Statement of the Executive Board

Statement of the Executive Board

Energy in transition, Gasunie in transition

In 2016, like the previous year, we achieved a transport security through our networks in the Netherlands and Germany of almost 100%. For our customers, we transported over 5% more gas through our Dutch and German gas networks than in 2015. To offset the decline in production of Groningen gas, we converted significantly more high-calorific gas to make it suitable for use by domestic households and companies. The amount of converted gas increased by almost 40%. Our safety results improved slightly, as evidenced by, for instance, a reduction in the number of reportable incidents per million hours worked. The new method decision for GTS as of 2017 resulted in an impairment of € 450 million, which resulted in a significant decrease in our result after taxation. Our normalised financial results also showed a decline, mainly as a consequence of our lower revenues. Our normalised profit (i.e., excluding the impairment) decreased by € 53 million.

In 2016, our employees were again fully committed to ensuring a safe and reliable supply of energy for society. In addition, we paid particular attention to  our strategy to offset and help enable the forecast reduction in the share of natural gas in the Dutch energy mix in the longer term.

Energy in transition, gas in transition

The Dutch energy policy, as is also evident from the Dutch government’s energy agenda, aims to achieve a CO2-neutral energy supply by 2050. Many parties are currently actively involved in this, including Gasunie. We aim to help accelerate the energy transition wherever we can and, through our infrastructure (both existing and new), our knowledge and our experience, we continue to provide added value to the energy supply of the future.

The gas market has undergone major changes, partly as a result of the sharp decline in the production of gas from the Groningen field due to earthquakes. Because gas comes from an increasing number of different sources, the composition of gas varies more than before. We solve this issue by mixing gas with nitrogen. Thanks to a properly functioning gas roundabout, the Netherlands is well connected to global gas resources, which safeguards the supply of natural gas

We aim to quickly achieve a CO2-neutral energy supply. For this purpose, fossil fuels will need to be replaced wherever possible by renewable forms of energy. This replacement should take place systematically and in the right order – the dirtiest fossil fuels should be the first to go. In addition, natural gas should only be deployed where currently no affordable, fully sustainable solutions are available as yet. In such cases, natural gas is the cleanest alternative. We call this the ‘Customised Gas’ approach. Especially in industrial high-temperature processes and heavy transport by road or by water, the use of natural gas reduces CO2 emissions significantly. In the built environment and in industry, natural gas will be replaced in the coming decades by sustainable alternatives, such as renewable gas. Gasunie also actively contributes to this development, among other things by taking part in various projects and pilots in the fields of green gas, hydrogen and heat. Good examples of these are the supercritical water gasification and hybrid heat pump projects.

A crucial part of a properly functioning gas roundabout is TTF, the Dutch virtual gas trading platform. TTF has again experienced significant growth (+29%) and is now Europe’s largest gas trading platform. Partly thanks to the size of the TTF, a sufficient amount of gas is available in Northwestern Europe at favourable rates. We also see growth in our LNG break-bulk activities. Now that the new infrastructure on the Maasvlakte has been taken into use, LNG can be transported in smaller quantities via trucks and vessels, to be used as a cleaner and affordable fuel for transport by road and water.

Energy crossing borders

The energy supply in the Netherlands is part of the European energy market. The integration of this market means that EU member states will increasingly be able to support each other in terms of energy supply. It also means that member states will become dependent on developments in each other’s markets, which is why we are committed to establishing cross-border policy and collaboration. A strong, international position of Gasunie not only benefits Europe and the Netherlands, but also provides development opportunities for our company.
In large parts of Europe, the position of natural gas is still developing. In these markets, natural gas is increasingly deployed to replace less clean energy sources, such as coal and oil. Our knowledge of and experience in the gas infrastructure enables us to advise these regions on the best approach. Together with partners, we are also investigating opportunities for participating (proportionally) in the gas infrastructure.

Uncertainties

In the future, the decreasing share of natural gas will probably lead to a reduced use of our gas transport network. Our existing transport infrastructure will continue to be important at peak times, as a back-up and for the storage of sustainable energy generated at a large scale (e.g., via power-to-gas). However, this will never fully replace our current transport activities. In addition, the regulatory authorities in the Netherlands and Germany are continuing to put extra pressure on our future regulated revenue through new method decisions.
In our non-regulated part of the business, some of the current capacity contracts are about to expire. This concerns EnergyStock (our gas storage) and BBL (the pipeline between the Netherlands and the United Kingdom). Additionally, this is a competitive market, resulting in downward pressure on tariffs.

Growth paths

In anticipation of these developments, we revised our strategy in 2016. In consultation with our shareholder and after approval by the Supervisory Board, we started implementing this strategy. We defined two growth paths for Gasunie. The first is internationalisation, by developing gas activities in collaboration with partners in growing European gas markets outside our core area of Northwestern Europe. The second growth path is the development of sustainable activities in our home markets of the Netherlands and Germany. In this way, we aim to accelerate the transition towards a CO2-neutral energy supply.

Vision 2023

In order to respond decisively to the changes and to achieve our growth paths, we have drawn up our vision for the next seven years, Vision 2023, and shared it with our employees. In it, we focus on renewing and improving both our activities and our organisation. The emphasis is on optimising our existing assets, growth from new activities, and the sustainable employability of our employees. With respect to the latter, we developed a range of services last year, together with our employees.

In order to remain an efficient organisation, we developed a structural Operational Excellence programme. In it, we identify where there are opportunities for efficiency improvement and reconsider certain points of departure in our organisation. We decided, for instance, to change our multi-year replacement programme with regard to the preventive renovation of our gas receiving stations into a programme for corrective maintenance. Network optimisation and robotisation will become important benchmarks in achieving our Operational Excellence targets after 2019.

The aforementioned internal and external developments will result in a reduction in the number of FTEs. In the first few years, this reduction will be offset by making use of our flexible workforce as much as possible.

Expansion of the Executive Board

On 1 May 2016, Annie Krist, Director of GTS, and Ulco Vermeulen, Director of Participations, joined the Executive Board of Gasunie. As a result of these appointments, the two Dutch business units each have a direct representative on the Board. On 28 February 2017, it was announced that Annie Krist will become CEO of GasTerra as of 1 April. She therefore resigned as Director of GTS on 28 February, stepping down from the Executive Board. The Executive Board regrets her departure, but fully understands this next step in her career. We would like to thank Annie for her long and significant commitment to Gasunie and wish her every success in her new position.

Finally

We consider it our task and duty to serve the public interest by contributing to a reliable, safe, affordable and sustainable energy supply in carrying out our activities. We do this in cooperation with our customers, project partners and employees. We are grateful for their commitment and dedication. We are confident that, together with them, we will be able to further shape the energy system of the future.

Groningen, 14 March 2017

Han Fennema
René Oudejans
Ulco Vermeulen