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Annual Report 2005
Contents
Introduction
The pioneers of electricity 7
Cegedel’s mission and values 8
Key figures 9
Corporate bodies as of 31 December 2005 10
Message 12
The economic and energy environment 15
Highlights 17
Management report
The Cegedel Group 24
Consolidated accounts summary 26
Change in the companies in the Cegedel Group 27
Comptes annuels 2005
Consolidated annual accounts 60
Annual accounts of Cegedel S.A. 90
Thomas Alva EDISON(1847 - 1931)
American inventor and indus-trialist, Edison was universally acknowledged as one of the most prolific inventors. several of his inventions and practical ideas, such as the telephone, incandescent electric light bulb, gramophone and cinema, com-pletely transformed the life of his contemporaries.
CegedelRegistered as a Société anonyme
under Luxembourg law with capital of EUR 134,500,000
Headquarters: Strassen (Luxembourg),
R.C.S. Luxembourg B4513
Annual General Meetingof 9 May 2006
Reports presented to the Annual General Meeting of
Shareholders by the Board of Directors and the statutory
auditors
Reports and annual accountsfor the 2005 financial year
2005 - 77th financial year
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James WATT (1736 - 1819)
scottish engineer who gave his name to the unit
of power (symbol W) still used today. The main
multiples and sub-multiples used are: megawatt
(MW), kilowatt (kW) and milliwatt (mW).
James WATT’s contribution to the field of science
and technology was outstanding and he was
admitted into the French Academy of sciences
in 1814.
Introduction
AnnuAl RepoRt 2005
intRoduCtion 7
It is impossible to imagine life today
without television, computers, the
electric oven or the internet.
However, none of these electrically-
powered inventions would have been
possible, without the scientists and
inventors who, over several centuries,
unlocked the mysteries of electricity
with their experiments and studies
for the benefit of man’s everyday life.
In ancient times, Thalès of MILET
discovered that a piece of semi-pre-
cious stone, yellow amber, developed
a mysteriously attractive force when
rubbed vigorously against material or
animal skin. As ‘elektron’ is the Greek
for yellow amber, researchers called
this force ‘electricity’.
It was only hundreds of years later
that man became preoccupied once
more with the phenomenon of elec-
tricity. However, the electric current
we use now was only discovered at
the end of the 18th century by the
Italians GALvAnI and voLTA.
In respect of the Grand Duchy, it
is worth noting that thanks to the
inventor Henri owen TUDoR, who
lived in Rosport, the town of Echter-
nach was one of the first in the world
to have public lighting in 1886.
over the centuries, an increasing
number of machines and applian-
ces appeared that were powered
by electricity. The success of these
practical inventions created more and
more demand for electric power. As
it is not a natural element, electricity
had to be produced and transmitted
before it could be used, and this led
to the creation of the first power
stations and electricity networks.
Growth was extremely rapid. nearly
all appliances used in everyday life
and at work rely on electricity, from
the razor to the toaster and the
computer to the lift. More than any
other previous technological revolu-
tion, electricity liberated man from
manual work.
This annual report uses photos
and illustrations to help the reader
(re)discover the different scientists
and inventors who contributed
to the rise of electricity through the
centuries.
We hope you enjoy reading about
electricity’s fascinating history.
The pioneers of electricity
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AnnuAl RepoRt 2005
Cegedel’s mission
Cegedel’s mission is to procure, trans-
mit and distribute electricity within
Luxembourg, both reliably and at
competitive prices.
In carrying out this mission, the
company respects its public ser-
vice and environmental protection
obligations, while at the same time
adapting to liberalisation of the
European electricity market. It seeks
to establish relations of trust with all
customers, based on the quality of
its service and its advice on efficient
energy use.
Cegedel’s mission also involves
capitalising on its expertise, size and
geographical positioning to diversify
into fields close to its core business.
Cegedel strives to carry out its acti-
vities in the interests of all parties
concerned, namely customers, the
general public, staff, shareholders
and public authorities.
Cegedel’s values
The company recognises that certain
values are essential for accomplishing
its mission.
As a result, it strives to foster a public
image founded on the quality of its
services and customer satisfaction, as
well as its respect for people, pro-
perty and the environment.
To this end, it capitalises on the skills
and efficiency of its staff and endea-
vours to create working conditions
that allow staff to fulfil their poten-
tial in a safe working environment.
Lastly, the company aims to ensure
that its internal culture is founded
on teamwork and initiative, as well
as a spirit of openness and loyalty
common to one and all.
Cegedel’s mission and values
AnnuAl RepoRt 2005
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Consolidated profit and loss account (amounts according to iFRS)
euR million 2004 2005 change
Sales 387,80 539,78 39,2 %
EBITDA* 88,83 86,13 - 3,0 %
EBIT (operating profit) 56,73 54,48 - 4,0 %
net profit, group share 47,42 52,35 10,4 %
* earnings before interest, taxes, depreciation and amortisation
Consolidated balance sheet (amounts according to iFRS)
euR million 2004 2005 change
Investment in fixed assets 34,31 35,00 2,0 %
Shareholders’ equity, group share (including profit for the year) 344,82 381,27 10,6 %
Total assets 482,63 585,06 21,2 %
per share data
2004 2005 change
Gross dividend per share (EUR) 2,50 2,75 10,0 %
net dividend per share (EUR) 2,00 2,20 10,0 %
Gross dividend yield per share at year-end 4,03 % 3,67 %
Price-earnings ratio (based on share price at year-end) 8,79 9,63
Share price at year-end (EUR) 62,00 75,00 21,0 %
2004 2005 change
Flow of power transmitted to networks (GWh) 4.415,4 4.487,8 1,6 %
Maximum output of networks (MW) 673,1 700,2 4,0 %
Length of networks (km) 7.008 7.093 1,2 %
Average (Cegedel and Cegedel net) 501 499
Key figures
Cegedel S.A., which is a listed company, is obliged to publish its consolidated accounts in compliance with International Financial Reporting Standards (IFRS).
The financial statements for the 2005 financial year must therefore be comparable with those of the previous year. The 2004 accounts prepared according to LuxGAAP therefore had to be revised in line with IFRS by means of an opening balance sheet in addition to the 2004 profit and loss account and the balance sheet as at 31 December 2004.
For this reason, the consolidated figures for 2004 in this annual report are no longer comparable with those in the 2004 annual report. These restatements are indicated in the notes to the consolidated financial statements in notes 2.1.and 2.2., pages 69 and 70.
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AnnuAl RepoRt 2005
Honorary Chairman: M. Alfred GIULIAnI
Board of Directors: M. Roland MICHEL, Chairman
M. Etienne SCHnEIDER, vice-Chairman
M. Willy BoSMAnS, Member of Board
M. Romain CRUCHTEn, Member of Board
M. Jean-Paul HoFFMAnn, Member of Board
M. Charel HUTMACHER, Member of Board
M. Gaston REInESCH, Member of Board
M. Werner RooS, Member of Board
M. Carlo SCHooS, Member of Board
M. Jacquot SCHWERTZER, Member of Board
M. Patrick THEIn, Member of Board
M. Frank n. WAGEnER, Member of Board
M. Théo WEBER, Member of Board
Government
Commissioner: M. Tom EISCHEn
Management
Committee: M. Romain BECKER, Chairman,
Chief Executive
M. André BALDAUFF, Member, Director
M. nestor DIDELoT, Member, Director
M. Carlo BARToCCI, Member, Deputy Director
Management
of Cegedel Net: M. Georges BonIFAS, Director
Corporate governance bodies as at31 December 2005
AnnuAl RepoRt 2005
intRoduCtion 11
Romain BeCKeR
Chairman,Chief Executive
nestor didelot
Member,Director
Carlo BARtoCCi
Member,Deputy Director
Georges BoniFAS
Director
André BAldAuFF
Member,Director
Management
of Cegedel net
Management
Committee
of Cegedel
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AnnuAl RepoRt 2005
Has the liberalisation of energy markets been a success?
Four years after the European summit
in Barcelona agreed on the liberali-
sation of energy markets - on 1 July
2004 for non-domestic users and on
1 July 2007 for domestic users - there
has been a wave of consolidation
among European energy companies.
Like in a game of ‘energy monopoly’,
the players involved have made a
range of moves. These included a
takeover bid by Gas natural for its
Spanish compatriot Endesa, Endesa’s
attempted acquisition of Germany’s
E.on, the announced merger of Gaz
de France and Suez to avoid Suez
being taken over by Italy’s Enel, the
merger of Enel and Eni in Italy and,
going back to 2003, E.on’s purchase
of Ruhrgas in Germany.
European ministers were initially
aiming to stimulate growth in the Eu-
ropean economy by introducing com-
petition into energy markets in an
effort to lower prices. Today Europe
is also worried about its security. The
year 2006 began with two crises in
the energy sector: the fight between
Moscow and Kiev over the price of
gas supplied to the Ukraine, closely
followed by a confrontation between
Iran and the West on Tehran’s nuclear
programme, which could lead to
reprisals on the oil front and create
tensions on the international mar-
kets. The stability of gas and oil
markets therefore seems to be under
threat, which has inevitably led to
price rises, including electricity prices.
Given these developments, European
countries are looking to respond by
creating strong entities at national le-
vel, generally offering both electricity
and gas. The European Commission
frowns upon these developments. It
is not so much against the principle
of companies merging, but worried
that such moves are essentially de-
signed to protect national markets
by stifling competition. ‘Europe will
not deal with globalisation by having
twenty-five mini-markets for energy,’
José Manuel Barroso, President of
the European Commission, recently
commented. In fact, apart from the
principle of market deregulation,
there is no real European energy
policy, as each country has its own
views on the role of hydrocarbons,
for example, or nuclear energy. This
also explains the trends and attempts
to establish national champions.
And where is Luxembourg and
Cegedel in this ‘European cham-
pionship’? A merger of Luxembourg
electricity and gas operators would
certainly be a scenario to recom-
mend to policy-makers in the light
of trends in neighbouring countries.
In view of the size of our economy
and exposure to foreign competition,
there would definitely be no ques-
tion of the creation of a cartel, and
yet Cegedel’s initiatives have yet to
bear fruit. nonetheless, a merger of
forces would be a good idea, given
the economic and commercial weight
of competitors emerging all over Eu-
rope. Pressure on margins is already
being felt, and while Cegedel’s results
remain very respectable overall, it
is clear that market deregulation is
not always working satisfactorily, as
following two examples show.
The cost of procurement is actually
rising sharply. This trend is clearly
contrary to the expectations of custo-
mers, who would have hoped to see
lower prices in the wake of liberali-
sation. Yet the beneficial effects of
competition have been offset by the
strong rise in the cost of electricity on
European markets, due in particular
to the increase in the cost of energy
Message
AnnuAl RepoRt 2005
intRoduCtion 13
resources, but also to the practice
among producers of gearing their
prices to the market rather than
basing them on generating costs. As
an importer for most of the needs
of Luxembourg’s grid, Cegedel is ex-
posed to these trends and had to put
up its sales prices on 1 January 2006.
We also regret the disappearance of
long-term products from electricity
markets. This is why consideration is
being given to greater involvement
in electricity generating projects in
Luxembourg and abroad.
However, it is worth noting that the
deregulation of electricity and gas
markets in Luxembourg has not been
moving at an equal pace. While a gas
company can easily canvas for new
electricity customers, the opposite is
not true because the procedures for
competitors to supply gas have yet to
be finalised. This imbalance in market
liberalisation is a real problem and
detrimental to our company.
We therefore have our work cut out
at both national and municipal level.
‘The energy market file has been
opened, but not the one on energy
policy’ complained a French Euro-MP
in an article on community policy in
Le Monde. nationally, we continue to
advocate the simultaneous deregu-
lation of gas and electricity markets
as well as greater collaboration
between Luxembourg operators. The
same also applies to infrastructure,
where both the Commission and
electricity industry bodies (Eurelec-
tric, ETSo, regulators) are calling for
national markets to be opened up
by more interconnections - another
reason for joining forces, in line with
current trends, to help us defend our
company’s interests in the face of
competition.
Roland MICHELRomain BECkER
Romain BeCKeR Roland MiCHel
Chief Executive Chairman of the Board of directorsChairman of the Management Committee
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AnnuAl RepoRt 2005
Ladies and Gentlemen,
In accordance with the law and our company’s articles of
association, we have convened this Annual General Meeting
in order to report on the company’s activity in 2005, the
seventy-seventh financial year since it was founded on
27 March 1928, and to submit the accounts for the year
ended 31 December 2005 for your approval.
Before reporting on the results of the Cegedel Group and the
Cegedel parent company, we would like to give you a brief
overview of the economic environment and the developments
in the power sector that characterised 2005.
AnnuAl RepoRt 2005
intRoduCtion 15
Following the tsunami that devas-
tated the coastline of South-east
Asia, the forces of nature once more
ravaged many regions of the world.
Among them, Hurricane Katrina,
which destroyed new orleans and
vast areas of Louisiana, will remain
particularly etched in people’s
memories, as it highlighted the lack
of preparation and vulnerability of
the world’s richest countries in the
face of natural disasters. Also, the
question of climate change is now
becoming a major concern in our
societies, including those traditionally
geared towards achieving tangible
short or medium-term economic
outcomes.
Economic performance has continued
to vary around the world. Whereas
the United States, Russia, and in-
creasingly China and India have seen
strong growth rates, other geogra-
phical areas have barely managed
any gains at all.
The year 2005 also saw a sharp rise in
energy costs.
As for Europe, it is struggling to
find its identity and move forward.
The economic and energy environment
Growth was generally weak, keeping
unemployment high and sparking
adverse reactions in some western
European countries to emerging
economies and immigration from the
east. Yet most large companies have
been able to consolidate the improve-
ment in their results since 2003.
Having reduced much of their debt,
many have stepped up their M&A
activities in their concern to increase
their competitiveness in what is now
a global market.
Under the Luxembourg presidency,
the Stability and Growth Pact drawn
up in 1997 to monitor budget poli-
cies within the eurozone has been
relaxed. After long and protracted
deliberations, the European Union
budget for 2007-2013 has been
adopted under the UK’s presidency
at a level some consider insufficient
to guarantee effective community
policy.
Europeans’ questioning and hesita-
tion by about their future role and
options was reflected in the French
and Dutch rejection of the European
Constitution. Yet without a complete
overhaul of its institutions, Europe
is unlikely to be in a position to
respond properly to the challenges
it faces industrially, environmentally,
competitively and on the energy
front.
on this front, security of supply is a
particularly pertinent issue. This was
illustrated by the conflict between
the Ukraine and Russia concerning
gas. The stand-off, which led to the
temporary suspension of gas supplies
to the Ukraine by Gazprom, remin-
ded us of the European Union’s heavy
dependence on foreign imports for
its energy.
Yet everything suggests that these
imports, some of which derive from
regions threatened by instability,
will account for around 70% of the
European Union’s energy needs in 20
to 30 years’ time, as opposed to 50%
today.
nevertheless, the global demand for
energy is rising, as can be clearly seen
in higher oil and gas prices. The price
of these primary energies has almost
doubled in the European Union over
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AnnuAl RepoRt 2005
the past two years, resulting in a
similar rise in electricity prices.
Although this situation is difficult
for consumers, these trends may also
rekindle interest in energy efficiency
in general, which could make the ne-
cessary investment in energy infras-
tructures more attractive.
Europe alone would need invest-
ment of some thousand billion euros
over the next 20 years to meet the
demand for energy and replace the
ageing infrastructure. At electricity
generating level, Germany alone
plans to build 20,000 MW of capacity
over the next fifteen years.
on the one hand, global climate
change now seems to be a gene-
rally accepted reality, as, according
to many experts, it lay behind the
recent spate of natural disasters. If no
action is taken, they predict a rise of
1.4°C to 5.8°C by the end of the cen-
tury. on the other hand, the global
demand for energy will be such that
carbon dioxide (Co2) emissions will
rise by some 60% by 2030 under the
‘business as usual’ scenario.
Luxembourg itself has recorded
GDP growth of around 4.5% com-
pared with 2004. Despite this strong
performance, unemployment stands
at 4.6% of the working population,
whereas the budget deficit is close
on 2% of GDP. Inflation has risen to
2.5%.
In 2005, overall demand for electrici-
ty in Luxembourg totalled 6,231 GWh
(1 GWh = 1 million kWh), a fall of 1%
on the previous year.
The electricity needs of all customers
served by Cegedel’s networks went
up by 1.6% year-on-year. Excluding
trading activities, Cegedel supplied
63.2% of the country’s total electri-
city demand (59.4% in 2004), with
most of the rest supplied for the iron
and steel industry via its own grid
(Sotel).
The annual variations in overall
electricity demand recorded in nei-
ghbouring countries were as follows:
Germany +0.66 %, Belgium -1.68%
and France +1.08%.
AnnuAl RepoRt 2005
intRoduCtion 17
Certain major events stand out in the
review of 2005. These are:
• the commencement of operations
of our Cegedel net subsidiary
against the backdrop of electricity
market deregulation,
• the impact of liberalisation on
Cegedel’s results,
• the rise in energy prices in general
and the demand for electricity in
particular,
• and the creation of artelis in the
telecommunications sector.
Creation of Cegedel net S.A.
Cegedel net, a wholly-owned subsi-
diary of Cegedel, was created in res-
ponse to an obligation arising from
the deregulation of the electricity
market. With a view to guaranteeing
non-discriminatory network access,
the European electricity liberalisation
directive requires the separation of
regulated activities remaining de
facto monopolies, and monitored
by an independent regulator, from
electricity generation and supply
activities which are open to compe-
tition. This was the motivation for
creating Cegedel net S.A., which is
responsible for managing Cegedel’s
networks. These networks remain the
property of the parent company, and
are operated by Cegedel net under
lease. The company was incorporated
on 8 november 2004 and employs
around 100 members of staff trans-
ferred from the parent company on 1
January 2005, the date when activi-
ties commenced.
