Financial results

Key figures reported

Key figures reported
  2018 2017
In millions of euros    
     
Revenues 1,247  1,241 
Total expenses ‑916  ‑910 
     
Operating result 331  331 
Financial income and expenses ‑74  ‑79 
Share in result of associates 61  47 
     
Result before taxation 318  299 
Taxes ‑42 
     
Result after taxation 325  257 

Revenues

In 2018, revenues increased by € 6 million compared to the previous year. The share in BBL increased by € 7 million on account of extra revenues from capacity auctions. The regulated revenues remained approximately the same. Although the rates have decreased, the capacity sold increased by approximately the same amount (about € 30 million).

Operating result

Our operating result was the same as last year. Within the operating result, however, we see a number of important developments in the comparison between 2018 and 2017. The energy costs for gas transport increased by € 22 million compared to 2017.
 This rise is due to an increase in imports of H-gas plus the use of nitrogen, which is necessary for conversion to low-calorific gas. This makes it possible to further reduce production from the Groningen gas field. The cold winter period and higher energy prices are also important factors behind the increase in the energy costs.

In 2018, we created a provision for a voluntary severance scheme and the buyout of a number of employee benefit schemes. The effect of these schemes on the operating costs amounts to € 82 million. A GTS customer also caused an imbalance in the system. The customer took gas from the GTS system, but did not follow through on the corresponding obligation to ensure gas was fed in. GTS subsequently bought in gas itself, but the customer did not pay the invoice for this. That is why a provision for bad debts was created for the amount of € 16 million.

We depreciated one compressor at an accelerated rate because it was (temporarily) taken out of use. A new IT system for managing the gas transport was also taken into use. This increased the depreciation costs by € 9 million compared to the previous year.

We also depreciated our gas transport network in Germany with € 150 million in 2017. This depreciation had an effect of negative € 117 million on the operating result and negative € 33 million on the share in result of associates.

Normalised for the voluntary severance scheme and employee benefit schemes buyout in 2018 and the impairment in 2017, the operating result in 2018 was € 35 million lower than in 2017. This lower result is largely due to higher energy costs for the gas transport (€ 22 million) and the provision for bad debts (€ 16 million).

Result after taxation

The result after taxation increased by € 68 million compared to last year. This increase in the result is largely due to a change in the corporate income tax rate for 2020 and 2021 (€ 75 million). Normalised, i.e. excluding impairments in 2017, the voluntary severance scheme and buyout of a number of employee benefits in 2018 and the change in the tax rate, the result after taxation decreased by € 57 million. This lower result is largely due to higher energy costs (mainly nitrogen) for gas transport (€ 22 million) and the provision for bad debts (€ 16 million).

The financial expenses were lower than in the previous year. This decrease was mainly caused by the repayment of a bond loan of € 750 million in Q1 of 2017, the full effect of which only became visible in 2018. Excluding the impairment in 2017, our share in the result of associates fell by € 19 million (see the normalised key figures). This decline arose because 2017 included the book profit on the sale of ICE Endex (€ 19 million). The payment of part of the Nordstream dividend (approximately € 20 million) was postponed from 2018 to 2019.

Normalised key figures

Normalised key figures
  2018 2017
In millions of euros    
     
Revenues 1,247  1,241 
Total expenses*) ‑834  ‑793 
     
Operating result 413  448 
Financial income and expenses ‑74  ‑79 
Share in result of associates *) 61  80 
     
Result before taxation 400  449 
Taxes ‑89  ‑81 
     
Resultaat na belastingen 311.3  368 

*) Normalised for the buyout and severance schemes (€ 82 million) and change in corporate income tax rates in 2020 and 2021 (€ 75 million). The 2017 figures have been normalised for impairment (€ 150 million).

Investments

In 2017, Gasunie Deutschland became a 16.5% partner in the EUGAL pipeline project. This is a multi-year investment project for the construction of a 485-kilometre pipeline in Germany. The total investment value for Gasunie Deutschland amounts to approximately € 475 million, € 165 million of which was realised as of year-end 2018.

We started on the preparations for construction of a new nitrogen installation in Zuidbroek. As a result of this, the use of quality conversion will be increased and gas extraction in Groningen will be reduced. The new installation is expected to be taken into use during the first quarter of 2022. The expected investments amount to approximately € 500 million, € 34 million of which was realised as of year-end 2018.

The focus in the coming years will remain on corrective maintenance to our existing gas transport network and other operating assets. The replacement and maintenance investments are expected to decrease in the coming years due to a recalibration of GTS’ multi-year replacement programme. This amounted to € 115 million in 2018.

As a result of new initiatives in the field of sustainable energy, our business development investments are expected to increase in the coming years. Approximately € 20 million is expected to be invested in business development in 2019.

