Notes to the consolidated financial statements
Preparation and adoption of the financial statements
The 2018 financial statements were prepared by the Executive Board on 26 February 2019. The financial statements as prepared were submitted for adoption to the General Meeting of Shareholders on 21 March 2019.
Nature of business operations
N.V. Nederlandse Gasunie (Gasunie) is a European gas infrastructure company. Gasunie’s network ranks among Europe’s largest high-pressure gas transport networks and consists of some 15,500 kilometres of pipelines in the Netherlands and northern Germany, dozens of installations and approximately 1,300 gas-receiving stations. The annual gas throughput totals approximately 1,250 TWh (125 billion m3). Gasunie serves the public interest in the markets in which it operates and seeks to maximise value creation for its stakeholders. Gasunie provides gas transport services through its subsidiaries, Gasunie Transport Services B.V. in the Netherlands and Gasunie Deutschland Transport Services GmbH in Germany. Gasunie also provides other gas infrastructure services, including gas storage, LNG storage and the certification of green gas through its subsidiary Vertogas. Gasunie seeks to deploy its infrastructure and knowledge for the ongoing development and integration of renewable energy sources, particularly green gas.
The company has its registered and actual office at Concourslaan 17, Groningen, the Netherlands, and is registered with the Chamber of Commerce under number 02029700.
All shares outstanding as at the balance sheet date are held by the Dutch State.
Basis of preparation
The consolidated financial statements have been prepared on the basis of the International Financial Reporting Standards (IFRS) endorsed by the European Union (EU) as at 31 December 2018 and the requirements of Part 9 of Book 2 of the Dutch Civil Code. IFRS encompasses both the IFRS standards and the International Accounting Standards issued by the International Accounting Standards Board and the interpretations of IFRS and IAS standards published by the IFRS Interpretations Committee (IFRIC) and Standing Interpretations Committee (SIC), respectively.
From the 2018 financial year onwards, the following new standards have been incorporated:
IFRS 9 Financial Instruments
IFRS 9 pertains to the classification and measurement of financial instruments and replaces IAS 39 (among others). The consolidated financial statements include several financial instruments that fall within the scope of IFRS 9.
On 1 January 2018 (the date of first application of IFRS 9), the management investigated what business models apply to the financial assets held by the group and it assigned its financial instruments to the relevant IFRS 9 categories.
For the assets, this concerns the following items: investments in other equity interests, receivables from joint ventures, loans to third parties and trade and other receivables. These assets are measured at amortised cost with the exception of the investments in other equity interests, which are measured at fair value with changes in value recognised in equity. No recycling takes place through the result. The introduction of IFRS 9 does not have any impact on the measurement of these financial instruments.
The company measures its trade receivables according to the ‘simplified approach’. This means that a provision is formed upon the first measurement of the receivable to cover the expected credit losses. This expectation is based on historical payment data and the debtor’s credit status. To determine this effect, Gasunie has analysed the corporate credit policy and scale of bad debt among its trade receivables over the past 5 years.
This credit policy includes, among other things, a risk analysis and credit limit per debtor, whereby security is furnished in the form of bank guarantees and security deposits, for instance. Despite one incident with a shipper in 2018, the expected degree to which it will not be possible to collect trade receivables is extremely limited in incidence and size. For the coming 12 months as well, Gasunie estimates the credit risk per debtor to be very low, based on, among other things, the credit status.
Given the very limited size and low incidence of write-offs on trade receivables, the future credit losses are negligible. A mark-up for expected credit losses (stage 1) is therefore not material and has not been accounted for in the financial statements. Gasunie continues to monitor the payment behaviour of its debtors. If the collection of a receivable is considered unlikely, a provision is created (stage 3).
With respect to liabilities, IFRS 9 only introduces changes regarding IAS 39 in terms of the classification and measurement of liabilities measured at fair value, whereby the result is taken to the profit and loss account. The consolidated financial statements do not contain any such liabilities.
The existing cash flow hedges were also reassessed as part of the IFRS 9 implementation analysis. As the result of this analysis, the cash flow hedge reserve for Gate terminal B.V. was reclassified in the consolidated financial statements from the cash flow hedge reserve to the other reserve to an amount of negative € 37.0 million (2017: negative € 39.0 million). This reclassification has been incorporated in the comparative figures for 2017. There is no effect on the consolidated total equity or result.
Finally, the consolidated financial statements include one cash flow hedge. This is the cash flow hedge of N.V. Nederlandse Gasunie relating to two bond loans. The results of this hedge are taken to equity (“Fair Value through Other Comprehensive Income”) and reclassified to the profit and loss account upon realisation. This recognition is maintained under IFRS 9.
To summarise, it can be said that the application of IFRS 9 does not bring with it any changes to the measurement of the company’s financial instruments.
