Activities of the Supervisory Board

Meetings of the Supervisory Board

The Board met twelve times in the reporting year, of which eight were scheduled meetings and four were extra meetings. 

The Board met three times outside the presence of the Management Board. At the meeting of April the performance of the Board as a whole as well as that of its individual members and its committees was assessed, also in the light of the profile of the Board. In addition, the performance of the Management Board as a whole and that of its individual members was discussed. The members of the Board also assessed the areas in which they require further training or education. The Board indicated a need to increase its knowledge on (geopolitical) developments in the European energy markets. They consider this necessary to enable a proper exploration and assessment of Nuon’s options for further strategic steps at European level. 

In November the Board evaluated the termination of the merger between Nuon and Essent and discussed the process approach and the scope of the strategic reorientation. In December three members of the Management Board were designated in consultation with the Board to lead the formation and organisation of, on the one hand, a production and supply company and, on the other hand, a network company for the purposes of implementing the Independent Network Operation Act (WON). These members are Mr Løseth (chairman) and Mr Vierstra for the production and supply company and Mr Erich for the network company. The appointments were made after an extensive and critical selection procedure, including discussions between delegations from the Board and the three members of the Management Board in question. The definite appointments will be made by the Management Board of n.v. Nuon early in 2008 after consultation with the Committee of Shareholders and the Central Works Council.

During the scheduled planned meetings the Board discussed a broad range of subjects, such as (strategic) decisions that required the approval of the Board (including substantial takeovers and investments), the quality of service, cost control and cost-to-serve, the assessment of the effectiveness and adequacy of the internal risk management and control systems, the remuneration of the Management Board and other relevant matters that were brought to its attention. The financial results were extensively discussed in the meetings of the Board before publication of the quarterly and annual figures. Prior to these meetings the Audit Committee advised the Board on the financial results and risk management.

The agenda of the Board was largely determined by the proposed merger between Nuon and Essent. This subject was on the agenda of practically every meeting of the Board. 

The subjects dealt with in this connection concerned the approval of the term sheet between Nuon and Essent, in which both parties provided a detailed description of the most important terms and conditions, and the situation surrounding the verification process. The Board made every effort to achieve an agreement on the verification process in the context of the proposed merger. Ultimately, both parties failed to reach agreement about the method of verification of the underlying company data and the related exchange ratio, after which the merger process was terminated. The Board regrets that, despite intensive efforts, the company failed to revive the merger process with Essent. 

Other items concerned the developments in relation to the WON and the status of the transfer of the high-voltage networks to TenneT. This was discussed several times in the meetings of the Board. In June 2007 the Board came to the conclusion that unbundling had become virtually unavoidable. In addition, the Board exchanged thoughts on possible legal actions against the prohibition imposed by the WON on integrated energy companies and discussed the starting points of the plan for unbundling Nuon into a network company on the one hand and a production and supply company on the other hand.

Other subjects discussed in the meetings were

• The 2006 annual report including the signing of the 2006 financial statements and the approval of the profit appropriation proposal;
• The management letter and the report of the external auditor;
• The discussion of the quarterly results;
• The nomination of the members of the Supervisory Board Messrs Meijer, Hooijmaijers and Zwarts for reappointment by the General Meeting of Shareholders;
• The customer satisfaction models 2007 for both the consumer and the business market;
• The preparation of the annual General Meeting of Shareholders on 25 April 2007;
• The preparation and follow-up discussion of the Extraordinary General Meeting of Shareholders to be convened on 14 June 2007 at the request of BV Houdstermaatschappij Falcon;
• The approval of the decision of the Management Board to make an investment in the gas-fired part of the multi-fuel power station at Eemshaven (Nuon Magnum) for a maximum of € 1.5 billion;
• The approval of the budget 2008.

Finally, the Board decided to propose to the General Meeting of Shareholder to reduce the Supervisory Board from eleven to nine members. 

Shareholder meetings

Virtually the entire Board attended the annual General Meeting of Shareholders on 25 April 2007. At this meeting the General Meeting of Shareholders adopted the financial statements for 2006 and the dividend for the financial year 2006 and decided to endorse the conduct of the company’s affairs by the members of the Management Board and the supervision by the members of the Board during the 2006 financial year. In addition, the General Meeting of Shareholders reappointed Messrs Meijer, Hooijmaijers and Zwarts as members of the Board. 