From now on, Cegedel’s two core
activities, grid operation and electri-
city supply, will therefore be perfor-
med by two different companies. A
section of this annual report relates
to the operations of Cegedel net.
pressure on margins
net profit for the Cegedel Group
(prepared under IFRS*) is in line with
that of 2004, other key figures such
as operating profit or pre-tax profit
Highlights
* international Financial Reporting standards
Alessandro VOLTA(1745 - 1827)
italian physicist and inventor of the electric battery, a true revol-ution in the field of physics. Elec-tricity, which had been static until then, became dynamic. Looking to establish a measure of electri-city, he defined a unit of tension which, in honour of his work, was called the ‘volt’ (symbol V).
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AnnuAl RepoRt 2005
show noticeable stability compared
to 2004. This was due to two contras-
ting trends:
• the results for the core business,
the transmission, distribution and
supply of electricity, were down,
mainly due to the more competi-
tive pricing in the face of fiercer
competition and therefore heavier
pressure on margins,
• this reduction was offset by a rise
in receipts from diversification ope-
rations, reinforcing the merits of
initiatives launched in this regard
several years ago.
energy price rises
The prices of different energy re-
sources – coal, oil and gas – all rose
sharply in 2005. The strong increase
in energy consumption in emerging
countries such as China and India
contributed to a rise in energy needs
at global level, which in turn pushed
up prices significantly. As electri-
city is a secondary energy produced
essentially from so-called primary
energy sources, its price has mirrored
those price rises, as, aside from the
investment in generating facilities,
fuel is a major element in the cost
of electricity. For gas power stations,
fuel represents some 65% of the
production cost.
Creation of artelis S.A.
our telecommunications subsidiary,
Cegecom, and vSA nET from the Sar-
re announced in December 2005 that
they intended to join forces to create
a new joint venture. Known as ‘ar-
telis’, the new company was formed
on 21 november 2005, and Cege-
com and vSE nET have been wholly
owned by it since 1 January 2006. The
aim of this alliance is to strengthen
the position in the Greater Region
(Lorraine, Rhineland-Palatinate, the
Saar and Wallonia) and based on
existing markets in Luxembourg and
the Saar, to increase penetration in
the Saar-Lorraine-Luxembourg (Saar-
Lor-Lux) economic area.
Cegedel owns 27.5% of artelis, which
is headquartered in Luxembourg.
AnnuAl RepoRt 2005
intRoduCtion 19
in addition to these four major
events, the year was also characte-
rised by strong levels of activity in all
Cegedel’s services.
liberalisation
A new deadline set by European
directive 2003/54/EC, of 26 June 2003,
was reached on 1 July 2004. Since
then, all non-domestic customers
have had the right to a free choice
of supplier. Full liberalisation of the
market is planned for 1 July 2007 at
the latest, when all customers - both
domestic and non-domestic - will
become ‘eligible’. In view of these
developments, we are currently
gearing up for increased competition
in all segments of our customer base.
diversification
2005 was also marked by a continua-
tion of diversification efforts begun
over the last decade. The activities
of LuxEnergie, Cegecom, Global
Facilities, Soteg, Twinerg and others
have also developed well and are
becoming increasingly significant in
the accounts of the Cegedel Group.
The healthy performance reported
by these companies helped produce
a substantial rise in the consolidated
results.
Risk management
The new legislative environment,
increased competition and new acti-
vities in the area of procurement, for
example, led us to carry out a review
of the new risks to which Cegedel is
exposed and to implement appro-
priate procedures. Audits are carried
out on a regular basis, and at present
we consider that thanks to these
measures we are able to guarantee
appropriate risk management.
Strengthening the infrastructure
The 2004 blackout was a reminder
that, despite the constraints associa-
ted with liberalisation, we must not
neglect our long-term future and
that it is important to ensure infra-
structure remains in perfect working
order to secure ongoing network
reliability. To this end, we continued
efforts to modernise and strengthen
networks at all voltage levels. Capital
expenditure for 2005 totalled EUR
27.76m versus EUR 28.14m in 2004.
Hans-ChristianOErSTED(1777 - 1851)
danish physicist and chemist who discovered the existence of a ma-gnetic field linked to an electric current, the basis of the classic theory of electromagnetism de-veloped by AMPÈRE, FARAdAY and MAXWELL in the course of the 19th century. He assembled the first thermoelectric battery.
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AnnuAl RepoRt 2005
environment
The company also continues to pay
great attention to respecting the
landscape when renewing power
lines or installing new infrastruc-
ture. At the end of 2005, 91.7%
of low-voltage lines and 47.1% of
medium-voltage lines were installed
underground. All in all, our efforts
to increase the proportion of under-
ground lines have reduced the total
length of overhead lines by some 406
km since 31 December 1992.
our new nova naturstroum tariff,
launched in May 2003, offers cus-
tomers an environmentally friendly
option in the form of green energy
produced essentially from renewable
energy facilities.
overall, renewable energies repre-
sented 5.4% of Cegedel’s supply in
2005. Cegedel is therefore already
not far from meeting for its cus-
tomers the government’s target
of 5.7% of energy supplies from
renewables in 2010.
employees
In 2005, the staff supported the
management’s initiatives through
their commitment and expertise. We
would like to thank them for their
dedication and openness to the
changes that have occurred in our
area of operations.
the following provides an overview
of our 2005 results:
overall, we can confirm that the
results were positive, despite lower
revenues from the core business. This
was to be expected for an ex-mono-
poly in a deregulated market, proof
that the strategic decisions made
over the last few years are paying off.
The economic environment picked
up gradually in 2005, but demand
for electricity grew more slowly
than in previous years. Electricity
flows through the grid operated by
Cegedel net therefore grew by some
1.6%, whereas this rate was between
3% and 4% in previous years.
Given that the companies included in
Cegedel’s scope of consolidation also
increased their business, consolidated
profit eventually rose sharply.
Financial results and dividend
In consolidated terms (as reported
under IFRS), sales rose 39.2% from
EUR 387.8 million in 2004 to EUR
539.8 million in 2005, while profit
advanced 10.4% from EUR 47.42 mil-
lion to EUR 52.35 million. The strong
sales performance is due to the
development of the parent com-
pany’s trading activities, which are
characterised by large volumes and
thin margins.
The same also applies to the parent
company’s key figures (as reported
under Luxembourg accounting stan-
dards), with sales having increased
36,4% from EUR 360.9 million in 2004
to EUR 492.4 million in 2005, driven
by strong demand from domestic
customers, the rise in selling prices as
well as significant growth in inter-
AnnuAl RepoRt 2005
intRoduCtion 21
national trading activity. Profit also
increased, after transfers to reserves
in accordance with Article 50 of the
Articles of Association, from EUR
16.4 million in 2004 to EUR 18.2 million
in 2005.
Based on these results, the Board of
Directors proposes to pay a gross
dividend of EUR 2.75 per share, a
10% increase on the previous year.
Cegedel shares
Cegedel shares are listed on the
Luxembourg and Brussels stock
exchanges. The variations in the
share price on the Luxembourg stock
exchange (primary listing) were as
follows:
• in 2003: low of EUR 38.0 and high
of EUR 52.25;
• in 2004: low of EUR 51.5 and high
of EUR 62.0;
• in 2005: low of EUR 61.0 and high
of EUR 75.0.
The shares closed the year at EUR 75.0.
The share price posted further signifi-
cant gains at the start of 2006.
outlook
At this stage, the company foresees
no technical, commercial or financial
developments that could jeopardise
its economic stability in 2006.
steam engines consistently perfected by WATT were produced by BoULTon and WATT from
the end of the 18th century. They were one of the principal reasons for the industrial expansion
of the 19th century.
intRoduCtion22
AnnuAl RepoRt 2005
Benjamin FrANkLIN (1706 - 1790)
American physicist, writer and politician who
postulated a theory of electricity and introduced
the concept of positive and negative states.
Understanding the electrical nature of lightning,
he had the idea of provoking the discharge from
electrified clouds by the simple presence of a
metal rod. His experiments proved that the
grounded rod conducted electricity. This was the
origin of the lightning conductor.
Management report
AnnuAl RepoRt 2005
MAnAGeMent RepoRt 23
Cegedel Group as at 1 January 2006
Global Facilities33.3 %
artelis27.5 %
Cegecom100.0 %
VSE NET100.0 %
Agence de l'Energie40.0 %
Soler50.0 %
Soteg19.0 %
Ceduco50.0 %
Twinerg17.5 %
WandparkGemeng Hengischt
20.0 %
WandparkKehmen-Heischent
20.0 %
WandparkBurer Bierg
36.3 %
Luxgaz Distribution13.7 %
Cegyco50.0 %
LuxEnergie60.4 %
Surré11.2 %
SEO4.5 %
WSW (6.4 %)*
100 % 100 % 100 %
39%
25%
100 %
EEX (1.0 %)
Cegedel InternationalCegedel Participations Watt ReCegedel Net
Cegedel
12
3456
in time, it will havea 13,3 % holding
*
1 - principal electricity producers
2 - industrial and domestic cogeneration
3 - Gas
4 - Renewable energies
5 - telecommunications
6 - Facility management
MAnAGeMent Rep0Rt24
AnnuAl RepoRt 2005
Cegedel has been supplying Luxem-
bourg’s electricity since 1928, when
it was called ‘Compagnie Grand-Du-
cale d’Electricité du Luxembourg’. Its
status as concessionaire is governed
by an agreement signed with the
Luxembourg government.
Up until 2005, the year in which its
subsidiary Cegedel net was founded,
Cegedel’s mission of providing the
country with electrification led to
it being deemed, in liberalisation
parlance, a ‘vertically integrated
company’, as it was responsible for
procurement, transmission and distri-
bution, as well as supplying electricity
to customers. This mission extended
over the entire country, except for
certain municipalities supplied by
local distributors and the iron and
steel industry, whose requirements
are met by Sotel.
The Cegedel Group
AnnuAl RepoRt 2005
MAnAGeMent RepoRt 25
one of the major challenges Cegedel
has faced in the past was undoub-
tedly the gradual liberalisation of the
electricity market. The process, which
was triggered a number of years ago
by a European directive, has had nu-
merous effects on the company’s
organisation. It has helped draw a
clear distinction between Cegedel’s
two core activities: grid operation
and electricity supply. In accordance
with the European directive of 26
June 2003 regarding common regula-
tions for the domestic electricity
market, grid management activities
must be legally separate from elec-
tricity trading activities. Cegedel net,
which operates the electricity trans-
mission and distribution networks,
was created in november 2004 and
began operating on 1 January 2005.
Cegedel net now performs the role
of grid operator and is responsible
for the transmission and distribution
infrastructure, which is a regulated
activity monitored by the Institut
Luxembourgeois de Régulation. This
involves planning the networks on
the basis of ‘long-term’ considera-
tions, and one of its main focuses is
ensuring the quality of supply.
As a supplier of electricity, howe-
ver, Cegedel’s mission continues
to encompass buying and selling
electricity, and it now operates in
a competitive environment that is
increasingly dominated by the ‘short
term’. Cegedel offers its customers a
comprehensive range of energy-rela-
ted products and services.
The company initiated its diversifica-
tion programme in Luxembourg in
the early 1990s, taking a major step
forward in 1993 with the creation of
Cegedel Participations. Diversification
activities include electricity gene-
ration, cogeneration, natural gas
transportation and distribution, the
development and application of new
and renewable sources of energy,
facility management and telecommu-
nications. The aim of these diver-
sification activities is to ensure the
company’s growth by extending the
range of products and services that it
offers its customers beyond the core
business of transmitting and distribu-
ting electricity.
Cegedel International was created in
2003 to manage the Cegedel Group’s
diversification activities abroad. This
company controls the interests in
Wuppertaler Stadtwerke AG (WSW)
and in the European Energy Exchan-
ge (EEX) in Germany.
MAnAGeMent Rep0Rt26
AnnuAl RepoRt 2005
Apart from the first-time inclusion
of Cegedel net, the scope of consoli-
dation was unchanged in 2005. The
2005 consolidated accounts have
been prepared for the first time
according to International Financial
Reporting Standards (IFRS), and the
2004 financial statements have been
restated according to IFRS to facili-
tate comparison.
As from the 2005 financial year, it is
mandatory for listed companies to
prepare consolidated accounts accor-
ding to IFRS.
The Cegedel Group’s consolidated
profit in 2005 was EUR 52.35 million,
compared with EUR 47.42 million in
2004.
Key figures (in EUR million) 2004 2005 Change %
Under IFRS
Total assets 482.63 585.06 102.43 21.2 %
Fixed assets 399.35 413.40 14.05 3.5 %
Shareholders’ equity 344.82 381.27 36.45 10.6 %
Financial debt 18.10 21.15 3.05 16.9 %
Sales 387.80 539.78 151.98 39.2 %
Consolidated net profit (group share) 47.42 52.35 4.93 10.4 %
Consolidated accounts summary
AnnuAl RepoRt 2005
MAnAGeMent RepoRt 27
Customers
2005 was dominated by the effects of
the second phase of liberalisation in
the energy sector, which was triggered
by the opening of the electricity and
gas markets to all non-residential
customers on 1 July 2004.
Despite fiercer competition, our
company continues to successfully
develop its commercial activities by
offering new products and services to
its clientele, both in its core activity
as electricity supplier and in its rela-
ted activities.
on 8 July 2005, for example, we
signed a collaborative contract with
Gaz de France to supply natural gas.
By ministerial order of 15 September
2005, Cegedel was licensed to supply
natural gas to customers within
Luxembourg, and the first gas supply
accounts came on stream in october
2005.
Performance of Cegedel Group companies(under Luxembourg accounting standards)
Key figures (in EUR million) 2004 2005 Change %
Total assets 403.84 461.11 57.27 14.2 %
Fixed assets 343.73 349.51 5.78 1.7 %
Shareholders’ equity 315.73 339.22 23.49 7.4 %
Financial debt - - - -
Sales 360.92 492.35 131.43 36.4 %
net profit *1) 16.39 18.17 1.78 10.9 %
Cegedel is the Group’s parent company. Its core mission is to supply electricity
within Luxembourg.
*1) net profit is stated after deducting transfers to reserves in accordance with article 50 of the Articles of Association. Before deduction, net profit in 2005 was EUR 39.17 million, compared with EUR 41.48 million in 2004.
Cegedel S.A.
MAnAGeMent Rep0Rt28
AnnuAl RepoRt 2005
At the start of 2005, fees for low
and medium-voltage customers were
amended to reflect better the cost
price structure, in particular grid utili-
sation tariffs and procurement costs.
Since the start of the year, electri-
city prices on the wholesale markets
have rocketed (+56.9% for ‘base’
and +55.2% for ‘peak’). For the 2006
supply year, the base price rose from
EUR 34.0/MWh (3 January 2005) to
EUR 53.36/MWh (28 December 2005),
while peak prices rose from EUR
47.57/MWh to EUR 73.85/MWh.
30
32
34
36
38
40
42
44
46
48
50
52
54
56
01/0
1/05
01/0
2/05
01/0
3/05
01/0
4/05
01/0
5/05
01/0
6/05
01/0
7/05
01/0
8/05
01/0
9/05
01/1
0/05
01/1
1/05
01/1
2/05
Pric
e in
€/M
Wh
eeX Future Base 2006-2008
AnnuAl RepoRt 2005
MAnAGeMent RepoRt 29
Electricity sales
Sales of electricity to end customers,
local suppliers and distributors,
and foreign re-sellers amounted
to 9,740.5 GWh in 2005, a 52.1%
increase on 2004. Deducting sales
to foreign re-sellers (trading activi-
ties) and sales made in 2005 to the
transmission grid operator, Cegedel
net, to offset its network losses, the
increase was around 3.7%.
The changes in sales can be broken
down into the following broad
customer categories:
• high voltage (220 kv and 65 kv),
where electricity sales to final cus-
tomers and distributors increased
by 7.9% overall. This growth
was principally the result of two
contrasting effects: greater market
share of supply to the main munici-
pal distributor, offset by the loss of
a 65 kv industrial customer.
• medium voltage (20 kv), where
sales fell 2.1%. Demand from the
craft industry and services sector,
and supply to end customers in
third-party networks, grew around
3.0%, while sales to local distribu-
tors fell 40.1%. This was in res-
ponse to a municipal distributor
switching to a different supplier
and was partially offset by the
acquisition of the Wormeldange
(in July 2004) and Useldange (in
January 2005) networks.
• low voltage (230/400 v), where
invoiced sales rose 1.6% relative
to the previous year. It should be
remembered that in order to elimi-
nate the fluctuations resulting from
invoicing fixed instalments, the
low-voltage consumption figures
are entirely based on invoices cal-
culated according to annual meter
readings. The overall volume of
electricity invoiced on the basis of
annual meter readings in 2005 was
874.9 GWh, compared with 860.8*
GWh in 2004.
• foreign re-sellers (trading sales),
where our trading activities ge-
nerated an overall sales volume
of 5,805.0 GWh (2,719.6 GWh in
2004).
* n.B.: value in 2004 corrected
MAnAGeMent Rep0Rt30
AnnuAl RepoRt 2005
Changes in Cegedel’s electricity sales
GWh % change
2005 01/00 02/01 03/02 04/03 05/04
65 kV and 220 kV customers
Distributors 754.9 4.6 % 3.0 % 5.1 % - 42.2 % 29.3 %
Industrial 1,212.9 - 18.7 % 0.4 % 24.4 % - 9.3 % - 2.2 %
20 kV customers
Distributors 70.9 1.9 % - 0.8 % - 2.0 % - 5.8 % - 40.1 %
other customers 906.6 13.1 % 8.4 % 5.7 % 5.3 % 3.0 %
low-voltage customers (*) 874.9 9.8 % - 5.1 % 7.7 % 3.6 % 1.6 %
total sales (excl. trading and losses) 3,820.1 - 1.2 % 1.3 % 11.1 % - 11.4 % 3.7 %
trading sales 5,805.0 339.4 % 166.2 % 113.4 %
Grid loss coverage 115.4
total sales (incl. trading and losses) 9,740.4 - 1.2 % 7.5 % 30.0 % 23.2 % 52.1 %
(*) note:
The low voltage consumption figures for 2004 and 2005 have been corrected and only include the volumes actually
invoiced on the basis of annual meter readings.