IFRS 15: revenue from customer contracts (including Clarifications to IFRS 15)
IFRS 15 is in effect as of 1 January 2018, and supersedes IAS 18. The company has implemented the guideline according to the retrospective application, making use of the exemption allowing contracts that expired before 1 January 2017 to be disregarded.
In the context of IFRS 15 implementation, the company has analysed its current contracts with customers, regarding the contract terms and conditions, the rate structures, the terms of the contracts and any special stipulations. The purpose of this analysis was to determine whether IFRS 15 has an impact on the measurement of its contracts, and whether any discounts, prepayments or advance deliveries of services might give rise to new contract assets or liabilities.
In the context of IFRS 15, the company considers customer contributions to investments related to transport capacity as prepayment for the transport service. These contributions are presented as a contract liability on the balance sheet, and are recognised in the profit and loss account over the useful life of the related asset. This resulted in an adjustment for two contracts..
The implementation of IFRS 15 does not give rise to any adjustment in the measurement or recognition of the regular transport and storage contracts. However, for long-term contracts entered into prior to 1 January 2018, three contracts have been identified which give rise to an adjustment of the opening balance on 1 January 2018. Furthermore, we have reassessed an existing contract liability, and reclassified it from a current to a non-current liability. The table below shows the impact of these adjustments on the opening balances on 1 January 2018 and 2017 respectively.
|In millions of euros||31 Dec. 2017||Retrospective application IFRS 15||1 Jan. 2018|
|Tangible fixed assets||8,499.9||18.2||8,518.1|
|Total change in assets||18.2|
|Equity (Other reserves)||5,782.3||‑9.6||5,772.7|
|Non-current contract liabilities||-||47.2||47.2|
|Current contract liabilities||-||3.8||3.8|
|Trade and other payables||276.0||‑23.2||252.8|
|Total change in equity and liabilities||18.2|
|In millions of euros||31 Dec. 2016||Retrospective application IFRS 15||1 Jan. 2017|
|Tangible fixed assets||8,665.3||18.6||8,683.9|
|Total change in assets||18.6|
|Equity (Other reserves)||5,601.9||‑7.2||5,594.6|
|Non-current contract liabilities||-||48.6||48.6|
|Current contract liabilities||-||3.7||3.7|
|Trade and other payables||280.4||‑26.5||253.9|
|Total change in equity and liabilities||18.6|
The impact of the implementation on the result after taxation amounts to approximately negative € 2 million for 2017 and 2018.
IFRS 15 contains a number of additional disclosures regarding categorisation of revenue, contract liabilities, services to be rendered and management assessments. These disclosures are included under ‘Accounting policies’ and in note 21.
IFRS 16 Leases
IFRS 16 Leases will become effective from the 2019 financial year. Gasunie will implement this standard using what is known as the ‘modified retrospective approach’, whereby the remaining lease commitments will be presented as a liability on the balance sheet and discounted at the incremental borrowing rate. The comparative figures for previous financial years will not be adjusted. The asset or right of use associated with the lease will be presented on the balance sheet as an asset with a value corresponding to the value of the lease liability.
The lease contracts subject to IFRS 16 mainly relate to company cars, land and the use of specific assets for the supply of nitrogen. The company has examined to what extent IFRS 16 will have a material effect on the equity or result of the company in the period of first-time adoption and to what extent this will require any further disclosures. In this examination, the company did not take into account assets with a low value and contracts with a term of less than one year.
There is no material effect on the company’s equity and result. However, approximately € 15 million in operating expenses will be restated as interest and depreciation expenses. In addition, the tangible fixed assets, as well as the current and non-current liabilities, will increase. The company expects this increase in the balance sheet total to amount to approximately € 120 million. In addition, in the cash flow statement, approximately € 15 million of operational cash flows will be restated as financing cash flows. Finally, the company is preparing additional disclosures with regard to the lease liabilities concerning the depreciation and financing expenses.
As of the financial year 2018, other new standards endorsed within the European Union have come into force, specifically the following:
- Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions (issued on 20 June 2016)
- Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (issued on 12 September 2016)
- Annual Improvements to IFRS Standards 2014-2016 Cycle
- IFRIC Interpretation 22: Foreign Currency Transactions and Advance Consideration (issued on 8 December 2016)
- Amendments to IAS 40: Transfers of Investment Property (issued on 8 December 2016)
These standards do not have any material effects on the company’s equity and result, and do not require additional disclosures.
