Notes to the consolidated profit and loss account

21. Net revenue

As of the financial year 2018, the company now applies the IFRS 15 standard ‘Revenue from contracts with customers’. For more information on the implementation and application of this standard, please refer to the sections ‘Basis of preparation’ and ‘Accounting policies’.

Segmentation of net revenues

Gasunie’s net revenues are divided into two categories. The first is revenue from regulated transport and related services. This revenue is determined every 5 years by the regulator in the Netherlands and Germany. The second segment is non-regulated services, the revenues of which are determined by tariffs and volumes resulting from market mechanism.

The revenue from regulated services is generated by the Gasunie Transport Services and Gasunie Deutschland segments. The revenue from other services is generated by the Participations segment. Inter-segment service revenues are eliminated from the consolidation and presented separately to ensure consistency of segment information. For details, refer to note 29.

The following table shows the revenues in both categories:

In millions of euros 2018 2017
Revenu streams    
Regulated services 1152.1 1,153.1
Other services 133.8 122.5
Inter-segment ‑38.6 ‑34.4
     
Total 1,247.3 1,241.2

Contract liabilities

At year-end 2018, Gasunie's contract liabilities amounted to € 50.3 million. These commitments are related to customer prepayments for transport and storage services to be delivered. The following table shows the change in these contract liabilities.

In millions of euros 2018 2017
     
Balance as at 1 January 50.9 52.3
     
Recognised in profit and loss ‑2.5 ‑3.3
Accrued interest 1.9 1.9
     
Balance as at 31 December 50.3 50.9

At year-end 2018, € 3.8 million of the contract liabilities had a term shorter than one year (year-end 2017: € 3.8 million). The remainder of the liabilities has a term of more than 5 years.

22. Staff costs

In millions of euros 2018 2017
     
Salaries 237.4 159.1
Social security expenses 17.8 17.3
Pension costs 32.1 29.7
     
Total staff costs 287.3 206.1

The salary costs include the costs for the restructuring provision of € 43.3 million and the costs of buying out the employee benefit schemes of € 39.3 million.

The ‘pension costs’ of defined contribution pension plans total € 24.0 million (2017: € 25.0 million).

Remuneration for members of the Executive Board and Supervisory Board

I. Members of the Executive Board

In € Salary Variable remuneration Fixed & variable remuneration Deferred remuneration Social security expenses Other benefits Total
               
2018              
Executive Board              
               
J.J. Fennema, chair  310,291   31,029   341,320   72,843   9,492   22,939   446,594 
I.M. Oudejans  286,333   28,633   314,966   67,356   9,492   21,398   413,212 
U. Vermeulen  248,223   24,822   273,045   58,629   9,492   12,566   353,732 
B.J. Hoevers  225,281   22,528   247,809   53,376   9,492   2,991   313,668 
               
Total  1,070,128   107,012   1,177,140   252,204   37,968   59,894   1,527,206 

The variable remuneration shown in the table above is based on the realisation of agreed targets during the financial year. The agreed targets comprise both collective Gasunie targets and long-term strategic targets, as described in the section entitled Remuneration policy for the Executive Board. The collective Gasunie targets relate to achieving agreed financial and operational results over 2018.

As of 1 July 2013, the pension scheme of employees of N.V. Nederlandse Gasunie was changed. The new pension scheme is a defined contribution plan, which means that the company is committed to paying a fixed, predetermined contribution. This contribution is based on a conditional average-salary scheme. As of 1 July 2013, this new pension scheme also applies to members of the Executive Board.

In € Salary Variable remuneration Fixed & variable remuneration Deferred remuneration Social security expenses Other benefits Total
               
2017              
Executive Board              
               
J.J. Fennema, chair  303,018   42,423   345,441   64,288   9,059   22,404   441,192 
I.M. Oudejans  279,621   39,147   318,768   59,492   9,059   20,900   408,219 
A.J. Krist 1)  60,601   10,017   70,618   12,966   2,265   8,179   94,028 
U. Vermeulen  242,405   33,937   276,342   51,863   9,059   16,426   353,690 
B.J. Hoevers 2)  66,667   9,333   76,000   14,390   3,020   1,550   94,960 
               
Total  952,312   134,857   1,087,169   202,999   32,462   69,459   1,392,089 

1) Until 1 April 2017, 2) From 1 September 2017

II. Members of the Supervisory Board
The remuneration for members of the Supervisory Board (SB) is determined by, amongst other things, their participation in the various committees: the Audit Committee (AC) and the Remuneration, Selection and Appointment Committee (RAC). In addition, the premium paid with regard to the Health Insurance Act (HIA) is included in the remuneration.

