to these notes.
arose before the division in 2006.
                                                                   The remuneration of the managers of 50 Hertz amounted
50 Hertz Transmission has purchase obligations amounting           to € 1,560,000 in the reporting period ( previous year
to € 137.9 million for electricity purchases for the market-       € 1,281,000 ). It consists of a fixed salary, performance-
based equalisation of grid losses.                                 based bonuses and other non-performance-related
                                                                   amounts. The year-on-year increase is due to the larger
Auditor’s fees                                                     number of senior managers.
Information on the total fees charged by the auditors in
the financial year as required under section 285, number           The members of the Supervisory Board of 50 Hertz
17 HGB is provided in the consolidated financial state-            Transmission received € 20,000 ( previous year € 41,000 )
ments for Eurogrid GmbH.                                           for their work.

Transactions with related parties                                  Loans to company officers
During the reporting period, no transactions were con-             As of the reporting date, loans of € 9,000 ( previous year
cluded with related parties under terms contrary to market         € 12,000 ) had been made to members of the Supervisory
practice.                                                          Board. The loans bear interest at a rate of 5.0 per cent p.a.
                                                                   and run for ten years. In the reporting period, € 3,000 was
Transactions of a certain size within the meaning of               repaid.
section 6b, paragraph 2 of the Energy Industry Act
( EnWG )                                                           Use of profit
Pursuant to section 6b, paragraph 2 EnWG, transactions             Net income before profit transfer came to € 51,607,410.98.
of a certain size with related or associated companies, or         Of total net income, € 1,258,699.48 was transferred to
with companies belonging to the same shareholders, have            other retained earnings to satisfy the requirements of
to be disclosed.                                                   section 268, paragraph 8 HGB on dividend restrictions.
                                                                   The remainder of € 50,348,711.50 was transferred to
In the reporting period, 50 Hertz Transmission did not carry       Eurogrid GmbH under the existing profit and loss transfer
out transactions beside the normal course of business              agreement.
other than the financing transactions described in the
notes.                                                             Berlin, 15 February 2012

Financial statements for business units in line with               The management of 50 Hertz Transmission GmbH
section 6b, paragraph 3 of the Energy Industry Act
( EnWG )
50 Hertz Transmission conducts business only in the                Boris Schucht
business area ‘electricity transmission’. The financial
statements for business units required under section 6b,           Udo Giegerich
paragraph 3 EnWG are therefore the same as the financial
statements for the company.
                                                                   Dr Frank Golletz