As of the financial year 2019, the following new standards endorsed within the European Union have come into force:
- Amendments to IFRS 9: Prepayment features with negative Compensation (issued on 12 October 2017) is in force as of the financial year 2019, and is endorsed by the EU
- IFRIC 23: Uncertainty over Income Tax Treatments (issued on 7 June 2017)
As of the financial year 2019, the following new standards will become effective, but have not yet been endorsed in the European Union:
- Amendments to IAS 28: Long term interests in Associates and Joint Ventures (issued on 12 October 2017)
- Amendments to IAS 19: Plan Amendment, Curtailment or Settlement (issued on 7 February 2018)
- Annual Improvements to IFRS Standards 2015-2017 Cycle (issued on 12 December 2017)
These standards are not expected to have any material effects on the company’s equity and result and do not require additional disclosures.
Management judgements and estimates
In preparing the financial statements, management makes estimates and assessments which affect the assets and liabilities presented as at the balance sheet date and the result for the financial year.
The judgements and estimates are mainly relevant for the valuation of fixed assets, the provision for abandonment costs and redevelopment, deferred taxation, pensions and other equity interests, especially the company's 9% interest in Nord Stream AG. IFRS 15 means that judgements and assessments are considered in the valuation of contract liabilities when determining the remaining term and any services the company needs to render in order to meet its performance commitments.
Fixed assets include the gas transport network.
Tangible fixed assets are valued at cost less straight-line depreciation based on the expected useful life, taking into account the residual value, and impairments. To this end, assumptions were made about the useful life, the residual value and the future cash flows of the transport pipelines in particular.
A significant part of the operating activities are ‘regulated’. The future cash flows and related recoverable amount of the regulated assets are partly based on judgements and estimates about the cash flows that can be earned within the regulatory framework. For more information, refer to note 1 to the consolidated balance sheet.
Provision for abandonment costs and redevelopment
A provision for abandonment costs and redevelopment is recognised in response to management decisions to decommission, remove or redevelop specific assets within the foreseeable future, for instance due to new legislation. The provision is determined on the basis of experience figures derived from completed projects. For more information, refer to note 17 to the consolidated balance sheet.
A provision for long-term general abandonment costs is not recognised because it is currently considered unlikely that the removal of transport pipelines and appurtenances will be needed. The income from alternative use (in the longer term) less the costs of conservation is anticipated to offset the costs of removal, including societal costs.
Gasunie finds itself in a changing environment because of the energy transition. The management expects that the transition will be accompanied by a significant reduction in income and jobs and has therefore launched a programme aimed at ensuring a lower cost level and a flexible organisation that is robust for the future. Among other things, the programme includes a voluntary severance scheme and the buyout of a number of employee benefit schemes. 240 employees will be leaving the company in 2019 under the voluntary severance scheme. The management has determined that the severance scheme satisfies the criteria of IAS 37, which is why the scheme was classified upon inception as a restructuring provision, based on the plans available on 1 October 2018. The provision concerns the costs of buying out the employment contracts and the costs relating to the departure of the employees. The provision is of a short-term nature.
Deferred tax assets
A deferred tax asset is recognised for all deductible temporary differences and available carry-forward losses, to the extent that it is likely that taxable profit will be available for set-off. To this end, assumptions have been made about future taxable profits.
The costs relating to the defined benefit pension plans and the valuation of defined benefit pension liabilities are determined using actuarial calculations. To this end, significant assumptions have been made about the market yields on high-quality corporate bonds for the purpose of determining the discount rate, the expected future increases in salary, the expected future increases in pensions and the average life expectancy. For more information, refer to note 17 to the consolidated balance sheet.
Other equity interests
The interest in Nord Stream AG is stated at fair value, taking into account a post-tax discount rate on the expected cash flows. The projected cash flows are based on contractual agreements. In determining the post-tax discount rate, the assumptions made by management are significant. For more information, refer to note 6 to the consolidated balance sheet.
Consolidation and accounting principles
The consolidated financial statements include the financial data of N.V. Nederlandse Gasunie and its subsidiaries. Subsidiaries are legal entities and companies over which the company exercises control.
The Group exercises control if the Group has:
- power over the relevant activities of the investee; exposure or rights to variable returns from its involvement with the investee; and
- the ability to use its power over the investee to influence the amount of the investor’s returns.
Generally, it is presumed that a majority of voting rights results in control, but the Group considers all facts and circumstances when assessing whether it exercises control over an investee.
The Group reassesses whether or not it exercises control over an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.
Subsidiaries are fully consolidated from the date on which control of the group company is obtained until the date that control no longer exists. The items in the consolidated financial statements are calculated in accordance with the Group’s accounting policies.