Furthermore Mr H. Zwarts, chairman of the Selection, Appointment and Remuneration Committee, gave the General Meeting of Shareholders a report on the discussions between the Selection, Appointment and Remuneration Committee and representatives of shareholders about the remuneration policy of the Management Board of Nuon. The great dilemma with this theme involves reconciling the company’s business and commercial interests and the public debate surrounding director’s remunerations. The discussions will be continued in 2008. 
In addition, in that same meeting the General Meeting of Shareholders appointed the Management Board for a period of one year as the body competent to issue 3,308,346 shares chargeable to the share premium reserve of other freely distributable reserves for the implementation of the EPON pension supplement scheme. Finally, the Management Board gave a further explanation of the latest state of affairs regarding the proposed merger between Nuon and Essent.

By letter of 3 May 2007 Nuon received the request of B.V. Houdstermaatschappij Falcon to convene an Extraordinary General Meeting of Shareholders in order to discuss and vote on several agenda items relating to the proposed merger between Nuon and Essent. This Extraordinary General Meeting of Shareholders was held on 14 June 2007 and was attended by half of the members of the Board. At the meeting the parties involved voiced and extensively discussed their diverse views on the agenda items in relation to the proposed merger between Nuon and Essent. The agenda items presented for voting were withdrawn at the meeting by the representative of B.V. Houdstermaatschappij Falcon and the vote was therefore not held. 
In addition, it was decided at this Extraordinary General Meeting of Shareholders to make an additional payment to shareholders. At the annual meeting held on 25 April 2007 Nuon pledged that, in addition to the dividend for the 2006 financial year adopted at that meeting, a one-off additional payment would be made from the reserves equal to 5% of the profit after taxation (excluding incidental items that did not lead to cash flows). The General Meeting of Shareholders decided to approve the payment of € 37 million chargeable to the freely distributable reserves on the proposal of the Management Board subject to the approval of the Board. 

Finally, several members of the Supervisory Board attended an Extraordinary General Meeting of Shareholders on 22 November 2007, where the General Meeting of Shareholders approved the proposal for the first phase of the investment in Nuon Magnum of up to a maximum of € 1.5 billion, paying due regard to an optimal financial and corporate structure.
During that meeting the Management Board gave a further explanation of the process involving the unbundling of the Nuon Group on the one hand and the strategy on the other.

Majority Shareholder Consultation

The Majority Shareholder Consultation is an informal consultative gathering between the Management Board and representatives of majority shareholders that takes place alongside the General Meeting of Shareholders. This consultative gathering, which was held five times in 2007, is aimed at exchanging information on developments and at facilitating opinion-forming and informal discussion. During the reporting year several members of the Board attended one or more of the Majority Shareholder Consultation meetings, where the topics discussed included the proposed merger between Nuon and Essent, the manner in which Nuon proposes to fulfil its obligations under the WON and – after the termination of the merger talks between Nuon and Essent – the main outlines of Nuon’s unbundling and strategy process.

Contacts with the Central Works Council

In accordance with the covenant concluded with the Central Works Council, consultation was held prior to each meeting of the Board between the members of the Board appointed upon the (reinforced) recommendation of the Central Works Council, namely Messrs Bouw, Van der Heijden and Zwarts, and the Executive Committee of the Central Works Council.

In conformity with the Works Councils Act, members of the Supervisory Board were invited to attend the consultative meeting between the Central Works Council and the Management Board. One or more members of the Board attended these consultative meetings in turns, including those in which the general state of affairs at the company were discussed. The Board greatly appreciates the contacts with the Central Works Council. 

Workshop

On 14 December 2007 the Management Board organised a workshop entitled ‘Developments in the international energy markets’ for representatives of majority shareholders and members of the Board.

The aim of the workshop was to give the participants up-to-date insight into the developments in numerous areas of the international energy markets and external factors confronting Nuon. Early in 2008, the Management Board will conduct a substantive discussion about the main outlines of Nuon’s future together with the Board, and in close consultation with the majority shareholders.