                                                                   Hans-Jörg Dorny
124 · Annual report 2011 Notes




Auditor’s report
We have audited the annual financial statements – com-            The audit includes assessing the accounting principles
prising the balance sheet, the profit and loss statement,         applied and significant estimates made by the legal repre-
the notes and the cash flow statement – together with             sentatives, as well as evaluating the overall presentation
the bookkeeping system and the management report of               of the annual financial statements and the management
50 Hertz Transmission GmbH, Berlin, for the financial year        report and assessing whether the recognised amounts and
starting on 1 January and ending on 31 December 2011. In          allocation of accounts in accordance with section 6b, para-
accordance with section 6b, paragraph 5 EnWG, the audit           graph 3 EnWG are correct and logical and the principle of
also covered compliance with accounting obligations under         consistency has been followed. We believe that our audit
section 6b, paragraph 3 EnWG, which stipulates that sepa-         provides a reasonable basis for our opinion.
rate accounts are to be kept for the businesses defined
in section 6b, paragraph 3 EnWG. The company’s legal              Our audit did not give rise to any objections.
representatives are responsible for the accounting, for pre-
paring the financial statements and management report in          In our opinion, based on the findings of our audit, the
accordance with German commercial law and for compli-             annual financial statements are compliant with statutory
ance with section 6b, paragraph 3 EnWG. Our responsibil-          regulations and with the principles of proper accounting
ity is to give an opinion of the financial statements with ref-   and provide a true and fair view of the company’s net
erence to the accounts, on the management report and on           assets, financial position and results of operations. The
compliance with the reporting requirements of section 6b,         management report is consistent with the annual financial
paragraph 3 EnWG on the basis of our audit.                       statements and, as a whole, provides a relevant view of
                                                                  the company’s position and appropriately presents the
We conducted our audit of the annual financial statements         opportunities and risks for future development.
pursuant to section 317 HGB and in compliance with the
German standards for the audit of financial statements            The audit of compliance with the accounting obligations
promulgated by the Institute of German Auditors [ Institut        defined in section 6b, paragraph 3 EnWG, which requires
der Wirtschaftsprüfer ( IDW ) ]. These standards require that     separate accounting for the business activities described
we plan and perform the audit in order to detect with rea-        in section 6b, paragraph 3 EnWG, did not give rise to any
sonable assurance misstatements materially affecting the          objections.
presentation of the net assets, financial position and re-
sults of operations in the consolidated financial statements      Berlin, 23 February 2012
and in the management report in accordance with German
principles of proper accounting and to judge with reason-         Ernst & Young GmbH Wirtschaftsprüfergesellschaft
able assurance whether the reporting obligations defined in
section 6b, paragraph 3 EnWG have been met in all mate-           Glöckner                          Bährens
rial respects. Knowledge of the company’s business activi-        Auditor                           Auditor
ties and economic and legal environment and expectations
of possible misstatements are taken into account in the
determination of the audit procedures. The effectiveness of
the accounting-related internal control system and the evi-
dence supporting the disclosures in the accounts, finan-
cial statements, management report and those relevant for
compliance with the reporting obligations defined in section
6b, paragraph 3 EnWG are examined primarily on a test
basis within the framework of the audit.
List of abbreviations
50Hertz Transmission     50Hertz Transmission GmbH, Berlin
50Hertz Offshore         50Hertz Offshore GmbH, Berlin
Amprion GmbH             Amprion GmbH, Dortmund ( formerly RWE Transportnetz Strom GmbH, Dortmund )
BNetzA (FNA)             Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway, Bonn
CAO                      Central Allocation Office GmbH, Freising
DMBilG                   Act on the Opening Balance Sheet in Deutsche Mark and the Reassessment of Share
                         Capital ( D-Mark Opening Balance Sheet Act )
DRS                      German Accounting Standards
E.ON edis AG             E.ON edis AG, Fürstenwalde / Spree
EEG                      German Act on Granting Priority to Renewable Energy Sources ( Renewable Energy Act )
EEX                      European Energy Exchange AG
Elia                     Elia System Operator NV / SA, Brussels, Belgium
EMCC                     European Market Coupling Company GmbH, Hamburg
Energinet.dk             Energienet.dk, Fredericia, Denmark
ENTSO-E                  European Network of Transmission System Operators for Electricity
EnWG                     German Electricity and Gas Supply Act ( Energy Industry Act )
EnBW Transportnetze AG   EnBW Transportnetze AG, Stuttgart
EPEX                     EPEX Spot SE, a subsidiary of EEX and the French company Powernext SA located in
                         Paris (electricity spot market )
Eurogrid                 Eurogrid GmbH, Berlin
Eurogrid International   Eurogrid International CVBA / SCRL, Brussels, Belgium
GW                       gigawatt
HGB                      German Commercial Code
HGÜ                      high-voltage direct-current transmission
HöS / HS                 peak voltage / high voltage
HRB                      Commercial Register Section B
IDW                      Institut der Wirtschaftsprüfer in Deutschland e. V.
                         ( Institute of Public Auditors in Germany, Incorporated Association), Düsseldorf
IFM                      Industry Funds Management PTY Ltd, Melbourne, Australia
IFRS                     International Financial Reporting Standards
IG BCE                   Mining, Chemical and Energy Industrial Trade Union
kV                       kilovolt
kWh                      kilowatt-hour
KWK                      combined heat and power (CHP)
KWKG                     Law on the Conservation, Modernisation and Development of Combined Heat and Power
                         (German CHP Law)
MVA                      megavolt ampere
MW                       megawatt
RückAbzinsV              Regulation on the determination and announcement of rates for discounting provisions
                         ( by-law on the calculation of accrued interest on provisions)
TenneT TSO               TenneT TSO GmbH, Bayreuth (formerly transpower stromübertragungs gmbh, Bayreuth )
TWh                      terawatt-hour
ÜNB                      transmission system operator ( TSO)
Vattenfall Europe        Vattenfall Europe AG, Berlin
VEAG                     Vereinigte Energiewerke AG
VNB                      distribution system operator ( DSO)
WEMAG Netz               WEMAG Netz GmbH, Schwerin
Publishing information
Published by
50 Hertz Transmission GmbH
Eichenstrasse 3 A
12435 Berlin, Germany
Telephone + 49 (0) 30 5150-0
Fax + 49 (0) 30 5150-4477