AnnuAl RepoRt 2005
MAnAGeMent RepoRt 31
Number of custumers
Changes in the number of customers
supplied directly by the Cegedel grid
and possessing a supply contract with
the company were as follows:
31/12/2004 31/12/2005 Variation
High voltage 32 31 - 1
Medium voltage 2,365 2,440 + 75
Low voltage 152,762 155,715 + 2,953
total 155,159 158,186 + 3,027
Customer relations
Advice and information activities
The customer magazine ‘Watt’s Life’
was distributed to all our low-voltage
customers (131,000 copies) in March
(no. 5), July (no. 6) and november
(no, 7).
‘Contact’ (3,000 copies), a magazine
that targets major non-domestic
customers (high, medium and low
voltage-BHP), was published in July
(no. 5) and December (no. 6).
our teams in Differdange, Hautcha-
rage, Moutfort, Lamadelaine and
Dudelange ran information sessions
aimed, in particular, at sensitising the
general public to using energy more
rationally, with a focus on optimising
domestic consumption of electricity.
Trade fairs and exhibitions
The ‘Am Stroum vun der Zäit’ exhibi-
tion took place in the mall of the La
Belle Etoile hypermarket in Bertrange
from 15 to 26 February 2005.
The exhibition’s core theme was to
illustrate the phenomenon of ‘elec-
tricity’ by means of a large variety of
interesting examples; these included
the different methods of generating
Thalès DE MILET(625 - 547 av. J.Chr.)
Greek philosopher, mathemati-cian and astronomer
He is famous for his ‘Thalès theo-rem’ on triangles and parallel lines with two intersecting lines.
He also discovered that certain minerals in Magnesia were com-bustible.
Thalès dE MiLET was one of the
seven sages of Ancient Greece..
MAnAGeMent Rep0Rt32
AnnuAl RepoRt 2005
electricity and the changes in house-
hold electrical appliances over the
last five decades.
The Spring Fair at the LuxExpo in
Kirchberg, from 30 April to 8 May
2005, met with its customary success.
Large numbers of visitors came to
our stand, most notably their Royal
Highnesses, the Grand Duke and
Duchess of Luxembourg, on the oc-
casion of the opening ceremony. The
core themes were the nova naturs-
troum green tariff, the fonds nova
naturstroum and promoting the heat
pump.
The ‘Electricians’ electricity forum,
held on 4 May at the LuxExpo during
the Spring Fair, attracted some 200
professionals from the sector.
The ‘Architects’ and ‘Installers’ elec-
tricity forums, held for the first time,
met with genuine interest. on 10
June at the Energy Park in Remers-
chen, architects and installers were
updated on current and future trends
in heat pumps. This event was fol-
lowed on 12 June by a ‘heat pump’
discovery day for the general public,
which attracted more than 500 visi-
tors and gave them the opportunity
to ask the exhibitors questions about
heat pumps.
Finally, our company took part in the
‘Dag vun der natur’ at the natura ex-
hibition in Kockelscheuer on 19 June
and at the oekofoire from 16 to
18 September.
Sponsorship
As well as actively encouraging
company sports through Cegedel
Loisirs, Cegedel promotes the use of
human energy in the various spor-
ting disciplines represented by the
Luxembourg Sporting and olympic
Committee (CoSL). It also actively
supports sporting events in Luxem-
bourg through its sponsoring
partnership with the CoSL and
through its sponsorship of the yellow
jersey in the Tour de Luxembourg
(cycling). By attending a variety of
major popular and sporting events,
Cegedel achieves a closer relationship
with its clientele.
Cegedel’s mascot, ‘Professer Mega’,
personally attends the various events
supported by Cegedel to distri-
bute his educational brochure about
electricity. More than 10,000 copies
of this brochure, which is available
in French and German, have been
distributed at trade fairs, sponsorship
events, exhibitions and school events.
It can also be downloaded for free
from our website, where young peo-
ple can also find a very entertaining
explanation of electricity.
Press relations
Cegedel regularly informs the media
about its strategic decisions, activities
and results by means of interviews
with members of management, press
releases and press conferences.
AnnuAl RepoRt 2005
MAnAGeMent RepoRt 33
procurement
In 2005, Cegedel continued to refine
its structured procurement policy on
wholesale markets by assuming acti-
ve management of its own electricity
purchasing portfolio, as well as that
of other distributors. This approach
enabled it to further optimise its
procurement costs.
Some 63.3% of electricity was bou-
ght from foreign suppliers and from
the Leipzig EEX (European Energy
Exchange).
The remainder, around 36.7% of
requirements, was purchased from
Luxembourg-based generating
facilities, with the bulk - 22.4% of
Cegedel’s total demand - coming
from a 100 MW band reserved for
Cegedel by Twinerg, the operating
company of the combined cycle gas
and vapour power plant at Esch-sur-
Alzette.
The procurement breakdown by supplier was as follows:
2004 2005
imports 62.6 % 63.3 %
twinerg 23.2 % 22.4 %
Cogeneration plants 9.0 % 8.9 %
Industrial plants 4.4 % 4.1 %
Small plants 4.6 % 4.8 %
Hydroelectric plants 2.5 % 2.1 %
Plants on the Sûre (Soler) 1.0 % 0.8 %
Plants on the Moselle (SEO) 1.4 % 1.2 %
Small plants 0.1 % 0.1 %
Wind farms 1.0 % 1.3 %
photovoltaic facilities 0.2 % 0.4 %
Biomass plants 0.5 % 0.7 %
Sidor 1.0 % 0.9 %
total: 100 % 100 %
MAnAGeMent Rep0Rt34
AnnuAl RepoRt 2005
the environment
Energy is a key factor in the modern
life we lead. our economy cannot
function properly without it, and it is
vital to the well-being of our civili-
sation. The electricity industry does,
however, impact the environment by
consuming energy resources, produ-
cing waste and emitting greenhouse
gases, and its facilities also make a
visual impact.
nevertheless, respecting and pro-
tecting the environment remain an
extremely important part of Cege-
del’s activities. This can be seen both
in our efforts to promote renewable
energies (e.g. via a green tariff and
the creation of an environmentally-
friendly investment fund) and in the
care we take to ensure our facilities
respect the landscape.
Through its subsidiaries and equity
holdings, Cegedel is also very ac-
tive in electricity generation from
renewable forms of energy and
cogeneration.
Renewable energy
The contribution of renewable energy to Cegedel’s requirements, generated by
all producers in Luxembourg, was as follows:
2004 2005
GWh GWh
Hydroelectric plants 92.7 82.5
Wind farms 39.6 52.5
Photovoltaic 8.5 16.5
Biomass 20.3 27.2
Waste incineration (Sidor) 38.0 34.4
total 199.1 213.1
Percentage of Cegedel’s grid requirement 5.3 % 5.4 %
There has been a decline in the contribution of hydroelectric plants versus
2004, due to a lack of rainfall, particularly in the second half of 2005.
nevertheless, the fall in hydroelectric generation has been offset by new
facilities coming on stream for generating electricity from renewable forms of
energy, especially wind, photovoltaic and biomass sources.
AnnuAl RepoRt 2005
MAnAGeMent RepoRt 35
Cogeneration
The development of industrial coge-
neration plants and district heating
stations, with their high energy
yields, helps promote savings in pri-
mary energy and reduce global Co2
emissions.
In 2005, two new residential cogene-
ration plants were opened.
The contribution of cogeneration
plants to the volume of electricity,
generated by all producers in
Luxembourg, was as follows:
Cegedel’s environmentally-friendly
nova naturstroum tariff has enjoyed
encouraging commercial success since
its launch in May 2003, and customer
numbers were stable during 2005.
At the end of 2005, there were 800
customers and the annual volume
had risen to 5.4 GWh. There was a
slight decline in interest from resi-
dential customers, compared with
a marked increase in the volume
purchased by various public sector
institutions, particularly the munici-
pal authorities. Currently, some
2.2 GWh is purchased by low-vol-
tage residential customers, with the
balance of 3.2 GWh taken principally
by municipal authorities and various
medium-voltage customers.
The nova naturstroum green tariff
2004 2005
GWh GWh
Industrial cogeneration 166.6 160.1
Residential cogeneration 175.9 186.3
total 342.5 346.4
Percentage of Cegedel’s grid requirement 9.1 % 8.9 %
Charles AugustinDE COuLOMB(1736 - 1806)
French scientist and physicist, who discovered electrostatics with the British chemist and physicist, Hen-ry CAVEndisH. He developed nu-merous experiments to prove the electrostatic and magnetic laws of attraction and repulsion. The cou-lomb unit of electric charge (sym-bol C) is named after him.
dE CoULoMB became a member of the Académie des sciences in 1773.
MAnAGeMent Rep0Rt36
AnnuAl RepoRt 2005
The fonds nova naturstroum
The fonds nova naturstroum, set up by Cegedel on its own initiative, aims to
harness and promote renewable energy sources in Luxembourg.
Cegedel has committed to paying 2 euro cents to this fund for every kWh
consumed under a nova naturstroum tarif.
The fonds nova naturstroum, a non-profit organisation, consists of the fol-
lowing three members: nATURA (Luxembourg League for the Protection of
nature and the Environment), Agence de l’Energie and Cegedel.
The fonds nova naturstroum received 15 requests for incentive bonuses in 2005
and lent its support to the first eligible projects, which were selected for their
innovative and educational approach.
total length of overhead lines: Change relative to 31/12/1992:
End-1992: 2,454 km 0 km
End-1998: 2,235 km - 219 km
End-2005: 2,090 km - 406 km
Burying lines underground
Cegedel has made a specific com-
mitment to burying network infras-
tructure underground in population
centres and the surrounding areas
when renewing lines or installing
new infrastructure.
Since this commitment was made at
the end of 1992, the overall length
of overhead lines has declined as
follows:
AnnuAl RepoRt 2005
MAnAGeMent RepoRt 37
Asset Services
As part of the legal unbundling
required by directive 2003/54/EC, the
task of managing and operating the
Cegedel networks was transferred to
Cegedel net with effect from
1 January 2006. Under the terms of
the same directive, Cegedel retains
ownership of the transmission and
distribution networks. It is for this
reason that a management and
leasing contract was concluded
between Cegedel and Cegedel net,
a principal objective of this contract
being to determine the condi-
tions under which Cegedel leases
to Cegedel net the facilities and
equipment used for the transmission
and distribution activities. The table
below shows the growth in Cegedel’s
networks during 2005:
network development by voltage level 31/12/2004 31/12/2005
Low-voltage lines (400/230 v): overhead (km) 364 355
underground (km 3.849 3.912
Total (km): 4.213 4.267
underground rate: 91,4 % 91,7 %
Medium-voltage lines (20 kv): overhead (km) 1.224 1.213
underground (km 1.043 1.081
Total (km) : 2.267 2.294
underground rate: 46,0 % 47,1 %
High-voltage lines: 65 kv 2 circuits (¹): overhead (km) 156 176
underground (km 4,0 8,7
High-voltage lines: 65 kv 1 circuit: overhead (km) 247 226
underground (km 1,2 1,6
High-voltage lines: 220 kv (²): overhead (km) 120 120
1) including dudelange/Riedgen to Aspelt (1.4 km section), temporarily equipped with only one three-phase circuit
2) including schifflange–Bascharage–Bertrange (16.9 km) and schifflange–dudelange (4.9 km), temporarily operated at 65 kV
MAnAGeMent Rep0Rt38
AnnuAl RepoRt 2005
The table also shows Cegedel’s
commitment to burying networks
underground in population centres
and the surrounding areas when
renewing lines or installing new
infrastructure.
Since this commitment was made
at the end of 1992, the overall length
of overhead lines has declined by
406 km.
one of the main tasks of ‘Asset
Services’, Cegedel’s technical mana-
gement department, is to provide
services to the transmission and
distribution grid operator (Cegedel
net), as defined in the ‘Technical
Services’ contract between Cegedel
and Cegedel net dated 13 December
2004. These services cover work in
connection with the operation, main-
tenance and repair of the transmis-
sion and distribution networks.
Technical management comprises the
following areas:
• The ‘Purchase and Auxiliary
Services’ department, which is
responsible for buying materials
and managing stock, running the
central warehouse and organising
the works schedule of the Mersch
workshop; this area also provides
computer management services
and provides Cegedel net with
secretarial support for managing
Cegedel net’s grid connection
and utilisation contracts; it also
manages the drawing office and
implementation of the GIS project
(Geographical Information System);
• The ‘Mv/Lv Services’ department,
which provides the services
governed by the Technical Services
contract relating to the setting
up and operation of the medium
and low-voltage networks and
customer connections, including
repairs and maintenance; it is also
responsible for managing vehicles
and the garage at the head office
in Strassen;
• The ‘Hv Services’ department,
which also provides services go-
verned by the Technical Services
contract relating to operating the
high-voltage networks, including
repairs and maintenance.
The technical management depart-
ment may also be tasked with perfor-
ming studies into technical aspects of
energy generation within the broa-
der context of Cegedel Participations
and Cegedel International.
In parallel with the unbundling pro-
cess, an analysis into enhancing Asset
Services’ efficiency has been carried
out. The results have shown that
there is potential to make substantial
savings in work procedures, together
with further opportunities for impro-
ving customer service.
The connection procedure, for
example, proved a key issue in
optimising work procedures. Efforts
have focused on the quality of
customer contacts and the speed
with which requests are handled.
The local organisation has been
centralised at Cegedel’s head office
in Strassen, enabling the connection
formalities to be completed more
quickly and efficiently.
A team of specially trained customer
service assistants has been set up to
provide customers with all the infor-
mation they require on connecting to
the grid.
AnnuAl RepoRt 2005
MAnAGeMent RepoRt 39
Bertrange220/65/20 kV
Roost 220/65/20 kV
Heisdorf 220/65/20 kV
Flebour220/65/20 kV
Schifflange220/65/20 kV
2 x 220 kV connectionwith Germany (Bauler)
2 x 220 kV connectionwith Germany(trier and Quint)
Connection withBelgium
the grid
MAnAGeMent Rep0Rt40
AnnuAl RepoRt 2005
In order to provide customers with
a better service, we have put to-
gether an information file for the
project manager and designed a
new connection request form. These
documents and information are also
available on Cegedel’s website.
The following provides some infor-
mation on the work carried out by
Cegedel on behalf of Cegedel net:
The 20 kv grid
Cegedel has continued expanding
the medium-voltage grid, with new
closed circuit networks and the crea-
tion of additional 20 kv outgoing
lines from 65/20 kv substations. By
making medium-voltage supply more
secure, this investment means fewer
customers will be affected by any
power interruption on a section of
line.
In addition, 33 new 20,000/400 v
transformer substations were in-
tegrated into the medium-voltage
grid. Many of these projects were
undertaken at the request of muni-
cipal authorities seeking to replace
old girder-mounted substations by
substations integrated into municipal
or other buildings. In 2005, Cegedel
took over medium and low-voltage
distribution for the village of Usel-
dange. By absorbing this former pu-
blic sector corporation, the company
acquired 259 new customers.
Cegedel and Cegedel net have also
confirmed their commitment to
gradually reducing the proportion of
overhead medium and low-voltage
power lines.
All new medium-voltage lines will be
underground lines. The proportion
of medium-voltage cables is currently
47.1%.
The low-voltage grid
Cegedel and Cegedel net have conti-
nued to strengthen and modernise
the networks in numerous villages
by installing underground low-vol-
tage networks. These new lines were
virtually all completed underground
and bring the proportion of under-
ground cables at the end of 2005 to
91.7%.
Collaboration between Cegedel and
the municipal authorities is progres-
sing well. All work is systematically
coordinated with the natural gas dis-
tributors, the highways department,
the various departments of the postal
and telecommunications company
P&T Luxembourg, etc. The aim is to
minimise both cable-laying costs and
inconvenience to local residents.
Finally, we made 3,033 new three-
phase connections in 2005, including
1,046 for single-family dwellings and
1,987 for apartment buildings.
As in the past, technical installation
of connections is carried out by the
regional centres of Schifflange, Heis-
dorf and Wiltz.
.
AnnuAl RepoRt 2005
MAnAGeMent RepoRt 41
Human resources
Staff changes
Due to the foundation of Cegedel
net on 1 January 2005 and the trans-
fer of some of the parent company’s
staff to the new structure, the ave-
rage headcount for the period was
399 for Cegedel and 100 for Cegedel
net. The headcount for the group
- Cegedel and Cegedel net - was
therefore virtually unchanged at 499,
compared with 501 in 2004.
The adjacent graph shows staff
trends at Cegedel over the last ten
years. The newly created Cegedel net
does not employ any artisans (skilled
workers or craftsmen).
The age of Cegedel’s workforce has
reduced considerably over the last
few years, with 49% of staff now
aged between 25 and 39.
The average age is 37 for women and
40 for men.
In terms of new recruits, most arti-
sans are in the 20-25 age group and
most white-collar staff are in the 20-
30 age group.
It is interesting to note that 98.5% of
Cegedel’s salaried staff are employed
on permanent contracts and that the
proportion of women making up the
workforce has risen from 8% in 1995
to 14% in 2005.