In € SB AC RAC HIA premium Total
           
2018          
R. de Jong RA, chair  31,652   3,957   2,116     37,725 
Drs. D.J. van den Berg  23,216     2,116   1,748   27,080 
Mr. M.M. Jonk  21,104     2,116     23,220 
Drs. M.J. Poots-Bijl RC  21,104   5,276     1,820   28,200 
Dr. W.J.A.H. Schoeber  21,104   5,276       26,380 
Ir. A.S. Visser 1)  10,552   2,638       13,190 
Ir. J.P.H.J. Vermeire 2)  6,669   1,667       8,336 
           
Total  135,401   18,814   6,348   3,568   164,131 

1) Untill 1 July 2018, 2) From 24 April 2018

In € SB AC RAC HIA premium Total
2017          
R. de Jong RA, chair 30,908   2,064   32,972
Drs. D.J. van den Berg 22,668   2,064 1,645 26,377
Mr. M.M. Jonk 20,608   2,064   22,672
Drs. M.J. Poots-Bijl RC 20,608 5,152   1,713 27,473
Dr. W.J.A.H. Schoeber 20,608 5,152   1,713 27,473
Ir. J.P.H.J. Vermeire 20,608 5,152   1,713 27,473
           
Total 136,008 15,456 6,192 6,784 164,440

23. Other operating expenses

In millions of euros 2018 2017
     
Costs of subcontracted work and other external costs 201.3 218.4
Cost of network management 131.8 110.2
Other operating expenses 48.6 45.6
     
Total other operating expenses 381.7 374.2

The additions to and release of the provision for abandonment costs and redevelopment totalling € 1.0 million (2017: € 1.1 million) and the additions to the provision for obsolescent inventories amounting to € 3.1 million (2017: € 2.7 million) are included in ‘Other operating expenses’.

24. Finance income

In millions of euros 2018 2017
     
Interest income 2.9 7.8
Foreign exchange results 0.2 0.1
     
Total finance income 3.1 7.9

Interest income relates to loans granted and receivables.

25. Finance expenses

In millions of euros 2018 2017
     
Interest expenses 75.5 84.5
Foreign exchange results - 0.5
Other finance expenses 1.4 2.3
     
Total finance expenses 76.9 87.3

The interest expenses on financing liabilities stated at amortised cost amount to € 75.5 million (2017: € 82.3 million). Interest income relating to current financing liabilities amounts to € 1.3 million (2017: € 1.0 million). Of the interest expenses, a total of € 3.8 million (2017: € 3.1 million) was capitalised in 2018, based on a weighted average interest rate of 2.4 % (2017: 2.6%).

26. Taxes

The taxes on the result in the consolidated profit and loss account comprise the following components:

In millions of euros 2018 2017
     
Corporate income tax payable for the financial year ‑3.7 56.8
Corporate income tax payable for the previous financial years 0.2 ‑7.9
Movement in deferred taxation ‑3.3 ‑7.4
     
Total tax charge ‑6.8 41.5

The movement in deferred taxation is specifically related to the change in the Dutch corporate income tax rate, effective from 2020.

The reconciliation between the effective tax rate and the applicable tax rate for the consolidated financial statements is as follows:

In percentages 2018 2017
     
Profit and loss account    
Applicable tax rate, the Netherlands 25.0 25.0
Effect of tax rates in other countries ‑0.1 ‑1.9
Prior-year adjustments 0.2 ‑5.1
Effect of tax rate change on deferred taxation ‑23.4 0.5
Effect of innovation box ‑0.7 ‑1.1
Other differences ‑3.1 ‑3.6
     
Effective rate ‑2.1 13.8
     
Deferred taxation    
Applicable rate (for subsequent financial years) 25,0 - 20,5* 25.0
Effective rate (for subsequent financial years) 25,0 - 20,5* 25.0

* From 2019 to 2021, this rate will decrease in increments from 25% to 20.5%

The other differences relate to non-taxable amounts as a result of the application of the participation exemption.

27. Number of employees

The average number of employees in full-time equivalents in 2018 totalled 1,742 (2017: 1,772). At year-end 2018, the company employed 1,722 (2017: 1,763) full-time equivalents.