Management
Chairman (CEO)
Boris Schucht

Chief Technical Officer (CTO)
Dr Frank Golletz

Chief Human Resources Officer (CHRO)
Hans-Jörg Dorny

Chief Financial Officer (CFO)
Udo Giegerich

Editorial staff
Olivier Feix (responsible), Silja Bilz

Pictures
Jan Pauls, Olivier Polet, Philippe Sautier, Andreas Teich,
Frank Wölffing-Seelig, 50Hertz archive

Concept and layout
Oswald + Martin Werbeagentur, Berlin

Printing
Kehrberg Druck Service
            Denmark
                                                                Energinet.dk
                                                                Denmark




                      Schleswig-
                       Holstein                                        Rostock



                                                                            Güstrow
                                      Hamburg                   Schwerin                                     Neu-
                                                                                                      brandenburg
                                                                                    Mecklenburg-
                                                                                  Western-Pomerania



                    Lower Saxony                                                         Brandenburg
                                                                                                                                               PSE Operator
                                                          Saxony-                                                                                Poland
                                                           Anhalt
                                                                                                                                     Berlin
                                                                                                                               220
                                                                                                                                        Frankfurt (Oder)
                                                                                                          Potsdam
                                          TenneT
                                                                             110
                                                                                                       380+220


                                                                           Magdeburg




                                                                                                                                        Cottbus



                                                                                   Halle
                                                                                                Leipzig
                                                                                                                        110
                                                                                                    Saxony
                                                                                                                              Dresden
                                                                Weimar
                                                Erfurt                     Jena
                                Eisenach                                          Gera

               Hesse                                                                                       Chemnitz
                                      Thuringia                                             Zwickau



                                                                                                                        ˇ
                                                                                                                        CEPS
                                                                                                                    Czech Republic
                              Bavaria                             TenneT

Legend                                                   Line                              380 kV
                                                                                                                      System users :
Switching station (in large part with transi-                                                                         Our customers include the regional distri-
                                                         Line planned /                    380 kV                     bution system operators as well as power
tion to distribution system operators)
                                                         under construction                                           plants, pump storage plants, wind farms
                                                                                                                      and big industry customers connected to
                                220 kV
                                                         Line                              220 kV                     the transmission system.
                                380 kV                                                                                Conventional power plant
                                                         Operating voltage ( kV )                   110
                                                                                                                      ( lignite- or hard-coal-fired, nuclear
 380 kV planned / under construction                                                                                  or gas turbine power plant )
                                                         Other companies            380 / 220 kV
                                                                                                                      Plant under construction
                           380 / 220 kV
                                                         HVDC/DC link                      400 kV
                                                                                                                      Pump storage plant
                     Other companies
                                                         Grid connection offshore          150 kV
                                                                                                                      Wind power plant onshore / offshore
                                                         Grid connection offshore 150 kV                              Plant planned / under construction
As at : December 2011                                    planned / under construction
www.50hertz.com




                                            carbon-neutral printing using
                                            environmentally friendly inks
50 Hertz Transmission GmbH
Eichenstrasse 3 A · 12435 Berlin, Germany
T + 49 ( 0 ) 30 5150-0
F + 49 ( 0 ) 30 5150-4477
info @ 50hertz.com

				
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