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
400
420
440
460
473477
480476
472 473
488
495
501 499
480
500
520
MAnAGeMent Rep0Rt42
AnnuAl RepoRt 2005
Continuous professional training
Besides offering numerous tailored
training activities aimed at deve-
loping the technical expertise of all
staff members, the management
bodies of both companies support
the implementation of a training and
information process for their mid-
dle managers, which commenced in
2004.
The concept is based on the desire to:
• facilitate the flow of information
and to encourage members of mid-
dle management and the senior
management bodies to exchange
information,
• encourage middle and senior ma-
nagement to reflect on the annual
strategy as a group,
• stimulate and encourage synergies
by staging seminars and meetings
to gather the various disciplines
around the same table,
• encourage greater responsibility via
transparency, dialogue and trust.
The purpose of this training plan is
to cultivate highly qualified staff by
developing their technical and ma-
nagerial skills. It should also prepare
staff for the challenges of the future
and the increasingly diverse tasks
they face, and create a new process
of exchange that benefits interperso-
nal relationships.
The underlying aim of these collec-
tive training initiatives, discussion
sessions and individual development
measures is to evolve and anticipate.
With this in mind, we would like to
thank and congratulate all our staff
for the skill and expertise with which
they have provided their services
during the 2005 financial year, and
for their absolute commitment to
bringing about the substantial
changes that liberalisation of the
electricity market has entailed.
André-Marie AMPÈrE(1775 – 1836)
French physicist and mathemati-cian, Ampère discovered electro-magnetism and developed the language of electricity. He is now recognised as one of the greatest scientists of the 19th century. Ampère became a member of the Académie des sciences in 1814.
The ampere unit of measuring electric current is named after him (symbol: A).
AnnuAl RepoRt 2005
MAnAGeMent RepoRt 43
Cegedel net’s corporate purpose is
the management of electricity trans-
mission and distribution networks
in the Grand Duchy of Luxembourg.
Cegedel net has been managing the
Cegedel Group’s transmission and
distribution networks since 1 January
2005.
This was brought about by the
European directive of 26 June 2003
on the deregulation of the electri-
city market, which requires the legal
separation of electricity transmission
and distribution activities from other
sector activities, such as the genera-
tion and supply of electricity.
The new grid operator is responsible
for the planning, construction, ex-
pansion, maintenance and operation
of these networks.
By means of service contracts, Cege-
del net assigns the technical staff,
who remain employed by the parent
company, responsibility for the
construction, operation, maintenance
and repair of its networks, except
for high-voltage networks, whose
construction and operation remain
the responsibility of Cegedel net.
What are the main points regarding 2005?
The quality of supply remained
excellent
• After 2004, when a 33-minute
blackout ‘imported’ from Germany
dominated the media, no notable
incident occurred to disrupt grid
operation in 2005.
• on the contrary, security of supply
was further strengthened by the
installation of a second 400/220 kv
transformer at niederstedem, while
the capacity of the Heisdorf-Trier
220 kv line was almost doubled.
Created at the end of 2004, Cegedel net’s mission is the management of electri-
city transmission and distribution networks in the Grand Duchy of Luxembourg.
Key figures (in euR million) 2005
Total assets 21.75
Fixed assets -
Shareholders’ equity 0.75
Financial debt -
Sales 116.69
net profit 0.65
The company made a profit of EUR 0.65 million for the period ending
31 December 2005.
Cegedel net S.A.
MAnAGeMent Rep0Rt44
AnnuAl RepoRt 2005
• At the same time, Cegedel net and
Cegedel conducted a full review of
their emergency procedures.
• In addition, negotiations with RWE
Transportnetz Strom, ELIA and
Sotel have been held with a view
to further improving reaction times
should an emergency supply be
needed.
Substantial investment in infrastruc-
ture
• To ensure a high level of security of
supply in the future as well, invest-
ment in grid infrastructure conti-
nued at a high rate, approaching
EUR 30 million a year.
Respect for the environment and
integration of infrastructure into the
landscape
• Cegedel net pays great attention
to the planning of new infrastruc-
ture, particularly through regional
feeder systems and making every
effort to minimise the impact of
these works on the environment
and the landscape.
network tariffs have remained stable
• Despite this major investment,
which is vital for ensuring that its
networks remain highly reliable,
Cegedel net has managed to keep
its network tariffs constant or even
reduce them during 2005.
Looking firmly to the future
• In its first year of existence,
Cegedel net showed that despite
its reduced size, it played a full part
as an independent grid operator
and met the challenges that came
its way.
non-discriminatory treatment of
customers
Cegedel net has taken all the neces-
sary measures in terms of organisa-
tion, management and information
systems with a view to preventing
• Cegedel net’s decision makers
from having responsibilities in a
Cegedel Group activity linked to
the purchase, sale or generation of
electricity;
• Cegedel net staff from having
access to the databases of
Cegedel’s sales department (SAP-
ISU). In general, access to databases
is linked to the job description for
the various positions. When a staff
member changes position, their
initial access rights are withdrawn
and changed according the job
description for their new position;
• Cegedel staff, and sales depart-
ment staff in particular, from
having access to data from Cegedel
net’s meters.
AnnuAl RepoRt 2005
MAnAGeMent RepoRt 45
Consumption up 1.6%
The total volume of electricity injec-
ted at national level via
• 220 kv interconnection lines,
• self-generated electricity (with
metering on customer sites) or
• local sources of production connec-
ted to Cegedel’s networks or to
those of the eight local distribu-
tors/sellers
came to 4,487.8 GWh in 2005
(4,415.5 GWh in 2004), equivalent
to an increase of 1.6% in national
consumption (excluding Sotel).
For the first time, the national peak
crossed the 700 MW threshold
The maximum peak for Cegedel’s
grid was 700.2 MW in 2005
(673.1 MW in 2004), recorded at
5.45 p.m. on 12 December 2005.
Statistics on electricity flows
Peak
Consumption
. . . . . . . . . . . . . . ......... ..
Growth in grid peak and consumption
MAnAGeMent Rep0Rt46
AnnuAl RepoRt 2005
The question of future interconnec-
tions with neighbouring countries
Following the launch of an operation
authorisation procedure, Sotel’s pro-
ject to construct a 220 kv double-
circuit line to France became public
and reignited the debate about
making Luxembourg’s electricity
supply more secure.
It goes without saying that safe-
guarding the security of supply is a
central concern of Cegedel net. For
this reason the company regularly
updates the transmission capacity of
its networks, taking account of the
latest changes in our economy and
society in general. Accordingly, the
Grid 2025 study, conducted for
Cegedel, also revealed that in fu-
ture an additional interconnection
would be needed in the south of our
country.
Aware of its responsibilities regar-
ding security of supply, the ministry
of economics asked the consultants
Consentec to analyse the extent to
which the Sotel project might contri-
bute to a more secure supply for the
Grand Duchy of Luxembourg.
While Cegedel net substantially
shares this study’s conclusions, the
fact remains that many technical
and economic aspects have still to be
analysed more exhaustively in close
consultation with all the interested
parties.
As a result, we will have to take into
consideration the needs of the public
grid and involve Cegedel from the
outset in the Sotel project, with the
aim of safeguarding the general inte-
rest in line with the Consentec study’s
conclusions.
electricity flows in Cegedel’s grid (2005)
Injections into the grid
Cross-border exchanges
Imports 87.5 %
local production
Cogeneration 7.7 %
Hydroelectric plants 1.8 %
Wind farms 1.2 %
Waste incineration 0.8 %
Biogas 0.6 %
Photovoltaic 0.4 %
AnnuAl RepoRt 2005
MAnAGeMent RepoRt 47
Cegedel Participations is a wholly-owned subsidiary of Cegedel. It manages
the Cegedel Group’s diversification activities in Luxembourg.
Key figures (in EUR million) 2004 2005 Change %
Total assets 57.57 58.78 1.21 2.1 %
Fixed assets 56.93 56.94 0.01 0.0 %
Shareholders’ equity 39.79 40.19 0.40 1.0 %
Financial debt 15.45 15.45 0.00 0.0 %
Profit for the year 1.76 2.56 0.80 45.5 %
The profit was EUR 2.56 million in 2005 (EUR 1.76 million in 2004).
twinerg S.A.(participating interest: 17.5%)
Twinerg is a combined cycle gas and vapour turbine that has been operating
since 2002.
Total electricity production in 2005 was 2,688 GWh. The company made a
profit of EUR 18.11 million in 2005, compared with EUR 2.17 million in 2004,
thanks to the posting of extraordinary income.
Cegedel participations S.A.
MAnAGeMent Rep0Rt48
AnnuAl RepoRt 2005
Ceduco S.A.
(participating interest: 50%)
Ceduco is jointly owned by Du Pont de nemours and Cegedel Participations. It
operates an industrial cogeneration plant.
In 2005 its sales of vapour and electricity totalled 206,801 tonnes and 85.26
GWh respectively, compared with 217,875 tonnes and 91.09 GWh in 2004.
The company made a profit of EUR 0.45 million in 2005, compared with EUR
0.68 million in 2004.
Cegyco S.A.
(participating interest: 50%)
Cegyco is jointly owned by Goodyear and Cegedel Participations. It operates an
industrial cogeneration plant.
In 2005 its sales of vapour and electricity totalled 269,775 tonnes and
74.88 GWh respectively, compared with 258,023 tonnes and 75.49 GWh in 2004.
The company made a net profit of EUR 0.39 million in 2005, compared with
EUR 0.54 million in 2004.
luxenergie S.A.(participating interest: 60.35%)
LuxEnergie generates and supplies heat, cold air and electricity in the public,
domestic and service sectors, particularly on a cogeneration basis.
AnnuAl RepoRt 2005
MAnAGeMent RepoRt 49
In the course of the year, the company invested EUR 10.28 million. The
company made a net profit of EUR 2.63 million in 2005, compared with
EUR 2.27 million in 2004. LuxEnergie operates a total of 29 power stations,
which in 2005 produced 222.18 GWh of heat, 25.25 GWh of cold air and
107.43 GWh of electricity. The company also supplies maintenance services
to third-party cogeneration stations. At the end of 2005, the company had
34 employees.
Soteg S.A.(participating interest: 19%)
Soteg mainly imports, transports and supplies natural gas.
In 2005 the company made a net profit of EUR 10.57 million, an increase of
EUR 2.73 million on 2004. Total gas sales reached 14,738 GWh in 2005, com-
pared with 15,227 GWh in 2004.
Wandpark Gemeng Hengischt S.A.(participating interest: 20%)
This company built and operates a wind farm of around 10 turbines in
Heinerscheid. The total installed capacity of the farm is 12,200 kW.
Electricity production was 18.9 GWh in 2005, against 21.0 GWh in 2004.
It is set to make a profit of EUR 0.22 million in 2005 as opposed to
EUR 0.56 million in 2004.
MAnAGeMent Rep0Rt50
AnnuAl RepoRt 2005
Wandpark Kehmen-Heischent S.A.
(participating interest: 20%)
This company was created to build and operate a wind farm in Kehmen compri-
sing seven wind turbines with a total installed capacity of 12,600 kW.
The seven turbines came into service in autumn 2004. In 2005 they supplied
20.4 GWh of electricity to the Cegedel grid, compared with 5.7 GWh between
September and December 2004. The company made a profit of EUR 0.34 million
in 2005, compared with EUR 0.49 million in 2004.
Soler S.A.(participating interest: 50%)
This company was formed in response to the government’s initiative to privatise
the running of state-owned hydroelectric power stations. Its corporate purpose
includes the design and creation of electricity generation facilities, based on
renewable sources of energy, and the running of these facilities.
As at 31 December 2005, the company operated the hydro stations of Ettelbrück,
Esch-sur-Sûre and Rosport. Total hydro output was 30.51 GWh in 2005, compared
with 40.40 GWh in 2004. The company made a loss of EUR 0.07 million in 2005, as
opposed to a profit of EUR 0.36 million in 2004.
AnnuAl RepoRt 2005
MAnAGeMent RepoRt 51
Cegecom S.A.(participating interest: 100%)
Cegecom offers a wide range of telecommunications services (voice, data trans-
mission and high-speed internet access), based on a fibre-optic network and
wireless local loop technology.
With 39 employees (compared with 34 in 2004), the company has been growing
steadily. In 2005 a joint venture was concluded between Cegecom and vSE nET,
the telecommunications subsidiary of the group vSE AG, based in the Saar. A new
company, artelis, 27.5% owned by Cegedel Participations, was formed at the end
of 2005 with the aim of holding from the beginning of 2006 the participating
interest in Cegecom as well as that of vSE AG in vSE nET.
The company made a pre-tax profit of EUR 1.16 million in 2005, well ahead of
the preceding year. The post-tax profit was EUR 0.06 million, however, compared
with EUR 0.79 million in 2004. This decline was due an extraordinary charge of
EUR 0.92 million, arising from the separate tax treatment necessitated by the
formation of artelis.
Global Facilities S.A.(participating interest: 33.33%)
The Cegedel Group jointly formed this company in 2002. It offers facilities
management services to companies and local authorities.
The company continued to expand in 2005, increasing its headcount to 74
(from 59 in 2004). It made a profit of EUR 0.43 million in 2005, compared with
EUR 0.38 million in 2004.
MAnAGeMent Rep0Rt52
AnnuAl RepoRt 2005
the following companies are not included in theconsolidated financial statements.
Société electrique de l’our S.A.(participating interest: 4.46%)
Société Electrique de l’our (SEo) owns and operates a 1,100 MW pumping station
in the vianden region and hydroelectric power stations on the Moselle river. The
company made a profit of EUR 2.19 million in 2005, compared with EUR 2.04
million in 2004.
luxgaz distribution S.A.(participating interest: 14%)
This company sets up and operates local gas distribution networks in regions
recently connected following the extension of the natural gas grid.
Gas sales increased by 9.5% in 2005 to 3.1 million GJ (2.8 million GJ in 2004).
The company made a profit of EUR 2.48 million in 2005, compared with
EUR 2.98 million in 2004.
Surré S.A.(participating interest: 11%)
Surré has three cogeneration plants, which in 2005 produced 2.20 GWh of electri-
city and 7.1 GWh of heat. The company made a profit of EUR 0.12 million in 2005,
compared with EUR 0.07 million in 2004.
AnnuAl RepoRt 2005
MAnAGeMent RepoRt 53
Agence de l’energie S.A.(participating interest: 40%)
Agence de l’Energie continued its activities in 2005, most notably raising awa-
reness, providing information and giving technical advice to the general public
about how to use energy efficiently, and encouraging the use of renewable ener-
gies following the implementation of Luxembourg’s new regulations in this area.
As in the past, the company broke even.
Wandpark Burer Bierg S.A.(participating interest: 36.25%)
In 2003, Cegedel Participations jointly formed this company in order to build a
7,200 KW-capacity wind farm. The authorisation procedures for the project are
still under way.
MAnAGeMent Rep0Rt54
AnnuAl RepoRt 2005
Key figures (EUR million) 2004 2005 Change %
Total assets 40,50 42,64 2,14 5,3 %
Fixed assets 40,20 40,20 0,00 0,0 %
Shareholders’ equity 30,00 29,95 (0,05) (0,2 %)
Financial debt 10,50 10,50 0,00 0,0 %
Profit for the year (0,05) 2,19 2,24 -
This company was formed on 23 January 2003 to manage the Cegedel Group’s
diversification activities abroad. At the end of 2003, it invested EUR 39.5 million
in the German company Wuppertaler Stadtwerke AG (WSW). Cegedel Internatio-
nal’s total shareholding in WSW is eventually expected to increase to 13.33%.
The company also has a 1% holding in the European Energy Exchange (EEX) in
Germany.
James Clerk MAXWELL(1831 – 1879)
MAXWELL’s work represents a milestone in the development of modern science.
in his publication A Treatise on Electricity and Magnetism, he set out the four basic equations of electrodynamics (MAXWELL’s equations).
The electromagnetic theory of li-ght follows directly from this set of equations.
Cegedel international S.A.
AnnuAl RepoRt 2005
MAnAGeMent RepoRt 55
Wuppertaler Stadtwerke AG
(participating interest: 6.4%)
This company is active in Wuppertal in supplying, distributing and producing
electricity, in distributing water, natural gas and heat and in urban transport and
refuse collection. Cegedel International’s participating interest in WSW is
restricted to its distribution division (electricity, water, natural gas and heat) and
entitles it to a dividend from 1 January 2004 based on this division’s profits.
Dividends paid in 2005 (for 2004) came to EUR 2.2 million.
european energy exchange (eeX) AG(participating interest: 1%)
Based in Leipzig, the European Energy Exchange (EEX) is the management com-
pany for the -Germany’s only electricity exchange, the largest in Europe. EEX is
active in the spot and futures market in Germany. It also plans to be active across
Europe and to expand its activities to natural gas and carbon dioxide.
.
MAnAGeMent Rep0Rt56
AnnuAl RepoRt 2005
Watt Re is a captive reinsurance company with capital of EUR 1.24 million whose
aim is to insure the parent company against major risks, particularly those
relating to damage caused to the electricity distribution and transmission grid.
Technical provisions were EUR 17.18 million at the end of 2005.
In accordance with Luxembourg’s insurance law of 6 December 1991 (Art 99-4),
reinsurance companies are obliged to set aside an equalisation provision, which
means that Watt Re’s profit is zero.
The power vehicle developed by Henri TUdoR. View of the distribution board (1886)
Watt Re S.A.
AnnuAl RepoRt 2005
Board of directors of Cegedel S.A.
Mr Frank n. WAGEnER, who is standing down
by rotation, will be replaced for the remainder
of his term of office.
We will submit to you a proposal on this
matter.
Statutory auditors
The mandate of the company auditors,
Deloitte S.A., is about to expire.
We will communicate to you the joint
consultative committee’s proposal on this
matter.