28. Dividend paid and proposed

The Executive Board proposes that € 97.2 million of the profit for 2018 be added to the other reserve and € 228.0 million be distributed to the shareholder. The dividend per share is € 150.7 thousand.

This dividend proposal has not yet been recorded in the balance sheet as at 31 December 2018 or in the notes. The profit for 2017 amounted to € 259.5 million (under IFRS 15, this amounted to € 257.2 million), of which € 258.8 million was paid out as dividend in 2018.

29. Information about reportable segments

The information is segmented in line with the Group’s activities. The operating segments reflect the management structure of the Group. The following segments are distinguished:

  • Gasunie Transport Services
    This segment covers network management in the Netherlands and is responsible for managing transport, developing the pipeline network and related plants, as well as promoting market mechanisme. This segment comprises the entity Gasunie Transport Services B.V.
  • Gasunie Deutschland
    This segment covers network management in Germany and is responsible for managing transport, developing the pipeline network and related plants, as well as promoting market mechanisme
  • Participations
    This segment focuses on facilitating access to the new gas flows for north-western Europe using an LNG connection and long-distance pipelines, and on utilising the geological infrastructure for the purpose of storing natural gas. Participation in national and international projects relating to the natural gas infrastructure in the Netherlands and Germany is another activity of this segment. This segment also includes joint ventures relating to pipelines that connect the Gasunie transport network with foreign markets, such as the BBL pipeline to the United Kingdom.

The accounting policies used for these segments are the same as those applied to the consolidated and company financial statements.

The assets, liabilities, revenues and results of a segment comprise both items directly related to the segments and items that can reasonably be attributed to the segments. Transaction prices for inter-segment transactions are determined at arm’s length.

Allocated assets are tangible fixed assets, intangible fixed assets, investments in joint ventures, investments in associates and other equity interests. Unallocated assets relate to deferred tax assets and current assets.

In millions of euros Assets  
  31 Dec. 2018 31 Dec. 2017*
Segments    
- Gasunie Transport Services 6,530.7 6,572.4
- Gasunie Deutschland 1,403.8 1,292.4
- Participations 1,336.3 1,334.7
     
Segments total  9,270.8   9,199.5 
     
Unallocated assets 625.4 650.2
     
Total consolidated assets  9,896.2   9,849.7 

* Adjusted for application of IFRS 15

I. Information on revenues and result

In millions of euros   Revenu     Segment result
  2018 2017   2018 2017*
Segments          
- Gasunie Transport Services  931.6  928.9   195.5 296.7
- Gasunie Deutschland 220.5 224.2   96.0 ‑20.4
- Participations 133.8 122.5   39.8 54.7
Inter-segment ‑38.6 ‑34.4      
           
Segments total  1,247.3   1,241.2    331.3 331.0
           
Unallocated financial income and expenses       ‑12.9 ‑32.3
           
Result before taxation       318.4 298.7
           
Taxes       6.8 ‑41.5
           
Revenues and result after taxation for the year  1,247.3  1,241.2   325.2 257.2

* Adjusted for application of IFRS 15

During 2018, the Gasunie Transport Services segment provided inter-segment services of € 11.4 million (2017: € 7.3 million), the Gasunie Deutschland segment provided inter-segment services of € 0.3 million (2017: € 0.5 million) and the Participations segment provided inter-segment services  of € 26.9 million (2017: € 26.5 million).

II. Other segment information
The reported fixed assets comprise tangible fixed assets, intangible fixed assets, investments in joint ventures, investments in associates and other equity interests.

In millions of euros Investments in fixed assets  
  2018 2017
Segments    
- Gasunie Transport Services 208.8 207.3
- Gasunie Deutschland 147.4 42.8
- Participations 22.8 8.0
     
Segments total 379.0 258.1

In millions of euros Depreciation     Tangible non-monetary items other than depreciation  
  2018 2017*   2018 2017
Segments          
- Gasunie Transport Services ‑246.4 ‑244.0   57.2 ‑9.0
- Gasunie Deutschland ‑31.9 ‑34.4   4.6 ‑112.2
- Participations ‑34.9 ‑26.0   3.3 -
           
Segments total ‑313.2 ‑304.4   65.1 ‑121.2

* Adjusted for application of IFRS 15

In millions of euros Investments in joint ventures and associates     Share in equity of joint ventures and associates  
  2018 2017   31 Dec. 2018 31 Dec. 2017
Segments          
- Gasunie Transport Services - -   - -
- Gasunie Deutschland - -   100.4 104.3
- Participations 2.4 2.9   98.1  86.5
           
