2020 half-year report Index
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Key figures
3 2020 half-year report ·· N.V. Nederlandse Gasunie
In millions of euros First half-year of 2020 First half-year of 2019
Revenue 712 683 EBITDA 492 469 Result after taxation 257 254
Transported volume (TWh) 579 577 Total reportable frequency index 2 3 Uncontrolled events (number of incidents 0 0 involving gas leaks) Security of supply (cases of non- or late supply) 0 1
Invested capital 9,528 9,367
4 2020 half-year report ·· N.V. Nederlandse Gasunie
Financial results
5 2020 half-year report ·· N.V. Nederlandse Gasunie
In millions of euros First half-year of 2020 First half-year of 2019
Revenue 712 683 Total expenses ‑379 ‑374
Operating result 332 309 Finance income and expenses ‑35 ‑38 Share in result of joint ventures 16 15 Dividend received from participating interests 20 39
Result before taxation 333 325 Income taxes ‑76 ‑71
Result after taxation 257 254
Revenue
Revenue achieved in the first half of the year was € 29 million higher than in the same period last year. This increase was largely due to the first pipeline of the EUGAL pipeline project being commissioned and shifting gas flows in Germany, which results in greater demand for transport capacity at Gasunie Deutschland (GUD). Revenue from regulated activities in Germany was approximately € 40 million higher than in the first half- year of 2019. Revenue from our regulated activities in the Netherlands was approximately € 10 million lower than in the first half-year of 2019. Tariffs rose in 2020 compared to 2019, mainly due to a ruling by the Dutch Trade and Industry Appeals Tribunal (CBb). The effect of this correction amounts to over € 30 million. Despite that, Gasunie Transport Services’ (GTS) revenue was lower than in the first half-year of 2019, because of falling transport capacity sales.
The method of regulation in both the Netherlands and Germany includes various regular ‘post-calculations’. If the actual revenues deviate from the permitted revenues, the difference is settled in the tariffs for subsequent years. A post-calculation mechanism also applies to part of the energy costs for gas transport. As a result, GTS repays a total of € 4 million through the tariffs for 2020, while GUD will receive a repayment of € 25 million. Based on the current financial outlook for the entire year 2020, Gasunie will, on balance, repay approximately € 17 million in future tariffs (2021 and beyond) under the regulatory system.
Revenue from non-regulated or exempted entities totalled € 78 million and was slightly higher than in the same period last year.
Operating result
The operating result for the first half-year of 2020 increased by € 23 million compared to the same period in 2019. This increase was primarily due to the higher revenue achieved. Total expenses in the first half-year of 2020 were comparable to those in the first half-year of 2019.
6 2020 half-year report ·· N.V. Nederlandse Gasunie
Result after taxation
Dividend from other participating interests was lower than in 2019. This is due to the timing of the dividend payment by Nord Stream. In the first half-year of 2019, Nord Stream paid both the regular dividend and the dividend for a previous financial year.
The developments outlined above lead to a result after taxation of € 257 million. This result is € 3 million higher than in the same period last year.
In millions of euros 30 June 2020 31 December 2019
Balance sheet Fixed assets 9,836 9,817 Equity 5,896 5,935 Balance sheet total 10,036 10,126 Invested capital 9,528 9,494
In millions of euros First half-year of 2020 First half-year of 2019
Cash flow statement Cash flow from operating activities 534 416 Cash flow from investing activities ‑173 ‑185 Cash flow from financing activities ‑385 ‑214 Net cash flow ‑24 18
Financial outlook
We expect the operating result for the whole of 2020 to be higher than that achieved in 2019. Revenue is expected to increase considerably because of the commissioning of the first pipeline of the EUGAL pipeline project, shifting gas flows in Germany, and the effects of an amended method decision in the Netherlands. Aside from that, we expect our non-regulated activities to generate more revenue. Energy costs are expected to be higher than in 2019, partly due to the expected increase in transport flows in the second half of the year and increased quality conversion. Since production from the Groningen field has fallen, the gas transported from the Groningen field (G-gas) also reduced. This means that we must blend more high-calorific H-gas with nitrogen to produce a quality that is similar to that of low-calorific gas from Groningen. This enables us to continue to meet the demand for G-gas.
For the whole of 2020, the result after taxation from regular operations is expected to be approximately € 400 to € 450 million.
Expenses for replacement and expansion investments for all of 2020 are expected to total approximately € 400 to € 450 million, which is comparable to expenses in 2019. The expenses involved in the long-term project for the building of the Zuidbroek nitrogen installation are expected to be higher this year than last year due to the phase that this project is currently in. The expenses involved in the EUGAL pipeline project will be lower this year as a result of the current project phase.
7 2020 half-year report ·· N.V. Nederlandse Gasunie
Financing
In the first half-year of 2020, Gasunie reached an agreement with the European Investment Bank (EIB) on a long-term loan to fund the construction of the Zuidbroek nitrogen installation. The loan granted by the EIB totals € 240 million. As at 30 June 2020, this loan has not yet been recognised. On 16 April 2020, the committed credit facility with a group of international banks was renewed for an amount of € 600 million for a period of five years with an option of two one-year extensions. No amounts were drawn on this facility over the past period. However, Gasunie has regularly raised short-term loans on the money market in the form of deposit loans and Euro Commercial Paper (ECP).