The Board of Directors
Strassen, 7 April 2006
ConSolidAted AnnuAl ACCountS58
AnnuAl RepoRt 2005
Henri Owen TuDOr (1859 - 1928)
Luxembourg engineer and inventor of the lead-
acid battery, the ‘Tudor accumulator’. industrial
production quickly took off, with 1,200 working
TUdoR lead storage batteries worldwide in 1890.
The TUdoR brothers were also behind the
invention of the power vehicle, a multi-purpose
battery-motor unit.
Annual accounts
AnnuAl RepoRt 2005
ConSolidAted AnnuAl ACCountS 59
Consolidated annual accounts 2005
Consolidated balance sheet as at 31 December 2005 60
Consolidated profit and loss account for the period from
1 January to 31 December 2005 62
Consolidated cash flow statement 63
Consolidated statement of changes in shareholders’ equity 64
notes to the consolidated financial statements 65
Auditors’ report on the consolidated annual accounts 87
Annual accounts of Cegedel S.A.
Balance sheet as at 31 December 2005 90
Profit and loss account for the period from 1 January to 31 December 2005 92
notes to the annual accounts 94
Auditors’ report on the annual accounts 105
ConSolidAted AnnuAl ACCountS60
AnnuAl RepoRt 2005
ASSetS Note(s) 2005 2004
€ €
FiXed ASSetS
intangible fixed assets
other intangible fixed assets Note 4 1,829,341 2,312,977
tangible fixed assets Note 5
Grid and other tangible fixed assets 245,778,665 242,886,797
Fixed assets in course of construction 43,451,875 34,683,080
long-term investments Note 6
Investments in affiliated undertakings Note 6.1 34,196,510 30,387,509
other long-term investments Note 6.2 83,402,726 79,448,321
deferred tax Note 7 4,744,969 9,632,625
totAl 413,404,086 399,351,309
CuRRent ASSetS
Stocks Note 8
Goods held for resale 3,320,106 3,058,906
Services in progress 6,155,307 7,503,417
Receivables
Receivables in respect of sales and services provided Note 9 68,371,461 39,099,785
other receivables Note 10 51,825,573 6,627,392
transferable securities
other transferable securities 10,250,288 2,713,600
treasury operations Note 11 31,193,572 24,003,691
prepayments and accrued income 539,553 275,001
totAl 171,655,860 83,281,792
totAl ASSetS 585,059,946 482,633,101
IAS 32 and 39 relating to derivative financial instruments are adopted as from 1 January 2005, without restatementfor the 2004 financial year.
Consolidated balance sheetas at 31 December 2005 (under IFRS)
Cegedel Group
AnnuAl RepoRt 2005
ConSolidAted AnnuAl ACCountS 61
liABilitieS Note(s) 2005 2004
€ €
SHAReHoldeRS’ eQuitY Note 12
Subscribed capital 134,500,000 134,500,000
Share premium 5,743,538 5,743,538
Reserves 164,252,993 130,645,949
Retained profit brought forward 24,418,061 26,515,919
Consolidated profit for the year, group share 52,350,990 47,418,886
SHAReHoldeRS’ eQuitY, GRoup SHARe 381,265,582 344,824,292
MinoRitY inteReStS 9,262,039 8,238,744
totAl SHAReHoldeRS’ eQuitY 390,527,621 353,063,036
lonG-teRM liABilitieS
Provisions for liabilities and charges Note 13 1,663,635 1,789,327
Deferred tax Note 7 8,062,641 8,968,184
Due to credit institutions Note 14 18,445,588 15,171,926
Due to staff (supplementary pension) Note 15 36,783,221 35,713,173
other long-term liabilities Note 16 7,952,317 6,167,850
totAl 72,907,402 67,810,460
SHoRt-teRM liABilitieS
Due to credit institutions 2,705,844 2,932,449
Due in respect of purchases and services 56,912,902 41,645,825
Tax and social security 9,510,954 5,946,358
other operating Note 17 50,885,286 10,593,957
Accruals and deferred income 1,609,937 641,016
totAl 121,624,923 61,759,605
totAl liABilitieS 585,059,946 482,633,101
IAS 32 and 39 relating to derivative financial instruments are adopted as from 1 January 2005, without restatementfor the 2004 financial year.
ConSolidAted AnnuAl ACCountS62
AnnuAl RepoRt 2005
Consolidated profit and loss account for theperiod from 1 January to 31 December 2005(under IFRS)
Note(s) 2005 2004
€ €
Sales Note 18 539,784,277 387,800,859
other operating income 2,222,933 1,577,562
Changes in stocks (1,204,940) (899,242)
own work capitalised 7,691,979 7,586,685
Supplies (397,055,124) (243,865,242)
Personnel expenses Note 19
Salaries and other payroll costs (38,585,768) (36,486,176)
Social security charges (8,260,172) (9,960,299)
other operating expenses (18,466,826) (16,928,951)
operating profit before value adjustments (eBitdA) 86,126,359 88,825,196
value adjustments in respect of tangible and intangible fixed assets (31,648,813) (32,094,792)
operating profit (eBit) 54,477,546 56,730,404
Financial interest and similar expenses (1,074,139) (1,215,666)
Interest receivable and similar income 1,367,970 717,755
Unrealised profit on derivative financial instruments 1,493,169 -
Income from participating interests 2,380,268 154,055
Share of profit in companies accounted for using the equity method 5,633,637 3,038,954
pre-tax profit 64,278,451 59,425,502
Tax on profit from ordinary activities Note 20 (10,882,729) (11,108,246)
Minority interests (1,044,732) (898,370)
net profit for the year, group share 52,350,990 47,418,886
number of shares 6,725,000 6,725,000
net profit for the year, group share, per share 7.78 7.05
IAS 32 and 39 relating to derivative financial instruments are adopted as from 1 January 2005, without restatementfor the 2004 financial year.
Cegedel Group
AnnuAl RepoRt 2005
ConSolidAted AnnuAl ACCountS 63
2005 2004
€ €
Consolidated operating profit 54,477,546 56,730,404
Elimination of operating income and expenses with no effect on cash flow
value adjustments and provisions 31,811,609 29,698,038
Fair value adjustment 38,302 31,126
Gross operating profit 86,327,457 86,459,568
Change in working capital (5,446,465) (9,232,108)
net operating cash flows 80,880,992 77,227,460
other inflows and outflows linked to operations
Financial charges (1,074,139) (1,215,666)
Financial income and income from participating interests 3,748,238 871,810
Dividends received on companies accounted for using the equity method 1,302,612 838,490
Corporation tax paid (11,966,014) (10,890,360)
net cash flows from operating activities 72,891,689 66,831,734
Cash flows from investment activities
Acquisitions of tangible and intangible fixed assets (43,965,669) (40,924,848)
Disposals of tangible and intangible fixed assets 1,143,116 102,726
Acquisitions of long-term investments (492,775) (125,833)
Effect of changes in structure of consolidated group 100,000 125,000
net cash flows from investing activities (43,215,328) (40,822,955)
Cash flows from financing activities
Dividends paid to parent company shareholders (16,812,500) (14,290,625)
Dividends paid to minority interests in integrated companies (364,803) (243,081)
Profit sharing (819,546) (745,184)
Increase/decrease in amounts due to credit institutions 3,047,057 (2,535,162)
net cash flows from financing activities (14,949,792) (17,814,052)
CHAnGe in net CASH poSition 14,726,569 8,194,727
Cash available at the beginning of the year 26,717,291 18,522,564
Cash available at the end of the year 41,443,860 26,717,291
IAS 32 and 39 relating to derivative financial instruments are adopted as from 1 January 2005, without restatementfor the 2004 financial year,
Consolidated cash flow statement
ConSolidAted AnnuAl ACCountS64
AnnuAl RepoRt 2005
1 January2004
dividends paid
Appropriation of profit
net profit others 31 december
2004iAS 39
restatement1 January
2005
Capital 134,500,000 134,500,000 134,500,000
Share premium 5,743,538 5,743,538 5,743,538
Revaluation reserve 9,393,821 9,393,821 9,393,821
Statutory reserve 8,590,702 1,005,305 9,596,007 9,596,007
Consolidated reserves 31,873,694 29,732,265 (2,247,048) 59,358,911 (700,875) 58,658,036
Special reserve 20,707,431 2,000,000 32,340 22,739,771 22,739,771
Blocked reserve 25,052,687 1,956,092(1) 27,008,779 27,008,779
Fair value reserve 1,756,347 792,313 2,548,660 2,548,660
Retained earnings 75,506,535 (14,533,706) (32 737,570) (1,719,340) 26,515,919 216,447 26,732,366
Profit for the year 47,418,886 47,418,886 47,418,886
total shareholders’ equity, group share 303,730,934 (14,533,706) 0 47,418,886 8,208,178 344,824,292 (484,428) 344,339,864
1 January 2005
dividends paid
Appropriation of profit
net profit others 31 december
2005
Capital 134,500,000 134,500,000
Share premium 5,743,538 5,743,538
Revaluation reserve 9,393,821 9,393,821
Statutory reserve 9,596,007 1,094,709 10,690,716
Consolidated reserves 58,658,036 28,641,633 (2,577,523) 84,722,146
Special reserve 22,739,771 2,000,000 13,127 24,752,898
Blocked reserve 27,008,779 2,777,817(1) 29,786,596
Fair value reserve 2,548,660 2,358,156 4,906,816
Retained earnings 26,732,366 (2,314,305) 24,418,061
Profit for the year 47,418,886 (17,177,303) (29,422,037) 52,350,990 (819,546) 52,350,990
total shareholders’ equity, group share 344,339,864 (17,177,303) 0 52,350,990 1,752,031 381,265,582
1) In 2005 an amount of EUR 2,777,817 (EUR 1,956,092 in 2004) was transferred from the consolidated reserves to the blocked reserve, owing to the allocation to the blocked reserve of five times the wealth tax credit.
Consolidated statement of changes inshareholders’ equity
AnnuAl RepoRt 2005
ConSolidAted AnnuAl ACCountS 65
The Cegedel Group prepares its
consolidated financial statements in
accordance with IFRS, as published
by the International Accounting
Standards Board (IASB) and adopted
by the European Union.
Information relating to the transition
between Luxembourg accounting
principles and IFRS can be found in
note 2 to the consolidated financial
statements.
The consolidated financial statements
have been prepared on the basis of
the commitment accounting and
historical cost conventions except
for certain assets valued at their fair
value.
note 1 - Accountingprinciples
Scope of consolidation
The consolidated financial statements
include those of Cegedel S.A. and
those of its affiliates, including
jointly controlled entities, and its
associated companies. Together they
form the group. The consolidated
companies are listed in note 3 ‘Scope
of consolidation’.
All consolidated companies prepare
their financial statements as at 31
December.
Consolidation methods
The methods used are:
• Full consolidation in the case of
those companies that the Cegedel
Group directly or indirectly controls
(generally with more than 50%
of the voting rights). With this
method, the assets and liabilities
of the consolidated companies are
incorporated into the consolidated
accounts, rather than the book
value of the equity interests held
by the group in the companies con-
cerned. Use of this method leads
to goodwill on consolidation and
minority interests being reported.
Similarly, the income and expenses
of these subsidiaries are consoli-
dated with those of the parent
company and their profits/losses for
the financial year are apportioned
between the group and the minori-
ty interests. Intercompany accounts
and transactions are eliminated.
• Proportional consolidation in the
case of those companies that the
Cegedel Group controls jointly
with a limited number of associa-
tes. With this method, the assets
and liabilities of the proportio-
nally consolidated companies are
incorporated, pro rata, into the
consolidated accounts - based
on the percentage of their share
capital held by the parent company
- rather than the acquisition cost
of these equity interests. Similarly,
the income and expenses of these
companies are consolidated with
those of the parent company, pro
rata, with those of the parent
company, based on the percentage
of their capital held by the parent
company. Intercompany accounts
and transactions are eliminated pro
rata, based on the capital held by
the parent company.
• The equity method in the case of
those companies over which the
Cegedel Group exercises significant
influence. With this method, the
parent company’s share of its affi-
liate’s equity, based on its equity
interest, is entered in its balance
sheet, rather than the acquisition
cost of the equity holding itself.
The difference thus generated is
Notes to the consolidated financial statements
ConSolidAted AnnuAl ACCountS66
AnnuAl RepoRt 2005
posted to group shareholders’
equity. Similarly, the dividends
shown in the parent company’s pro-
fit/loss are replaced by the parent
company’s share of the profit/loss of
the equity-reported company. The
other balance sheet and profit and
loss account items are not affected
and intercompany accounts and
transactions are not eliminated.
Goodwill
Goodwill is calculated at the time
of acquisition or consolidation of an
equity interest. It was deducted from
the consolidated reserves as at
31 December 2003. Since 1 January
2004, the goodwill represented by the
excess of the acquisition price over
the group’s interest share in the fair
value of the identifiable assets and
liabilities of the acquired entity has
been recorded in the balance sheet
as an asset. Goodwill is not amortised
but may be written off as required.
Revenue recognition
In energy supply, revenue is
recognised at the time of physical
delivery. For supplies of low-voltage
electricity from the parent company,
five flat-rate advance payments
and one detailed account following
meter reading are invoiced annually.
Both the advance payments and the
detailed accounts are recognised as
revenue. As regards the provision of
work and services invoiced to third
parties, revenue is recognised on
completion of the work, the work
generally lasting less than one year.
Instalments invoiced to customers
during work are recorded in the
balance sheet as payables.
Currency translation
Foreign currency transactions are
recorded at the exchange rate in
effect on the transaction date.
Balance sheet items denominated
in foreign currencies are converted
at the exchange rate in effect at the
end of the year. Exchange profits and
losses are included in the profit and
loss account.
All group currencies use EUR as their
working currency.
intangible fixed assets
Computer licences are amortised over
their estimated useful lives. Goodwill
has an indefinite life and is written
down as required.
Concession
Cegedel holds a concession signed
with the government on 11 november
1927 and approved by the law
of 4 January 1928. Its purpose is
the construction and operation
of all infrastructure for electricity
distribution in the Grand Duchy of
Luxembourg.
To this end, Cegedel S.A., as the
general concessionary, has the
exclusive right to construct and
maintain all infrastructure for
electricity distribution and to use
state and local government land
free of charge. It has the right, on
behalf of the state, to acquire local
government and private property
required for the construction
of electricity transmission and
distribution networks and the right
to establish easements.
In return, it has an obligation
to connect any customer on its
distribution grid who requests
connection.
The concession agreement was for
an initial term of 30 years renewable
for further 10-year periods by tacit
agreement.
AnnuAl RepoRt 2005
ConSolidAted AnnuAl ACCountS 67
In addition, in the light of the
European directive of 26 June
2003 on common regulations for
the internal electricity market,
Cegedel net S.A., which manages
the transmission and distribution
networks, was formed at the end of
2004 to enable any electricity supplier
to have free and non-discriminatory
access to Cegedel’s networks. Cegedel
net began trading on 1 January 2005.
tangible fixed assets
Tangible fixed assets are recorded in
the balance sheet at their acquisition
price or at cost.
The acquisition price is made up of
the purchase price, including customs
dues and non-refundable taxes, after
deduction of commercial discounts
and rebates, and any cost directly
attributable to the asset’s transfer
to its place of operation and any
adaptation needed for its operation.
Depreciation is recorded on the
basis of an asset’s economic life.
The depreciation periods used for
buildings, plant and equipment that
are part of the electricity grid are as
follows:
Transformer substations: 50 years
Substation and electric
transformer equipment: 20 years
Industrial buildings: 25 years
overhead electric lines: 33 years
Underground electric lines: 25 years
Meters: 15 years.
The assets are depreciated on the
basis of the straight-line or reducing-
balance method, applying one
approach per component.
Tangible fixed assets in the course
of construction are valued at cost,
based on all the direct costs involved.
The indirect costs are added on
completion of the assets concerned.
long-term investments
Investments in participating interests
are recorded in the balance sheet at
their acquisition cost and valued at
year-end at their fair value. When
their accounting value is greater than
the recoverable amount, a provision
for depreciation is in principle made
for the difference.
Long-term investments include
investments held as fixed assets
that are valued at year-end at their
market value. The value difference is
recorded in the fair value reserve, as
specified by IAS 39 for financial assets
available for sale.
Stocks
Stocks are recorded as the lower
of their historical cost and their
net realisable value. Historical cost
is calculated on the basis of the
weighted average cost.
value adjustments are made in
respect of old inventory items or
items with low rotation.
Services in progress equate to services
being performed and to be invoiced
to third parties. These services are
valued at cost, based on the direct
and indirect costs incurred by the
company.
Receivables
Receivables in respect of sales and
services provided are recorded at
their nominal value. They are written
down when there is a risk of partial
or total non-recovery. Amounts
ConSolidAted AnnuAl ACCountS68
AnnuAl RepoRt 2005
recorded in the balance sheet are net
of any write-downs.
depreciation of long-term assets
The value of assets is reviewed as at
the balance sheet date to ascertain
any indications of possible falls in
value. A write-down is recorded
when the accounting value of an
asset is greater than its recoverable
value. The recoverable value is the
higher of the asset’s net selling price
and its utility value. This may be
determined by estimating the future
financial flows generated by the asset
and updated at a rate adjusted to the
specific risks inherent in the asset.
The value of assets with an indefinite
life is subject to a depreciation test at
each year-end.
Short-term investments
Short-term investments are valued at
year-end at their market value. The
value difference is recorded in the fair
value reserve, as specified by IAS 39
for financial assets available for sale.
electricity trading activity
Given the specific aspects of this
activity, all positions, whether
physical deliveries or derivative
instruments, are included in a trading
portfolio and valued at fair value
from 1 January 2005. Underlying
gains and losses are posted to the
profit and loss account from this
date.
electricity trading activity
Given the specific aspects of this
activity, all positions, whether
physical deliveries or derivative
instruments, are included in a trading
portfolio and valued at fair value
from 1 January 2005. Underlying
gains and losses are posted to the
profit and loss account from this
date.
pension commitments
Commitments under the defined
benefits pension scheme granted to
staff are calculated on the basis of
the projected unit of credit method.
