Control and supervisory mechanisms

The Executive Board reports annually to the Board of Directors on strategic, medium-term and annual objectives and on progress towards their achievement. In the course of the year, the Executive Board reports quarterly and at each meeting on the course of business, progress made in achieving objectives, and other important developments. The Board of Directors also receives a short monthly report summarising the key financial figures, an assessment of the risk situation, and internal audits currently under way. The external auditors submit a Management Letter to the Board of Directors and give an oral presentation of the results and findings of their audit and of their future key audit areas. Internal Audit submits an annual audit programme to the Board of Directors for its approval, and subsequently reports periodically on its findings and recommendations as well as their implementation. The Board of Directors receives an annual written report on the situation and developments in Group-wide risk management and its most important constituents. The report presents principles and limits, details compliance with them, and contains information on planned expansion moves.

The Board of Directors also has two Board committees: the Audit and Risk Committee (ARC) and the Nomination and Remuneration Committee (NRC).

Audit and Risk Committee (ARC)

The ARC consists of Marc Boudier (Chairman), Jean-Yves Pidoux (member), Alex Stebler (member) and Urs Steiner (member).

The role of the ARC is to support the Board of Directors in carrying out its supervisory duties, particularly with regard to monitoring and assessing the activity and independence of internal and external auditors, the control system, accounting, risk management, compliance and corporate governance.

The ARC submits proposals to the Board of Directors for its approval and, at each meeting of the Board, reports orally on its activities, resolutions, conclusions and recommendations. If the ARC fails to reach consensus on matters within its remit, the decision is made by the full Board of Directors. Minutes of ARC meetings are circulated among the Directors for their information. The ARC also submits an annual accountability report to the Board of Directors, summarising the ARC's activities during the year.

As a rule the Chairman, CEO, CFO and Head of Internal Audit attend meetings of the ARC. Depending on the agenda, other unit heads and representatives of the external auditors also attend. Last year, the ARC met six times for an average of three and a half hours per meeting. On these occasions, the ARC deliberated in depth on risk management and had the auditors draw up an "Opinion on the functioning and effectiveness of risk management within the Alpiq Group". It concluded that the risk culture was strong throughout the Alpiq Group and that the organisational structure was appropriate, despite identifying some room for improvement in individual areas. The report was accepted, and the recommendations were implemented.

Nomination and Remuneration Committee (NRC)

The NRC consists of Guy Mustaki (Chairman), Marc Boudier (member), Hans Büttiker (member) and Christian Wanner (member).

The role of the NRC is to support the Board of Directors in fulfilling its supervisory duties with regard to succession planning for the Board of Directors and Executive Board, formulating the Group-wide remuneration policy, and defining the contractual terms and conditions of employment for the CEO, Executive Board and heads of business/functional units.

The NRC submits proposals to the Board of Directors for its approval and, at each meeting of the Board, reports orally on its activities, resolutions, conclusions and recommendations. The minutes of the NRC are circulated among members of the Board for their information and as a basis for Board resolutions. As a rule, the Chairman of the Board, CEO and Head of Corporate Human Resources attend meetings of the NRC. Last year, the NRC met nine times for an average duration of two and a half hours per meeting.

Division of responsibilities

The Board of Directors has delegated responsibility for the Alpiq Group's overall operational management to the CEO. The CEO presides over the Executive Board and has delegated some of his management responsibilities to members of the Executive Board.

The Organisational Regulations and Executive Board Regulations govern the authority and division of responsibilities between the Board of Directors and the CEO/Executive Board.

As part of the Group Guidelines, the CEO has issued regulations, valid throughout the Group, governing the assignment of authority and responsibilities. These regulations confer extended authority on the CEO for energy transactions.

Information and control mechanisms vis-à-vis the Executive Board

The Executive Board keeps the Board of Directors informed of important events on an ongoing basis. Financial reports are prepared quarterly. Each month the Board of Directors also receives information on the key financial figures and the current risk situation. Regular audits supplement the information and control mechanisms.

As a rule, members of the Executive Board attend meetings of the Board of Directors to supply any information it may require. They leave the meeting if the Chairman so directs.

Risk management monitors business, market and credit risks. The Board of Directors receives an annual written report on the situation and developments in Group-wide risk management and its most important constituents. The report presents principles and limits, details compliance with them and contains information on planned expansion moves. A central Risk Management Committee reporting to the CFO sets limits for individual areas based on the results of its analysis. The Executive Board is responsible for assigning the related risk categories. The overall limit for the Group is set annually by the Board of Directors. The Risk Management Committee monitors adherence to the defined limits.

At the ARC's request, the Board of Directors annually approves audit planning and the summary report. Corporate Internal Audit reports directly to the Chairman of the Board. Individual audit reports are submitted to the Chairman and (in summary form) to the ARC and are tabled for discussion at each meeting. Corporate Internal Audit engages an advisor independent of the external auditors for its work.