Intercompany account balances and unrealised results relating to group companies are eliminated. The subsidiaries included in the consolidation are:
|Company||Registered office||Interest as at 31 Dec. 2018||Interest as at 31 Dec. 2017|
|Gastransport Noord-West Europa B.V.||Groningen||100%||100%|
|Gastransport Noord-West Europa Holding B.V.||Groningen||100%||100%|
|Gastransport Noord-West Europa Services 1 B.V.||Groningen||100%||100%|
|Gastransport Noord-West Europa Services 2 B.V.||Groningen||100%||100%|
|Gastransport Noord-West Europa Services 3 B.V.||Groningen||100%||100%|
|Gastransport Noord-West Europa Services 4 B.V.||Groningen||100%||100%|
|Gasunie BBL B.V.||Groningen||100%||100%|
|Gasunie Engineering B.V.||Groningen||100%||100%|
|Gasunie New Energy B.V.||Groningen||100%||100%|
|Gasunie Waterstof Services B.V.||Groningen||100%||100%|
|Gasunie LNG Holding B.V.||Groningen||100%||100%|
|Gasunie Ambigo B.V.||Groningen||100%||100%|
|Gasunie Transport Services B.V.||Groningen||100%||100%|
|Gasunie Grid Services B.V.||Groningen||-||100%|
|Gasunie Energy Information Services B.V||Groningen||100%||-|
|Gasunie Deutschland GmbH & Co. KG||Hanover, Germany||100%||100%|
|Gasunie Deutschland Services GmbH||Hanover, Germany||100%||100%|
|Gasunie Deutschland Technical Services GmbH||Hanover, Germany||100%||100%|
|Gasunie Deutschland Transport Services GmbH||Hanover, Germany||100%||100%|
|Gasunie Deutschland Transport Services Holding GmbH||Hanover, Germany||100%||100%|
|Gasunie Deutschland Verwaltungs GmbH||Hanover, Germany||100%||100%|
|Gasunie Infrastruktur AG||Zug, Switzerland||100%||100%|
|BBL Company V.O.F.||Groningen||60.0%||60.0%|
|Arbeitsgemeinschaft GOAL/Fluxys NEL-Projektphase||Hanover, Germany||51.3%||51.3%|
|Biogas Netwerk Twente B.V.||Almelo||50.0%||50.0%|
|Gate terminal C.V.||Rotterdam||50.0%||50.0%|
|Gate terminal Management B.V.||Rotterdam||50.0%||50.0%|
|DEUDAN - Deutsch/Dänische Erdgastransport-GmbH||Handewitt, Germany||75.0%||75.0%|
|DEUDAN - Deutsch/Dänische Erdgastransport-GmbH & Co. KG||Handewitt, Germany||33.4%||33.4%|
|NETRA GmbH Norddeutsche Erdgas Transversale||Emstek/Schneiderkrug, Germany||50.0%||50.0%|
|NETRA GmbH Norddeutsche Erdgas Transversale & Co. KG||Emstek/Schneiderkrug, Germany||44.1%||44.1%|
|Jordgas Transport GmbH||Hanover, Germany||50.0%||50.0%|
|German LNG GmbH||Hamburg, Germany||33.3%||33.3%|
|GASPOOL Balancing Services GmbH||Berlijn, Germany||16.7%||16.7%|
|Other equity interests|
|Energie Data Services Nederland (EDSN) B.V.||Arnhem||12.5%||12.5%|
|PRISMA European Capacity Platform GmbH||Leipzig, Germany||12.7%||12.7%|
|Nord Stream AG||Zug, Switzerland||9.0%||9.0%|
Gasunie Transport Services B.V. is the network operator of the national gas transport network in accordance with the Dutch Gas Act. The ministry has issued rules with regard to proper financial management by a network operator (in Dutch: Besluit Financieel Beheer Netbeheerder). These rules consist of a number of financial ratios, including a minimum for equity. This can lead to restrictions with regard to the distribution of, amongst other things, dividends.
With effect from 2 January 2018, Gasunie Transport Services B.V. merged with Gasunie Grid Services B.V. (GGS B.V.), as defined in Part 7 of Book 2 of the Dutch Civil Code. As a result, Gasunie Transport Services B.V. acquired the shares without voting rights from N.V. Nederlandse Gasunie on 1 January 2018. Gasunie Grid Services B.V.’s entire asset base at carrying amount passed to Gasunie Transport Services B.V. by universal title on 2 January 2018, and Gasunie Grid Services B.V. legally ceased to exist. The merger has no impact on the consolidated equity and result.
Gasunie Energy Information Services B.V. was founded in April 2018 to boost, develop and operate activities in the field of energy information services to support the energy transition.
Ambigo VOF was founded at the end of 2017 and aims to demonstrate the viability of generating energy through gasification of waste. N.V. Nederlandse Gasunie and its group companies do not have control. Because the company has a direct interest in the assets and obligations of Ambigo V.O.F., the accounting method of this interest is similar to that of a joint operation.