This method, which retains the
benefits based on years of service,
does not take into account solely the
pension commitments conditions at
year-end but also pay increases and
anticipated future benefits. Actuarial
gains and losses are posted to the
profit and loss account.
taxes
Tax liabilities include the sum of
current and deferred taxes charged.
Deferred taxes are recorded on the
time differences existing between
the tax rules and those used for
preparing the consolidated financial
statements. Deferred taxes are
calculated in accordance with the
variable carrying forward method
based on the tax rate expected
at the time that the receivable or
liability materialises. Active deferred
taxes are recorded only if it is likely
that future taxable profits will be
available.
AnnuAl RepoRt 2005
ConSolidAted AnnuAl ACCountS 69
The Cegedel Group publishes its
consolidated financial statements
under IFRS for the first time as at
31 December 2005. The first
application of IFRS standards was to
the opening balance as at 1 January
2004. It does not include the IAS 32,
IAS 39 and IFRS 4 standards (except, by
anticipation, the fair value valuation
of financial assets available for sale).
These standards were applied to the
opening balance as at 1 January 2005.
This section shows the reconciliation
between the Luxembourg accounting
standards and IFRS for shareholders’
equity and the profit and loss account
at the dates of first application.
note 2 - First application of international accounting standards (iFRS)
01.01.2005 31.12.2004 01.01.2004
€ € €
net position, group share, (including profit) under luxembourg accounting standards
327,617,867 327,617,867 286,875,244
Formation expenses (237,081) (237,081) (385,260)
Intangible fixed assets (including goodwill) 576,777 576,777 226,215
Tangible fixed assets: valuation (2,325,134) (2,325,134) (1,622,709)
Reversal of revaluation of tangible fixed assets (10,017,473) (10,017,473) (11,448,541)
Tangible fixed assets: Depreciation 7,546,902 7,546,902 8,109,455
valuation of financial assets at fair value 3,660,815 3,660,815 2,522,762
Pensions (1,196,551) (1,196,551) 1,150,463
Provision for equalisation of Watt Re 14,848,074 14,848,074 12,851,427
Derivative financial instruments (IAS 39) (389,977) - -
other restatements 1,243,985 1,243,985 899,024
total iFRS restatements, before tax 13,710,337 14,100,314 12,302,836
Withholding tax on dividends 3,362,500 3,362,500 2,858,125
Tax on profit from ordinary activities (350,840) (256,389) 1,694,729
net position, group share, (including profit) under international accounting standards (iFRS)
344,339,864 344,824,292 303,730,934
2.1. Statement of change in net situation under luxembourg accounting standards and under iFRS
ConSolidAted AnnuAl ACCountS70
AnnuAl RepoRt 2005
2.2. Statement of change in profit presented in the financial statements as at 31 december 2004 under luxembourg
accounting standards and under iFRS
2004
€
net profit, group share, under luxembourg accounting standards 20,601,291
Transfers to reserves in accordance with Article 50 of the Articles of Association 25,832,115
Formation expenses 148,180
Intangible fixed assets (including goodwill) 350,562
Tangible fixed assets: valuation (702,425)
Tangible fixed assets: Depreciation (562,554)
Pensions (2,347,014)
Provision for equalisation of Watt Re 1,996,647
other restatements 344,960
total iFRS restatements, before tax 25,060,472
Withholding tax on dividend to be paid by Cegedel 3,362,500
Tax on profit from ordinary activities (1,605,377)
net profit, group share, under international accounting standards (iFRS) 47,418,886
AnnuAl RepoRt 2005
ConSolidAted AnnuAl ACCountS 71
2.3. description of adjustments
• Transfers to reserves
In accordance with IFRS, transfers
to reserves under Article 50 of
Cegedel’s Articles of Association
are now included in the profit.
• Formation expenses
In accordance with IFRS, formation
expenses have been charged to the
profit and loss account for the year
in which they arose.
• Intangible fixed assets
Goodwill has not been amortised
in accordance with international
accounting standards but is the
subject, as required, of a provision
for writing down in the event of a
diminution in value.
• Tangible fixed assets
- valuation of tangible fixed assets
Gross values of some tangible
fixed assets of consolidated
subsidiaries have been adjusted
to reflect the valuation principles
compatible with IFRS.
- Revaluation of tangible fixed
assets
The partial revaluation of fixed
assets, as made by Cegedel in
1982, was the subject of a rever-
sal under IFRS.
- Depreciation of tangible fixed
assets
IFRS principles stipulate that tan-
gible fixed assets are depreciated
over their economic life.
• valuation of financial assets at fair
value
International standards (IAS 39)
retain the principle of valuation at
fair value (market value).
• Provisions for liabilities and charges
The supplementary pension liability
has been calculated in accordance
with IAS 19, using the parameters
described in note 15. In accordance
with IFRS, this commitment has
been restated under operating
liabilities (due to staff).
• Provision for equalisation of Watt Re
In accordance with IFRS, the provi-
sion for equalisation of Watt Re, a
captive reinsurance company, has
been reversed.
• Derivative financial instruments
(IAS 39)
IAS 39 requires that derivative
financial instruments are valued
in the balance sheet at fair value
and that the change in fair value is
recorded in the profit or loss.
• Withholding tax on dividend to be
paid
In accordance with IFRS, withhol-
ding tax on the dividend to be paid
is no longer deducted from the
profit.
• Tax on profit from ordinary
activities
Under IFRS, deferred tax is recor-
ded on all the taxable/deductible
temporary differences between the
accounting value and the tax value
of group assets and liabilities.
ConSolidAted AnnuAl ACCountS72
AnnuAl RepoRt 2005
note 3 - Scope of consolidation
The only movement in the year is the first consolidation of Cegedel net on 1 January 2005.
Fully consolidated group companies
name Country of domicile proportion of capital held (%) Main activity
Cegedel net S.A. Luxembourg 100operates transmission and electricity networks
Cegedel Participations S.A. Luxembourg 100Holds participating interests in Luxembourg
Cegedel International S.A. Luxembourg 100Holds participating interests outside Luxembourg
LuxEnergie S.A. Luxembourg 60.35 Generates heat and electricity
Cegecom S.A. Luxembourg 100 Telecommunications
Watt Re S.A. Luxembourg 100 Reinsurance
partially consolidated group
companies
Cegedel Group holds:
a) a 50% participating interest in
Ceduco S.A., a joint venture with
Du Pont de nemours (plant pro-
ducing vapour and electricity).
b) a 50% participating interest in
Cegyco S.A., a joint venture with
Goodyear (plant producing va-
pour and electricity).
c) a 50% participating interest in
Soler, whose corporate purpose
is studying, constructing and run-
ning plants that generate electri-
city from renewable sources.
d) a 33.33% participating interest
in Global Facilities, a joint venture
specialising in facilities manage-
ment.
AnnuAl RepoRt 2005
ConSolidAted AnnuAl ACCountS 73
The following elements are included in the consolidated financial statements because of the partial consolidation of
these four companies:
31/12/2005 31/12/2004
by share of holding € €
Fixed assets 3,601,845 4,060,566
Current assets 3,667,610 3,229,227
operating liabilities 2,212,242 1,969,484
Financial liabilities 701,032 962,289
Total income 11,116,039 10,168,523
Total expenses 10,585,648 9,254,139
Consolidated group companies accounted for using the equity method
The following companies are accounted for using the equity method as at 31 December 2005:
name Country of domicile proportion of capital held (%) Main activity
Twinerg S.A. Luxembourg 17.5Generates electricity with a gas and vapour turbine
Soteg S.A. Luxembourg 19Imports and transmits natural gas
Wandpark Gemeng Hengischt S.A.
Luxembourg 20Generates electricity in wind farms
WandparkKehmen-Heischent S.A.
Luxembourg 20Generates electricity in wind farms
For the companies above where less
than 20% of voting rights are held,
the Cegedel Group exercises signifi-
cant influence over them by virtue of
its representation on their boards of
directors and the strategic interest
that their activities represent for the
group.
ConSolidAted AnnuAl ACCountS74
AnnuAl RepoRt 2005
Some elements of the 2005 balance sheets and profit and loss accounts of the companies accounted for using the equity
method are presented below:
twinerg SotegWandparkGemeng
Hengischt
Wandpark Kehmen-Heischent
(amounts in accordance with luxembourg accounting standards)
€ € € €
Balance sheet information
Balance sheet total 180,807,192 177,337,185 11,368,774 16,283,650
Total liabilities due within one year 21,185,937 36,891,495 1,147,432 1,920,857
profit and loss account information
Sales 130,489,288 288,882,205 1,640,888 1,696,294
net profit 18,105,435 10,574,411 224,906 338,264
note 4 - intangible fixed assets
31/12/2005 Goodwill Software, licences 31/12/2005 31/12/2004
€ € € €
CoSt
At beginning of year 1,297,041 14,128,318 15,425,359 15,094,024
Acquisitions - 200,478 200,478 331,335
Disposals - (829,365) (829,365) -
At end of year 1,297,041 13,499,431 14,796,472 15,425,359
VAlue AdJuStMentS FoR tHe YeAR
At beginning of year - (13,112,382) (13,112,382) (11,837,046)
value adjustments for the year - (684,114) (684,114) (1,275,336)
Disposals - 829,365 829,365 -
At end of year - (12,967,131) (12,967,131) (13,112,382)
net BooK VAlue At end oF YeAR 1,297,041 532,300 1,829,341 2,312,977
AnnuAl RepoRt 2005
ConSolidAted AnnuAl ACCountS 75
note 5 - tangible fixed assets
land and Machinery, other 31/12/2005 31/12/2004buildings plant and tangible
equipment assets
€ € € € €
CoSt
At beginning of year 58,353,347 547,752,295 40,030,698 646,136,340 612,144,443
Additions 2,505,461 29,658,123 2,832,812 34,996,396 34,311,296
Changes in scope - - - - 13,629
Disposals (6,326) (5,280,385) (257,683) (5,544,394) (333,028)
At end of year 60,852,482 572,130,033 42,605,827 675,588,342 646,136,340
VAlue AdJuStMentS in tHe YeAR
At beginning of year (15,651,068) (356,090,444) (31,508,031) (403,249,543) (372,657,291)
value adjustments for the year (2,029,071) (25,796,988) (3,135,353) (30,961,412) (30,819,454)
Changes in scope - - - - (3,100)
Written off on disposals 2,108 4,141,485 257,685 4,401,278 230,302
At end of year (17,678,031) (377,745,947) (34,385,699) (429,809,677) (403,249,543)
net BooK VAlue At end oF YeAR 43,174,451 194,384,086 8,220,128 245,778,665 242,886,797
tangible fixed assets in course of construction
At beginning of year
Additions disposals At endof year
€ € € €
Cost 34,683,080 38,497,784 (29,728,989) 43,451,875
ConSolidAted AnnuAl ACCountS76
AnnuAl RepoRt 2005
note 6 - long-term investments
investments in affiliated
undertakings
investmentsheld as
fixed assets
other participating
interests
total total
31/12/2005 31/12/2004
€ € € € €
Gross value at beginning of year 30,387,509 35,693,119 43,755,202 109,835,830 98,241,369
Acquisitions - 5,440,187 8,551 5,448,738 125,000
Divestments - (4,955,963) - (4,955,963) -
Transfers - - - - 833
Changes in scope - - (100,000) (100,000) (125,000)
Fair value adjustment - 3,561,630 - 3,561,630 1,064,038
Change in investments in equity-reported companies 3,809,001 - - 3,809,001 10,529,590
Gross value at end of year 34,196,510 39,738,973 43,663,753 117,599,236 109,835,830
value adjustments - - - - -
net BooK VAlue At end oF YeAR 34,196,510 39,738,973 43,663,753 117,599,236 109,835,830
6.1. investments in affiliated undertakings
The breakdown of investments in affiliated undertakings is as follows:
31/12/2005 31/12/2004
€ €
Soteg 24,668,386 22,849,507
Twinerg 8,051,001 6,083,400
Wandpark Kehmen-Heischent 779,051 674,769
Wandpark Gemeng Hengischt 698,072 779,833
total 34,196,510 30,387,509
Information on equity-reported affiliated undertakings is also given in note 3.
AnnuAl RepoRt 2005
ConSolidAted AnnuAl ACCountS 77
6.2. other participating interests
other participating interests comprise
interests in other companies over
which the group exercises neither
control nor significant influence.
other participating interests are
stated in the portfolio of securities
available for sale.
other participating interests also
includes companies that have not
been included in the scope of consoli-
dation even though they are at least
20% owned and domiciled in the
Grand Duchy of Luxembourg. This
is either because they were not yet
operational in 2005 or because their
impact on the consolidated accounts
is negligible . These companies are as
follows:
proportion of capital held by
Company name Accounting value
€
Cegedel and Cegedel participations
other consolidated undertakings
Wandpark Burer Bierg SA 725,000 36.3 % -
Surré SA 323,501 11.2 % 39.3 %
Agence de l’Energie SA 148,736 40.0 % -
Airport Energy SA 25,000 - 50.0 %
Escolux SARL 12,395 - 100.0 %
artelis 8,525 27.5 % -
note 7 - deferred tax
Deferred tax assets and liabilities break down as follows:
31/12/2005 31/12/2004deferred tax (assets) € €
Depreciation of tangible fixed assets 714,538 715,902
Pension commitments 281,276 5,081,334
Tax losses carried forward 3,749,155 3,835,389
Total 4,744,969 9,632,625
31/12/2005 31/12/2004deferred tax (liabilities) € €
valuation of financial assets at fair value 2,141,182 1,112,156
Pension commitments 185,171 3,345,184
Trading commitments 548,076 -
Reversal of provision for equalisation of Watt Re 5,188,212 4,510,844
Total 8,062,641 8,968,184
ConSolidAted AnnuAl ACCountS78
AnnuAl RepoRt 2005
Receivables in respect of sales and
services provided are due within
one year. value adjustments cover
a known risk of specific default by
some debtors.
note 8 - Stocks
The accounting value of stocks broken down by category is as follows:
Goods heldfor resale
€
Services inprogress
€
Gross value as at 31 December 2005 3,810,106 6,155,307
value adjustments (490,000) -
net value as at 31 December 2005 3,320,106 6,155,307
Gross value as at 31 December 2004 3,666,936 7,503,417
value adjustments (608,030) -
net value as at 31 December 2004 3,058,906 7,503,417
note 9 - Receivables in respect of sales and servicesprovided
31/12/2005 €
31/12/2004 €
Gross value of receivables 69,754,549 41,607,250
value adjustments (1,383,088) (2,507,465)
net value of receivables 68,371,461 39,099,785
Heinrich rudolf HErTz(1857 - 1894)
German physicist who proved the existence of electromagnetic waves. His electromagnetic theo-ry implied that waves could be emitted both in air and in a va-cuum. His work and discoveries were behind wireless telegraphy, X-rays, radar, radio and television.
The unit of measurement of the frequency of a periodic pheno-menon bears his name: 1 hertz = 1 cycle per second (symbol Hz).
AnnuAl RepoRt 2005
ConSolidAted AnnuAl ACCountS 79
EUR 2,950,708 at 1 January 2005 and
zero at 31 December 2004).
other receivables are due within one
year.
note 10 - other receivables
The increase in other receivables in
2005 is mainly due to the electricity
trading activities: the amount of
derivative financial instruments va-
lued at fair value was EUR 40,713,610
at 31 December 2005 (compared with
31/12/2005 31/12/2004
€ €
Gross value 51,825,573 6,627,392
Corrections de valeur - -
net value 51,825,573 6,627,392
note 11 - Cash and cash equivalents
The cash accounts comprise bank
and post office account balances,
cheques, cash in hand and deposits
for terms of under one year.
note 12 - Shareholders’ equity
As at 31 December 2005, the share
capital of Cegedel S,A, was EUR
134,500,000.
It was fully paid-up and represented
by 6,725,000 ordinary, no-par-value
shares with no preference rights
whatsoever.
There was no change in the share
capital of Cegedel S,A, in 2004 and
2005.
In 2005 a gross dividend of EUR 2,50
per share was paid to shareholders
for 2004.
The Board of Directors proposes
the payment of a gross dividend of
EUR 2,75 per share for 2005. This
dividend will be the subject of a
resolution at the Annual General
Meeting.
ConSolidAted AnnuAl ACCountS80
AnnuAl RepoRt 2005
note 13 - provisions for liabilities and charges
This item chiefly includes the provisions for liabilities and charges relating to com-
mitments under the overall guarantee for industrial installations:
At beginning
of yeartransfers
Write-backs
At endof year
Provision for overall guarantee 1,146,101 512,818 (646,204) 1,012,715
others 643,226 588,684 (580,990) 650,920
Total 1,789,327 1,101,502 (1,227,194) 1,663,635
note 14 - Amounts due to credit institutions
Amounts due to credit institutions break down by due date as follows:
31/12/2005 31/12/2004
€ €
From one to five years 13,039,478 10,997,957
More than five years 5,406,110 4,173,969
Total 18,445,588 15,171,926
Michael FArADAY(1791 - 1867)
British physicist and chemist who devised the theory of electromagnetism and worked out the principle of the electric motor. in electrochemistry, FARAdAY established the laws of electrolysis and gave us the words ‘electrode’, ‘electro-lysis’, ‘electrolyte’, ‘cathode’, ‘anode’ and ‘ion’.