For the next 3 years, we expect an investment level of between € 400 and € 550 million, as a result of the developments set out above. The investment level in 2018 was € 380 million.

Financial outlook

We expect the normalised operating result for the coming years to increase compared to the result for 2018. The rate decreases in the permitted revenues will be more than compensated in the coming years by regulatory settlements and the taking into use of new pipelines. We also expect a substantial outflow of employees in the first half of 2019, which will push down operating costs. The net result from regular operations is expected to turn out to be € 40 to € 60 million higher in the coming years than the normalised net result for this year.

Regulation of network operators

The revenues of the network operators in the Netherlands and Germany are regulated. The rates that we charge our customers are determined annually by the regulatory authorities. The regulatory authority in the Netherlands is the Authority for Consumers & Markets (ACM), and in Germany it is the Bundesnetzagentur (BNetzA).

Regulatory settlements

In both the Netherlands and Germany, a system of revenue regulation applies: the rates are calculated by dividing the permitted revenues for the year in question by the estimated capacity bookings. The permitted revenues consist of a capital cost allowance for the invested capital, a reimbursement for the annual depreciation costs (calculated on the basis of the depreciation periods determined by the regulatory authority and the value of the assets) and a reimbursement for the operating costs.

If the revenues achieved differ from the permitted revenues, the difference in revenues is settled in subsequent years. Current IFRS rules do not allow regulatory settlements to be recognised on the balance sheet as a receivable or debt. Consequently, under IFRS, regulatory settlements are not recognised in the year in which they arise, but in the year in which the settlements take place in the rates. This causes timing differences between IFRS and the regulatory revenue model, which can result in periodic impairments.

German regulation stipulates that network operators already receive an investment allowance during the construction phase of an expansion investment. After the investment is put into operation, this investment allowance must be repaid over a period of 20 years. This repayment takes place by settlement through the rates. Nominally this arrangement is neutral, however, by bringing the investment allowances forward, a positive net present value effect arises. Over the past decade, Gasunie Deutschland has made major expansion investments and therefore managed to bring forward significant investment allowances. The focal point of the repayment obligation lies in the period from 2023 onwards, resulting in a substantial decrease in revenues. The revenues normalised for this effect display a stable pattern, however.

In the overviews below, revenues are shown corrected for regulatory settlements resulting from differences between the permitted and actual revenues and energy costs (ENF). The revenues of Gasunie Deutschland have also been corrected for investment allowances received. Special settlements, such as settlements resulting from appeal procedures, have not been taken into account in the overviews below.

Gasunie Transport Services 2018 2017
In millions of euros    
     
Revenues based on IFRS policies  932   929 
This year paid for regulatory settlements to compensate for previous years  27  49
Settlement to be received for revenue / ENF achieved (versus permitted revenue-ENF) for this year  11  ‑6
Investment allowances 0 -
     
Revenues corrected for regulatory settlements 970 971

Gasunie Deutschland 2018 2017
In millions of euros    
     
Revenues based on IFRS policies 220 224
This year paid for regulatory settlements to compensate for previous years ‑6 3
Settlement to be received for revenue / ENF achieved (versus permitted revenue-ENF) for this year 22 36
Investeringsvergoedingen  ‑21  ‑20
     
Revenues corrected for regulatory settlements 215 243

The normalised EBITDA corrected for the aforementioned regulatory settlements (the underlying result) amounted in 2018 to € 759 million (€ 814 million in 2017) and decreased by € 55 million compared to the previous year. This decrease was mainly due to the effects of the voluntary severance scheme and the buyout of employee benefits.

The rates for 2018 included set-off of an amount of € 21 million from previous years. This sum consists of a negative settlement of € 27 million for Gasunie Transport Services and a positive settlement of € 6 million for Gasunie Deutschland.

In 2018, the difference between the permitted revenues and energy costs and actual revenues and energy costs amounted to € 33 million. For Gasunie Transport Services, this difference equalled € 11 million (less revenues/energy costs than permitted) and for Gasunie Deutschland, € 22 million (less revenues/energy costs than permitted). These amounts will be set off in the rates in subsequent years.

Gasunie Deutschland received approximately € 22 million in investment allowances in 2018 and repaid € 1 million. The amount received will have to be repaid again in future years.

The overviews below show the movements in the regulatory receivables and debts to be settled which, on the basis of IFRS policies, have not been included on the balance sheet. The special settlements have also not been taken into account in the overviews below.