Segments total 2.4 2.9   198.5 190.8

In millions of euros Investments in joint ventures and associates     Share in equity of joint ventures and associates  
  2018 2017   2018 2017
Segments          
- Gasunie Transport Services - -   - -
- Gasunie Deutschland - -   6.3 ‑18.5
- Participations - -   24.5 23.1
           
Segments total - -   30.8 4.6

30. Information on products and services

In millions of euros Revenues from third parties  
  2018 2017*
     
Gas transport  1,162.8  1,158.6
Other activities  84.5  82.6
     
Total  1,247.3   1,241.2 

* Adjusted for application of IFRS 15

31. Geographical information

Revenues from third parties and fixed assets by geographical area are determined primarily on the basis of the area where the activities take place. N.V. Nederlandse Gasunie operates in two geographical areas: the Netherlands and outside the Netherlands.

In millions of euros Revenues from third parties     Fixed assets  
  2018 2017*   31 Dec. 2018 31 Dec. 2017*
           
The Netherlands 982.6 980.6   7,155.2 7,184.9
Outside the Netherlands 264.7 260.6   2,115.6 1,996.4
           
Total 1,247.3 1,241.2   9,270.8 9,181.3

* Adjusted for application of IFRS 15

The above fixed assets comprise tangible fixed assets, intangible fixed assets, investments in joint ventures, investments in associates and other equity interests.

32. Major customers

In 2018 and 2017, the company generated at least 10% of its external revenues from gas transport for one single external customer.

33. Related parties

Services between N.V. Nederlandse Gasunie and its related parties are provided at arm’s length.

GasTerra B.V. is considered a related party because the Dutch State has significant influence, both directly and indirectly. The subsidiary Gasunie Transport Services B.V.  provides gas transport services to GasTerra B.V. These services are performed in compliance with the Dutch Gas Act, which stipulates that Gasunie Transport Services B.V. is obliged to act in a non-discriminatory manner and to conduct business as requested. The tariffs charged have been determined by the Dutch regulator ACM, an independent body with no involvement from the Dutch State. GasTerra B.V. qualifies as a major customer.

Services between N.V. Nederlandse Gasunie and its joint ventures and associates are not material.

The Executive Board also qualifies as a related party. For the remuneration of the members of the Executive Board, refer to note 22 to the consolidated financial statements.

34. External auditor’s fees

The following fees relating to the work carried out by the audit firm responsible for auditing these financial statements were charged to the legal entity in the year under review. Included are the fees charged to the consolidated subsidiaries.

In millions of euros Total PricewaterhouseCoopers     Of which PricewaterhouseCoopers Accountants N.V.  
  2018 2017   2018 2017
           
Audit of the financial statements 0.5 0.7   0.4 0.5
Other audit engagements 0.2 0.2   0.2 0.2
Tax consultancy - -   - -
Other non-audit services - -   - -
           
Total external auditor’s fees 0.7 0.9   0.6 0.7

Summary of the services provided by the auditor in addition to the audit of the financial statements

In addition to the statutory audit of the financial statements, PwC NL provided the following services to the company and its audited entities for the period to which the statutory audit relates:

Other audit engagements due to legal or regulatory requirements  
Audit of financial statements on behalf of a Regulatory Authority 0.1
0.1  
Other audit engagements  
Audit of Government grants < 0,1
Assurance report on CSR-report 0.1
Comfort Letter < 0,1
Review on the statutory financial statements of a subsidiary < 0,1
0.1  
   
Total other audit engagements 0.2
   
Advisory services related to taxes  
Not applicable -
-  
Other non-audit services  
Agreed upon procedures on financial statements for a third-party < 0,1

Audit of the financial statements

The fee for the statutory audits of subsidiaries’ financial statements amounted to € 0.1 million and is included in the total of € 0.4 million.

Gasunie’s financial statements are prepared in millions of euros; if an amount rounds down to zero, this is presented as < € 0.1 million.

35. Subsequent events

On 24 July 2018, the Dutch Trade and Industry Appeals Tribunal (CBb) rescinded the method decision regarding GTS. On 24 January 2019, the ACM published an amended method decision regarding GTS for the period of 2017-2021. The main amendment is the lowering of the target for the general productivity improvement. The management expects the impact of the adjusted permitted return (WACC) to be limited. Stakeholders such as network operators and GTS customers can appeal the decision.