AnnuAl RepoRt 2005
ConSolidAted AnnuAl ACCountS 81
Under a pension scheme that is
supplementary to the statutory
staff scheme, Cegedel and
Cegedel net have contracted the
following supplementary pension
commitments:
Under a defined benefits pension
scheme for staff who entered
service before 1 January 2001, these
companies undertook to pay a lump
sum on the retirement of each
employee, The amount reported in
the balance sheet as due to staff for
the supplementary pension is based
on the following assumptions:
• retirement age taken into account
for financing: 60 years,
• discount rate of 4,2% per year,
• estimated pay at time of retirement
based on past experience,
In a defined contributions pension
scheme for staff who entered service
after 1 January 2001, these two
companies pay a contribution to an
insurance company that is recorded
under operating expenses for the
year.
Amounts due to staff for the
supplementary pension, calculated
on the basis of the method described
in note 1, have changed as follows:
2005 €
2004 €
Actuarial debt at beginning of year 35,713,173 34,492,823
Cost of year’s commitments 1,787,433 1,836,276
Cost of interest on actuarial debt at beginning of year 1,421,486 1,398,165
Benefits paid (1,661,567) (2,141,104)
Actuarial gains/losses (477,304) 127,013
Actuarial debt at end of year 36,783,221 35,713,173
note 15 - due to staff (supplementary pension)
ConSolidAted AnnuAl ACCountS82
AnnuAl RepoRt 2005
note 16 - other long-term payables
other long-term payables correspond to income recorded in advance.
note 17 - other operating liabilities
31/12/2005 €
31/12/2004 €
Advance payments on orders 9,079,662 9,447,292
other operating liabilities 41,805,624 1,146,665
Total 50,885,286 10,593,957
note 18 - Sales
Sales break down as follows:
31/12/2005 €
31/12/2004 €
Sales of high and medium-voltage electricity 149,610,132 154,513,334
Sales of low-voltage electricity 109,112,928 96,758,307
Electricity trading sales 212,846,558 82,491,382
other energy sales 16,379,456 13,838,401
other income 51,835,203 40,199,435
Total sales 539,784,277 387,800,859
other operating liabilities include
derivative financial instruments
valued at fair value for an amount of
EUR 38,909,543 at 31 December 2005
(EUR 2,639,810 at 1 January 2005 and
zero at 31 December 2004).
Nikola TESLA(1856 - 1943)
American engineer and physicist of Croatian origin who was the first to imagine the principle of three-phase current. He made countless appliances and devices that advanced electrical and radio technology. The si unit of magne-tic induction, the tesla, bears his name (symbol T).
AnnuAl RepoRt 2005
ConSolidAted AnnuAl ACCountS 83
note 19 - Staff costs
The group had an average of 597 em-
ployees in 2005, compared with 586
in 2004. It should be noted that this
total of 597 includes a figure of 25
that represents the group’s share of
the 74 people employed by the pro-
portionally consolidated companies.
note 20 - tax on profit from ordinary activities
Tax on profit from ordinary activities breaks down as follows:
31/12/2005 31/12/2004
€ €
Current tax liabilities 8,024,092 9,802,869
Deferred tax liabilities 2,858,637 1,305,377
Tax on profit from ordinary activities 10,882,729 11,108,246
Tax liabilities are explained as follows:
31/12/2005 31/12/2004
€ €
Pre-tax profit and share of equity-reported companies 58,644,814 56,386,548
Tax rate 30.38 % 30.38 %
theoretical tax charge 17,816,294 17,130,233
Tax relief on investment (3,569,278) (4,279,747)
Exempt dividends (2,410,427) (810,906)
Write-back of provision for prior years’ tax (1,527,723) (1,113,493)
others 573,863 182,159
Real tax charge 10,882,729 11,108,246
Having met the terms and conditions
laid down in Paragraph 8a of the Law
of 21 December 2001, the company
applied a wealth tax credit.
The Cegedel parent company is
consolidated for tax purposes with
Cegedel net, Cegedel Participations,
Cegedel International and Watt Re.
The effect of this is as follows:
• tax charges are booked in the
subsidiaries’ accounts as would be
the case if no tax group existed;
ConSolidAted AnnuAl ACCountS84
AnnuAl RepoRt 2005
• tax savings relating to any loss-
making subsidiary are reallocated
to that subsidiary in the same year
as the loss arises. Such savings are
therefore included in the results of
the loss-making subsidiary;
• the parent company books the
balance on the basis of the
consolidated profit/loss.
Tax consolidation is possible only
where the companies concerned
are combined for this purpose for a
period of at least five financial years.
This means that if the criteria laid
down in Article 164a of the Income
Tax Act are not met at any time
during this period, the tax treatment
ceases to apply, retroactively,
from the first year in which it was
permitted.
In 2005 Cegecom left the tax
group, so that the arrangement in
place since 2003 ceased to apply to
Cegecom with retroactive effect.
note 21 - transactions with associated parties
Transactions with associated parties
are concluded at market conditions.
In particular, there is a procurement
contract between Cegedel and
Twinerg, which provides for the
supply of 100 MW of electricity per
year based on an index linked to the
price of coal.
Georg Simon OHM(1787 - 1854)
German physicist who studied the quantitative properties of electric currents, from which he formu-lated fundamental laws. The famous ohm’s law established that the amount of electric cur-rent passing through a metallic conductor is directly proportional to the voltage applied to it.
The unit of electrical resistance, the ohm, bears his name (symbol Ω).
AnnuAl RepoRt 2005
ConSolidAted AnnuAl ACCountS 85
The Cegedel Group focuses mainly
on Luxembourg. The division of the
group’s activities between the supply
of energy (main activity of the parent
company Cegedel S.A.), electricity
transmission and distribution
(by Cegedel net, the electricity
transmission and distribution
operator), energy production (by the
generating subsidiaries) and other
activities are as follows:
Cegedel S.A. Cegedel net S.A. Generating companies others total
€ € € € €
Sales 465,816,303 23,823,925 34,450,859 15,693,190 539,784,277
net profit 36,882,982 645,708 9,038,039 5,784,261 52,350,990
Balance sheet total 454,691,829 5,418,058 70,135,958 54,814,101 585,059,946
N.B.: The figures above represent the amounts included in the 2005 consolidated accounts. Comparative figures for 2004 have not been published, as some are not available (Cegedel Net started trading on 1 January 2005).
note 23 - Remuneration paid to members ofthe administration andmanagement bodies
Remuneration paid to members of
the administration and supervisory
bodies totalled EUR 1,487,555 in 2005
(EUR 1,477,549 in 2004). no advances
or loans were granted to members of
the administration and supervisory
bodies, nor was any commitment
undertaken on their behalf in respect
of any form of guarantee.
note 24 - Risk management
The main risks associated with the
Cegedel Group’s activity are the
market risk linked to changes in
electricity prices and the credit risk
linked to contractual commitments
with customers. These risks,
further accentuated by increased
competition and the new legislative
framework, have necessitated proper
procedures being put in place to
ensure their appropriate control.
The parent company adopts a
prudent policy on market risk,
observing the strict limits fixed by the
Board of Directors and management
as regards the level of open positions,
both in its procurement and its
electricity trading activities. Financial
risks used by the group are approved
by management and systematically
monitored using a value-at-risk risk
management model.
Credit risk is examined systematically
on the commencement of a
procurement or electricity trading
relationship and regularly reviewed.
This risk is reduced by participation
in the regulated market of the EEX
electricity exchange in Leipzig.
note 22 - Sector information
ConSolidAted AnnuAl ACCountS86
AnnuAl RepoRt 2005
note 25 - off-balance sheet liabilities and commitments
Cegedel Participations gave a coun-
ter-guarantee on behalf of Electrabel
amounting to EUR 18,686,875 as at
31 December 2005 (i.e. 17.5% - the
same percentage as the holding of
Cegedel Participations in Twinerg
- of a financing arrangement for an
amount of EUR 106,782,141 as at
31 December 2005 and covering
commitments entered into by
Electrabel on behalf of Twinerg). As
at 31 December 2004, this counter-
guarantee was for EUR 20,295,156.
In addition, the group’s commitments
under leasing contracts came to EUR
1,190,592.
Lastly, the parent company concluded
a number of forward contracts for
the purchase and sale of electricity as
part of its procurement programme.
As at 31 December 2005, electricity
forward sale contracts came to EUR
263,369,144 and forward purchase
contracts came to EUR 96,925,213.
The amounts of the above forward
purchase contracts include only
forward contracts signed with exter-
nal counterparties and not contrac-
tual purchase commitments with
local producers.
note 26 - events after the end of the year
A new company, artelis, 27.5%
owned by Cegedel Participations, was
formed at the end of 2005, with the
aim of holding from the beginning
of 2006 the participating interest of
Cegedel Participations in Cegecom as
well as that of Germany’s vSE AG in
vSE net, a specialist telecommunica-
tions company based in Saarbrücken.
note 27 - Approvalof financial statements
The financial statements were pre-
pared by the Board of Directors on
7 April 2006 and will be submitted
for approval to the Annual General
Meeting on 9 May 2006.
James Prescott JOuLE
(1818 - 1889)
British physicist and inventor of the calorimeter, which enables the thermal effect, or Joule effect (J), of the transformation of elec-trical energy into calorific energy (heat) to be measured.
The unit of work and energy, the Joule, is named in his honour.
Heat is expressed in the same unit, the calorie being equivalent to 4.18 joules.
AnnuAl RepoRt 2005
ConSolidAted AnnuAl ACCountS 87
In accordance with the terms of our
appointment at the Annual Gene-
ral Meeting, we have inspected the
accompanying consolidated finan-
cial statements of Cegedel S.A. for
the year ended 31 December 2005.
Financial statements consist of a ba-
lance sheet, profit and loss account,
statement of changes in sharehol-
ders’ equity, cash flow statement and
notes to the financial statements. We
have read the consolidated manage-
ment report. The consolidated finan-
cial statements and the management
report are the responsibility of the
Board of Directors. our responsibility
is to express an opinion on the conso-
lidated financial statements, based
on our audit, and to verify that the
management report is in conformity
with the them. These consolidated
financial statements have for the first
time been prepared in accordance
with the International Financial
Reporting Standards (IFRS), as adop-
ted in the European Union. For the
purposes of comparison, they include
figures relating to 2004 restated in
accordance with the same standards,
except for IAS 32, IAS 39 and IFRS 4,
which, in line with the option offered
by IFRS 1, are applied by the group
only from 1 January 2005.
We conducted our audit in accordan-
ce with international audit standards.
These standards require that we plan
and perform our audit work so as to
obtain reasonable assurance that the
consolidated financial statements are
free from material misstatement. An
audit includes an examination, on a
test basis, of evidence supporting the
amounts and disclosures contained
in the consolidated financial state-
ments. It also includes an assessment
of the accounting principles and
methods used and the significant
estimates made by the Board of Di-
rectors in preparing the consolidated
financial statements, as well as an
evaluation of the overall presenta-
tion of information. We believe that
our audit provides a reasonable basis
for the opinion expressed below.
In our opinion, the attached consoli-
dated financial statements, prepared
in accordance with IFRS as adopted in
the European Union, give a true and
fair view of the assets, liabilities and
financial position of the Cegedel S.A.
Group as at 31 December 2005 and of
its consolidated profits for the year
then ended.
The consolidated management report
is consistent with the consolidated
financial statements.
Deloitte S.A.
Statutory auditors
Stéphane CéSARI
Partner
7 April 2006
Auditors’ report on the consolidated annual accounts
to the shareholders of Cegedel S.A., Strassen
AnnuAl ACCountS oF CeGedel S.A.88
Rosport, home of the TUDoR family, was one
of the first houses in the world equipped
with a complete hydroelectric plant that wor-
ked without interruption.
In 1886, at Echternach in Luxembourg, the
Tudor brothers built the first plant genera-
ting electric light, which fed 120 lamps in the
village’s houses as well as public lighting.
Annual accountsof Cegedel S.A.
AnnuAl ACCountS oF CeGedel S.A.90
AnnuAl RepoRt 2005
Balance sheet as at 31 December 2005
ASSetS Note(s) 2005 2004€ €
Fixed assets
intangible fixed assets Note 3
Licences 16,561 32,619
tangible fixed assets Note 4
Land and buildings 40,294,094 39,668,928
Machinery, plant and equipment 139,229,612 137,413,991
Revaluation surpluses 8,586,406 10,017,474
other equipment, machines and furniture 4,208,123 3,403,031
Tangible fixed assets in course of construction 35,409,943 31,423,624
long-term investments Note 5
Investments in affiliated undertakings 68,524,009 68,524,009
Amounts due from affiliated undertakings 25,953,767 25,953,767
Investments held as fixed assets 27,290,819 27,290,819
totAl 349,513,334 343,728,262
Current assets Note 6
Stocks
Raw materials and consumables 2,428,896 2,080,696
Services in progress 6,137,029 7,475,429
Receivables Note 7
Trade receivables
with a residual term of up to one year 60,737,804 34,472,998
Amounts due from affiliated undertakings
with a residual term of up to one year 15,262,593 -
other receivables
with a residual term of up to one year 53,095 5,929,241
with a residual term of more than one year 7,949,168 485,096
Advance payments made 860,534 637,830
Bank and post office account balances, cheques and cash in hand 17,879,910 9,026,772
totAl 111,309,029 60,108,062
Accruals and deferred income Note 10 286,890 -
totAl ASSetS 461,109,253 403,836,324
The accompanying notes form an integral part of the annual accounts.
AnnuAl RepoRt 2005
AnnuAl ACCountS oF CeGedel S.A. 91
liABilitieS Note(s) 2005 2004€ €
Shareholders’ equity Note 8
Subscribed capital 134,500,000 134,500,000
Share premium 5,743,538 5,743,538
Revaluation reserve 8,586,406 10,017,474
Reserves
Legal reserve 9,176,605 8,357,059
Reserves under the Articles of Association 109,432,868 90,224,998
other reserves 52,965,770 49,160,512
profit brought forward 640,038 1,338,202
profit for the year 18,171,346 16,390,928
totAl 339,216,571 315,732,711
provisions for liabilities and charges Note 9
provisions for pensions and similar obligations 35,481,586 34,516,621
totAl 35,481,586 34,516,621
payables
Advance payments from customers
with a residual term of up to one year 8,946,509 9,224,314
due in respect of goods and services provided
with a residual term of up to one year 49,815,173 36,212,027
due to affiliated undertakings
with a residual term of up to one year 16,230,079 -
tax and social security liabilities
Due to tax authorities 9,234,988 6,363,100
Due to social security authorities 896,180 1,145,608
other liabilities
with a residual term of up to one year 515,097 641,943
totAl 85,638,026 53,586,992
Accruals and deferred income Note 10 773,070 -
totAl liABilitieS 461,109,253 403,836,324
The accompanying notes form an integral part of the annual accounts.
AnnuAl ACCountS oF CeGedel S.A.92
AnnuAl RepoRt 2005
Profit and loss account for the period from1 January to 31 December 2005
eXpenSeS Note(s) 2005 2004
€ €
Supplies 468,330,273 235,615,023
other external expenses 18,737,442 16,509,783
personnel expenses Note 11
Salaries and other payroll costs 26,074,961 32,339,220
Social security charges relating to salaries and other payroll costs 3,671,987 4,585,441
Supplementary pensions 2,934,624 2,596,180
Value adjustments in respect of formation expenses and tangible Note 12and intangible fixed assets 23,458,525 23,825,210
interest payable and similar expenses 46,029 57,702
transfers to reserves under Article 50 of the Articles of Association Note 8
Investment reserve
Deduction from profit 18,324,216 19,583,674
Tax relief on investment for the year 2,675,784 3,416,326
Reserve for contractual obligations - 2,000,000
Reserve for commitments to alternative and renewable energiesand to cogeneration - 33,704
Reserve for supplies of uncertain quality - 53,792
tax on profit from ordinary activities Note 13 11,500,000 13,900,000
other taxes not included in the above items 3,928,008 3,750,336
profit for the year 18,171,346 16,390,928
totAl 597,853,195 374,657,319
The accompanying notes form an integral part of the annual accounts.
AnnuAl RepoRt 2005
AnnuAl ACCountS oF CeGedel S.A. 93
inCoMe Note(s) 2005 2004
€ €
net sales Note 15 492,353,326 360,917,420
internal expenditure capitalised 6,792,482 6,935,073
other operating income note Note 16 89,912,120 544,427
income from participating interests arising from affiliated undertakings 3,150,000 1,005,000
other income from receivables included under fixed assets 60,159 72,683
other interest and similar income 228,893 134,448
extraordinary income Notes 6-17 2,680,431 1,631,942
tax relief on investment for the year 2,675,784 3,416,326
totAl 597,853,195 374,657,319
The accompanying notes form an integral part of the annual accounts.
Your Board of directors proposes the following distribution:
€
Profit available for appropriation 18,811,384
Transfer to legal reserve (5%) - 908,567
net dividend of EUR 2.20 per share - 14,795,000
Allocations under the Articles of Ass. (5%) - 908,567
Transfer to special reserve - 1,500,000
profit carried forward 699,250
proposed appropriation of net profit
net profit for the year amounted to EUR 18,171,346.
Adding in retained earnings brought forward of EUR
640,038, the profit available for appropriation is EUR
18,811,384. The gross dividend was increased to EUR
2.75, up by 10% on the previous year; this gave a net
dividend of EUR 2.20.
AnnuAl ACCountS oF CeGedel S.A.94
AnnuAl RepoRt 2005
Notes to the annual accounts
note 1 - General
Cegedel holds a concession granted
by the Luxembourg state and was
incorporated in Luxembourg on
27 March 1928 as a société anonyme
under Luxembourg law.
Its registered office is situated at 2 rue
Thomas Edison, Strassen, Luxembourg.
In accordance with Article 2 of its Ar-
ticles of Association, Cegedel’s main
corporate purpose is the distribution
of electricity throughout the Grand
Duchy of Luxembourg.
Its rights and obligations are gover-
ned by the concession agreement of
11 november 1927, approved by the
Law of 4 January 1928.