Overview of regulatory amounts to be settled 2018 2017
In millions of euros    
     
Gasunie Transport Services    
     
To be settled on 1 January ‑32 ‑75
This year paid for regulatory settlements to compensate for previous years 27 49
Settlement to be received for revenue / ENF achieved (versus permitted revenue-ENF) for this year 11 ‑6
Investment allowances 0 -
     
To be settled on 31 December 6 ‑32
     
Gasunie Deutschland    
     
To be settled on 1 January ‑39 ‑32
Regulatory settlements in year T; stemming from previous years ‑6 3
Difference between achieved revenues/ENF and permitted revenues/ENF in year T 22 36
Investment allowances  ‑21  ‑20
     
To be settled on 31 December ‑44 ‑13

The IMAs for the EUGAL project were added with retrospective effect in 2018. This accounts for the difference between the 2017 closing balance and 2018 opening balance.

A sum of € 38 million had to be settled (debt) at year-end 2018. This sum consists of € 6 million to be received for Gasunie Transport Services and an amount repayable for Gasunie Deutschland of € 44 million, based on a best estimate. The final amounts will ultimately be set by the regulatory authorities. In the overview below, this amount is divided up according to the periods in which the amounts will be settled in the rates and recognised in the financial statements on the basis of IFRS policies:

Amounts to be settles at year-end 2017 according to term Total 0-1 year 2-5 year > 5 year
In millions of euros        
         
Gasunie Transport Services 6 ‑6 11 0
Gasunie Deutschland  ‑44   18   43   ‑104 
         
Total to be settled ‑38  12   54   ‑104 
         
of which investment allowances to be settled  ‑120   ‑1   ‑15   ‑104 

An amount of positive € 61 million will be settled for Gasunie Deutschland in the upcoming (5-year) regulatory period; in the subsequent period (from 2023 onwards) an amount of negative € 104 million will be settled.

Financing

One of Gasunie’s financial goals is to safeguard its access to the national and international money market and capital market and be able to have a broad range of possible financial instruments at its disposal. Having an adequate credit rating is essential to this, so Gasunie pursues a financing policy that is aimed at satisfying the financial criteria used by the rating agencies as closely as possible. The financial policy is aimed at reducing financial risks at minimal cost. Derivative financial instruments such as swaps and derivatives are only used to reduce risks and are explicitly not permitted for use in creating speculative positions.

In October 2018, we repaid a bond loan of € 300 million. For the purposes of this repayment, a 10-year bond loan of € 300 million was issued at the same time, at an interest rate of 1.46%.

During 2018, besides short-term deposits on the money market, we also made use of the Euro Commercial Paper (ECP) programme. Our short-term loans increased during 2018, from € 281 million to € 356 million. This increase is mainly due to the fact that the investment expenditures and dividend payment are higher than the cash flow from operating activities.

The total interest-bearing debt at the end of 2018 was € 3,499 million, an increase of € 53 million compared to year-end 2017. The ‘Cash and cash equivalents’ balance sheet item amounted to € 27 million at the end of 2018 (year-end 2017: € 41 million). As a result, our net debt position (interest-bearing debt less cash) increased in 2018 by € 67 million to € 3,472 million.

Solvency at year-end 2018 was 58%. Solvency decreased due to a decline in equity by € 65 million and an increase in the net debt position.

Looking ahead, a bond loan of € 300 million will have to be repaid in November 2019. Based on the current outlook, we expect to commit new credit in 2019 for this repayment and our investments in expansion. No repayments are scheduled for 2020. A bond loan of € 800 million must be repaid in 2021.

Credit ratings

In 2018, the rating agency Standard & Poor’s maintained our long-term credit rating at AA- with a stable outlook, while the short-term rating is A-1+. Moody’s Investors Services increased the outlook for our long-term credit rating from A2 positive to A1 stable. Important reasons behind this increase were: solid financial profile, clarity with regard to the regulatory framework in the coming years and an important role in achieving the Dutch energy objectives. The short-term rating remains at the highest possible rating level of P-1.

Tax payments

In 2009, we entered into a ‘compliance covenant’ with the Dutch tax authorities, in which we laid down mutual agreements. In line with this covenant, we have set up an internal Tax Control Framework (TCF), on the basis of which we draw up and execute our tax policy, tax processes and control measures. Our tax policy aims to ensure that we pay any taxes due in a timely manner and in accordance with tax laws and regulations in those countries where we operate.

The table below shows how much we paid and withheld in taxes for the most important types of taxes.

Tax payments 2018 2017
     
Netherlands    
Corporate income tax 39 45
VAT ‑27 64
Wage tax 69 68
Dividend tax 39 17
Total 120 194
     
Germany    
Corporate income tax 52 25
VAT 18 17
Wage tax 11 11
Total 81 53

The difference between the dividend tax paid in the Netherlands in 2017 and 2018 was due to the fact that a higher dividend was paid out in 2018 than in 2017. The difference between the VAT in 2017 and 2018 was due to the bonded warehouse scheme taking effect. The difference between the corporate income tax paid in Germany in 2017 and 2018 was due to, among other things, the conclusion of the 2008-2012 tax audit.