By virtue of the decisions taken at the
Extraordinary General Meeting held
on 17 March 1997, the company is
incorporated for an unlimited period.
Cegedel’s shares are listed on the
Luxembourg and Brussels stock ex-
changes.
The company also prepares consoli-
dated accounts that are published in
the forms required by law.
Annual accounts
The company’s financial year runs
from 1 January to 31 December each
year.
note 2 - Accounting policies
General principles
The annual accounts have been
prepared in accordance with Luxem-
bourg legislation and regulations
and generally accepted accounting
principles.
Comparability
For comparison of Cegedel’s accounts
for 2005 with those for 2004, it
should be noted that Cegedel net,
which operates the electricity trans-
mission and distribution networks,
was formed on 8 november 2004,
with Cegedel remaining owner of the
networks. For this reason, for 2004,
items combine the amounts that
now relate to Cegedel and Cegedel
net. Cegedel net began trading on
1 January 2005, thanks in particular
to the transfer of some of Cegedel’s
staff to it.
In addition, for some balance sheet
and profit and loss account items, the
grouping differs from that shown last
year. Figures relating to 2004 have
been stated on the same basis.
Pursuant to the Law of 19 Decem-
ber 2002, the presentation of the
company’s annual accounts has been
amended compared with that used
for the year ended 31 December
2004. A number of restatements have
therefore been made regarding the
balances for 2004 in order to ensure
comparability with those presented
for the year ended 31 December
2005.
Foreign currency conversion
Balance sheet items denominated
in a currency other than EUR are
converted at the exchange rate in
effect on the date of the transaction.
Income and expenses in currencies
other than EUR are also converted
into EUR at the exchange rate in ef-
fect on the date of the transaction.
All exchange differences, both posi-
tive and negative, are included in the
profit/loss for the year.
AnnuAl RepoRt 2005
AnnuAl ACCountS oF CeGedel S.A. 95
intangible fixed assets
Intangible fixed assets comprise
licences and are amortised over their
estimated useful lives.
tangible fixed assets
Tangible fixed assets are recorded at
their acquisition price or at cost.
value adjustments are made in accor-
dance with the following principles:
• Buildings, plant and equipment
that are not part of the grid:
straight-line depreciation based on
the coefficients laid down in Article
30 of the Concession Agreement
of 11 november 1927 and in the
Agreement of 8 September 1998 or,
failing this, those accepted by the
tax authorities.
• Buildings, plant and equipment
that are part of the grid: deprecia-
tion using the declining-balance
method based on coefficients equal
to double those referred to above
for investments completed before
1990, and to triple those referred
to above for investments comple-
ted as from 1 January 1990.
• other equipment, machines and
furniture: straight-line depreciation
in accordance with the useful life
of the asset acquired.
• Revaluation surpluses: straight-
line depreciation until 2010. The
corresponding contra entry to the
revaluation surplus is the revalua-
tion reserve, which is depreciated
at the same rate. one figure there-
fore cancels out the other so that
these figures have no impact on
the company’s profit/loss.
Tangible fixed assets in the course of
construction are valued at cost, based
on the direct cost to company. The in-
direct costs are added on completion
of the assets concerned.
long-term investments
Investments in affiliated underta-
kings and investments held as fixed
assets are recorded in the balance
sheet at their acquisition cost.
Amounts due from affiliated com-
panies are included at their nominal
value. In the case of impairment that
the Board of Directors considers las-
ting in nature, value adjustments are
made to these long-term investments
to apply the lower value to be assi-
gned to them on the balance sheet
date. These value adjustments are
not maintained when the reasons for
making them have ceased to exist.
Stocks
Raw materials and consumables are
valued at their weighted average
cost.
Services in progress equate to services
being performed and to be invoiced
to third parties. These services are
valued at cost, based on the direct
and indirect costs incurred by the
company.
value adjustments are made when
the estimated realisable value of
stocks is lower than the weighted
average cost.
Receivables
Receivables are recorded at their
nominal value. value adjustments are
made when there is a risk that all or
part of the amounts concerned may
not be recovered.
AnnuAl ACCountS oF CeGedel S.A.96
AnnuAl RepoRt 2005
These value adjustments are not
maintained if the reasons for making
them have ceased to exist.
provisions for liabilities and charges
The aim of provisions for liabilities
and charges is to cover charges or
liabilities that have a clearly circums-
cribed nature but that, on the ba-
lance sheet date, are either probable
or certain but of an indeterminate
amount or date of occurrence.
A review is carried out at year-end to
determine the provisions to be made
for the company’s liabilities and
charges.
Provisions made in previous years are
reviewed annually and those no lon-
ger needed are released to extraordi-
nary income.
prepayments and accrued income
This item includes recorded costs and
premiums for options bought before
the year-end and attributable to a
later financial year.
Accruals and deferred income
This item includes income received
and premiums for options sold
before the year-end and attributable
to a later financial year.
net sales
net sales comprise sales of goods and
services provided corresponding to
the company’s ordinary activities, net
of discounts, value added tax and
other taxes directly linked to sales.
note 3 - intangible fixed assets
Intangible fixed assets comprise computer licences. Movements during the year
were as follows:
€
Gross values at beginning of year 13,216,087
Additions during year 171,273
Disposals during year (829,365)
Gross values at end of year 12,557,995
value adjustments at beginning of year 13,183,468
Transfers for year 187,331
Write-backs for year (829,365)
Value adjustments at end of year 12,541,434
net value at end of year 16,561
AnnuAl RepoRt 2005
AnnuAl ACCountS oF CeGedel S.A. 97
note 4 - tangible fixed assets
land and buildings
Machinery, plant and
equipment
Revaluation surplus
other equipment,
machines and furniture
tangible fixed assets incourse of
construction
totAl 2005
€ € € € € €
Gross values at beginning of year 54,375,137 467,438,183 44,870,289 37,377,977 31,423,624 635,485,210
Additions during year 2,450,287 21,823,074 - 2,432,650 27,418,973 54,124,984
Disposals during year (6,326) (1,069,019) - (206,100) (23,432,654) (24,714,099)
Gross values at end of year 56,819,098 488,192,238 44,870,289 39,604,527 35,409,943 664,896,095
value adjustments at beginningof yeare
14,706,209 330,024,191 34,852,815 33,974,946 - 413,558,161
Allocations for year 1,820,903 19,822,733 1,431,068 1,627,558 - 24,702,262
Amounts released for year (2,108) (884,298) - (206,100) - (1,092,506)
Value adjustments at end of year 16,525,004 348,962,626 36,283,883 35,396,404 - 437,167,917
net value at end of year 40,294,094 139,229,612 8,586,406 4,208,123 35,409,943 227,728,178
note 5 - long-term investments
Movements for the year were as follows:
Shares inassociated
undertakings
Amounts due from affiliated undertakings
investmentsheld as
fixed assets
totAl2005
€ € € €
values at beginning and end of year 68,524,009 25,953,767 27,290,819 121,768,595
The company holds at loast 20 % of the capital in the following undertakings:
Company name Registered office
proportion of capital held
last year-end
Shareholders’ equityat year-end
of which profitfor the year
(including profit)% € €
Cegedel Participations S.A. Strassen 100 31/12/2005 42,756,138 2,561,301
Cegedel International S.A. Strassen 100 31/12/2005 32,135,013 2,187,747
Watt Re S.A. Strassen 100 31/12/2005 1,240,000 0
Cegedel net S.A. Strassen 100 31/12/2005 745,708 645,708
AnnuAl ACCountS oF CeGedel S.A.98
AnnuAl RepoRt 2005
note 6 - Current assets
The value of current assets was adjusted as follows:
Cumulative totalof which net allocation
(amounts released) for the year
31/12/2005€
31/12/2004€
2005€
2004€
Provisions for bad and doubtful debts 1,250,000 2,050,000 (800,000) (500,000)
Provisions for obsolete stocks - 238,030 (238,030) (17,456)
value adjustments made during the year are included in ‘operating expenses’ and amounts released from value adjust-
ments made during the year are included in ‘extraordinary income’.
note 7 - Receivables
Receivables in respect of sales and
services provided comprise energy
sales of EUR 56,154,840 (EUR
28,053,249 in 2004) and sundry invoi-
ces of EUR 4,582,964 (EUR 6,419,749
in 2004).
This first item has greatly increased
owing to energy sales on the interna-
tional market.
Workers at Henri TUdoR’s battery factory in 1895
AnnuAl RepoRt 2005
AnnuAl ACCountS oF CeGedel S.A. 99
note 8 – Shareholders’ equity
As at 31 December 2005, the company’s subscribed capital was EUR 134,500,000. It was fully paid-up and represented by
6,725,000 no-par-value shares.
distribution Appropriation profit for others 31/12/2004 of dividends of profit the year increases decreases 31/12/2005
€ € € € € € €
A – Subscribed capital 134,500,000 134,500,000
B – Share premium 5,743,538 5,743,538
C – Revaluation reserve 10,017,474 -1,431,068 1) 8,586,406
d – legal reserve 8,357,059 819,546 2) 9,176,605
e – Reserves in accordance with the Articles 90,224,998 21,000,000 -1,792,130 109,432,868of Association:
Investment reserve 59,883,137 21,000,000 3) -1,792,130 2) 79,091,007
Reserve for contractual obligations 19,000,000 19,000,000
Reserve for supplies of uncertain quality 500,000 500,000
Reserve for commitments to alternative and renewable energies and to cogeneration 4,000,000 4,000,000
Reserve for significant and unforeseeable 6,841,861 6,841,861damage( Reserve for self-insured risks)
F – other reserves: 49,160,512 2,000,000 6,763,127 -4,957,870 52,965,770
Special reserve 22,739,771 2,000,000 2) 13,127 2) 24,752,898
Blocked reserve 26,420,741 6,750,000 2) -4,957,870 2) 28,212,871
G – profit brought forward 1,338,202 -698,164 2) 640,038
H – profit for the year 16,390,928 -13,450,000 2) -2,121,382 18,171,346 -819,546 2) 18,171,346
total 315,732,711 -13,450,000 0 18,171,346 27,763,127 -9,000,614 339,216,571
1) Value adjustments (see note 12).2) decision taken at the Annual General Meeting held on 10 May 2005. The legal reserve comprises a mandatory allocation amounting to at least one-twentieth of the net profits for the year, up to a ceiling of one-
tenth of subscribed capital. This reserve is not available for distribution. The special reserve includes unclaimed dividends. The amount allocated to the blocked reserve equates to five times the wealth tax credited against the corporate income tax liability for financial
years before 2002, and to the amount of the wealth tax credit for each financial year thereafter. This reserve must be retained in the balance sheet for the five tax years following the year in which the credit was applied. The total reserve amounts to EUR 28,212,871 and breaks down as follows: EUR 4,957,871 for 2000, EUR 5,000,000 for 2001, EUR 5,250,000 for 2002, EUR 6,255,000 for 2003 and EUR 6,750,000 for 2004. The amount allocated for 1999, EUR 4,957,870, was released to the investment reserve as at 31 december 2005.
3) Transfers to reserves made by the Board of directors in accordance with Article 50 of the Articles of Association.
AnnuAl ACCountS oF CeGedel S.A.100
AnnuAl RepoRt 2005
note 9 - provisions for liabilities and charges
This item consists of the provision for supplementary pensions of EUR
35,481,586 in 2005 (EUR 34,516,621 in 2004), which takes account of likely
increases in salaries and other payroll costs based on past experience.
note 10 - prepayments and accrued income
These accounts cover option premiums paid or received to be applied to the
accounting period in which the performance of the underlying is reported.
note 11 - Staff
Average staffing levels over the year:
2005 2004
Employees 399 501
The decline in staffing numbers is due to the transfer of some of the staff
to Cegedel net, which operates the electricity transmission and distribution
networks.
note 12 - Value adjustments in respect of formationexpenses and tangible and intangible fixed assets
value adjustments booked to the profit and loss account break down as follows:
2005 2004
value adjustments in respect of intangiblefixed assets (note 3)
187,331 315,170
Cvalue adjustments in respect of tangiblefixed assets (note 4)
24,702,262 24,941,108
Depreciation of revaluation reserve (1,431,068) (1,431,068)
23,458,525 23,825,210
AnnuAl RepoRt 2005
AnnuAl ACCountS oF CeGedel S.A. 101
note 13 - tax on profit from ordinary activities
The tax provisions made are suffi-
cient to cover the tax liability for the
year.
Tax relief on investment is stated as
income.
Having met the terms and conditions
laid down in Paragraph 8a of the Law
of 21 December 2001, the company
applied a wealth tax credit.
Cegedel is consolidated for tax
purposes with Cegedel net, Cegedel
Participations, Cegedel International
and Watt Re. The effect of this is as
follows:
• tax charges are booked in the sub-
sidiaries’ accounts as would be the
case if no tax group existed;
• tax savings relating to a loss-ma-
king subsidiary are reallocated to
this subsidiary in the same year as
the loss arises; these savings appear
in the result of the loss-making
subsidiary;
• the parent company books the
balance on the basis of the consoli-
dated profit/loss.
Tax consolidation is possible only
where the companies concerned
are combined for this purpose for a
period of at least five financial years.
This means that if the criteria laid
down in Article 164a of the Income
Tax Act are not met at any time
during this period, the tax treatment
ceases to apply, retroactively, from
the first year in which it was permit-
ted.
In 2005 Cegecom left the tax group,
so that the arrangement in place
since 2003 ceased to apply to Cege-
dom with retroactive effect.
William BradfordSHOCkLEY(1910 – 1989)
American physicist who invented, together with John BARdEEn and Walter BRATTAin, the point-contact transistor in 1947. He refi-ned the junction transistor and re-ceived the nobel Prize for physics in 1956.
The transistor replaced the use of vacuum tubes and became the key component in any electronic device.
AnnuAl ACCountS oF CeGedel S.A.102
AnnuAl RepoRt 2005
note 14 - Remuneration paid to members ofthe administration andsupervisory bodies
Remuneration paid to members of
the administration and supervisory
bodies totalled EUR 1,464,653 in 2005
(EUR 1,464,846 in 2004). no advances
or loans were granted to members of
the administration and supervisory
bodies, nor was any commitment
undertaken on their behalf in respect
of any form of guarantee.
note 15 - net sales
net sales for the period to 31 December 2005 break down as follows:
2005 2004
€ €
Energy sales and accessories for the provisionof energy on the national market
264.537.996 252.709.511
Energy sales on the international market 212.846.558 95.745.987
other income 14.968.772 12.461.922
total 492.353.326 360.917.420
note 16 - other operating income
other operating income of EUR 89,912,120 mainly covers the provision of
services to Cegedel net for EUR 88,450,668 and the disposal of fixed assets for
EUR 955,200.
note 17 - extraordinary income
Extraordinary income comprises the releases of tax provisions following the
deduction by the tax authorities of contributions relating to the 2000 tax year
and the releases of provisions for current assets.
note 18 - off-balance-sheet commitments
During the year, the company concluded a number of forward contracts for the
purchase and sale of electricity as part of its procurement programme.
AnnuAl RepoRt 2005
AnnuAl ACCountS oF CeGedel S.A. 103
Change in invested assets *[EUR million]
* Invested assets represent fixed assets plus stocks, net of revaluation surpluses
and amounts due from affiliated undertakings.
3.2 3.1 4.8 10.5 28.4 54.5 81.8 115.2 148.9 166.4 219.4 288.0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
0
50
100
150
200
250
300
AnnuAl ACCountS oF CeGedel S.A.104
AnnuAl RepoRt 2005
AnnuAl RepoRt 2005
AnnuAl ACCountS oF CeGedel S.A. 105
Auditors’ report on the annual accounts
In accordance with the terms of our
appointment by the Annual General
Meeting held on 10 May 2005, we
have inspected the accompanying
annual accounts of Cegedel S.A. for
the year ended 31 December 2005
and have read the supporting mana-
gement report. The annual accounts
and the management report are the
responsibility of the Board of Direc-
tors. our responsibility is to express
an opinion on the annual accounts,
based on our audit, and to verify that
the management report is in confor-
mity with the accounts.
We conducted our audit in accordan-
ce with international audit standards.
These standards require that we plan
and perform our audit work so as
to obtain reasonable assurance that
the annual accounts are free from
material misstatement. An audit
includes an examination, on a test
basis, of evidence supporting the
amounts and disclosures contained in
the annual accounts. It also includes
an assessment of the accounting
principles and methods used and the
significant estimates made by the
Board of Directors in preparing the
annual accounts, as well as an eva-
luation of the overall presentation
of information. We believe that our
audit provides a reasonable basis for
the opinion expressed below.
In our opinion, the attached annual
accounts, prepared in accordance
with Luxembourg legislation and
regulations, give a true and fair view
of the assets, liabilities and financial
position of Cegedel S.A. as at
31 December 2005 and of its profits
for the year then ended.
The management report is consistent
with the annual accounts.
Deloitte S.A.
Statutory auditors
Stéphane CéSARI
Partner
Luxembourg, 7 April 2006
to the shareholders of Cegedel S.A.,Strassen
Cegedel S.A.’s annual report is published in
both French and English.
Copes in both languages can be downloaded
from our website:
www.cegedel.lu/cegedel-sa/finances/ rapport_
annuel/rapport_annuel.html
You may also request a hard copy by comple-
ting the form published on this website.
We would like to thank all those involved in
the preparation and publication of this annual
report.
The English version is a free translation from
the original text and may thus not be binding
on the company.
publication team:
design and artwork:
Service Communication, Cegedel S.A.
photography:
Henri TUDoR Museum archives
Saint-Paul archives
Cegedel Group archives
printers:
Imprimerie victor BUCK, Leudelange
2, rue Thomas Edison
Strassen
Postal Address:
L-2089 Luxembourg
Tel.: 2624-1
Fax: 2624-6100
mail@cegedel.lu
www.cegedel.lu