Credit ratings
Gasunie’s credit ratings by Moody’s Investors Service and Standard & Poor’s Global Ratings have remained unchanged over the past period.
In millions of euros 30 June 2020 31 December 2019
Credit ratings Standard & Poor’s AA- AA- Moody’s Investors Service A1 A1
8 2020 half-year report ·· N.V. Nederlandse Gasunie
Pro le
9 2020 half-year report ·· N.V. Nederlandse Gasunie
We are Gasunie, an energy infrastructure company. Since 1963, energy for the Netherlands has been flowing through our network of pipelines, storage facilities and stations. The energy we transport is used to heat homes and buildings, as a resource and fuel for industry, and increasingly also for mobility. Safety, sustainability, reliability and affordability are central to everything we do. Whether it be domestic households or companies, our society must always be able to rely on a constant supply of energy. We do our best to ensure that, day and night. Our infrastructure, services and geographical position mean that we are at the heart of the north-western European gas market.
Gasunie has two principle activities: we provide regulated transport services through the gas transport network in the Netherlands and Germany, and we offer infrastructure services, either independently or in partnership with other parties. Our infrastructure connects energy suppliers and end users, and is open to third parties. It functions as an international hub for the supply and transit of gas. For this purpose, we manage and develop gas infrastructure and gas trading platforms: gas transport networks, international transit pipelines, gas storage, LNG infrastructure and virtual gas trading platforms. This enables us to contribute to a liquid, competitive and reliable European gas market.
We are committed to our social duty, and this is precisely why we are now looking beyond natural gas transport and already working on solutions for the energy system of tomorrow. We are developing sustainable technologies and infrastructure, in new partnerships and with new business models. For example, we share our knowledge and expertise in projects relating to hydrogen, green gas, heating, carbon storage and the use of LNG for water and road transport. This is how we, as a connecting link and together with our partners, are accelerating the energy transition.
We are a state-owned company, the Dutch State is our only shareholder. Our employees are spread over more than 30 locations in the Netherlands and northern Germany, with delegations in Brussels and Moscow. Our headquarters are in Groningen (the Netherlands), and our main German office is located in Hanover.
10 2020 half-year report ·· N.V. Nederlandse Gasunie
Recent developments
11 2020 half-year report ·· N.V. Nederlandse Gasunie
The COVID-19 pandemic led to major public health challenges in the Netherlands, triggering a crisis that also came with a major economic impact. While abiding by all the guidelines, we were able to continue our operations and keep working on the energy transition with the same intensity. Over the past six months, we have also been able to take major steps in phasing out gas extraction from the Groningen field and scaling up and boosting the uptake of green, gaseous energy carriers.
In the following, Han Fennema (CEO - representing the Executive Board), Hans Coenen (Strategy and Business Development Director) and Helmie Botter (Commerce and Regulation Manager at GTS) go into recent developments.
Gasunie and COVID-19 In late January 2020, we activated our crisis management organisation in both the Netherlands and Germany, consisting of multidisciplinary teams with a compact core team. In defining our own internal measures, we based ourselves on government guidelines, advice from the Dutch Institute for Public Health and the Environment (RIVM), and measures by other (essential) organisations. Needless to say, the German government guidelines were used as the basis for the set of measures for GUD.
Han Fennema: “Gas transport is an essential process in the Netherlands and Germany. This simple fact suddenly takes on even greater significance when a pandemic hits. It makes you, as a company, realise all the more that the gas infrastructure has to be up and running 24/7 no matter what. That is why we are prepared for emergency situations, also unrelated to COVID-19. In fact, emergency preparedness is part of our normal operations. Although the effects of COVID-19 will reverberate for some time to come, we have shown during this crisis, as we also did previously during the much smaller Citrix crisis that preceded it, that we are a robust organisation with a capacity to respond quickly.”
Dutch government vision for the energy transition The rijksvisie marktontwikkeling voor de energietransitie (Dutch government vision for market development for the energy transition) published by the Minister for Economic Affairs and Climate Policy clearly states that the current gas infrastructure will partly continue to be used to advance the energy transition. The Dutch government has great faith in Gasunie’s ability to contribute to this development. Han Fennema: “We are ambitious in our policy-making and strike up constructive working relationships with governments and partners to be able to reuse our infrastructure for other renewable energy carriers and heating.
The ‘HyWay 27’ project, for example, sees the Ministry of Economic Affairs and Climate Policy team up with Gasunie and power grid operator TenneT to explore options for the possible use of national gas infrastructure for the transport and storage of hydrogen in the future. And we are part of the ‘NortH2’ consortium that is working on the world’s largest green hydrogen project.”
Gas in the energy mix Hans Coenen explains: “Both on a national and an international level, there is growing belief in the prospect of a connection between our gas grid and the energy grid of the future. The Dutch government and parliament are also exploring options.”
12 2020 half-year report ·· N.V. Nederlandse Gasunie
Letters from the government to parliament On 30 March, the Dutch government sent three letters to the Dutch House of Representatives. These letters deal with the role of gas in the current and future energy system, the government’s vision on hydrogen, and the roadmap for green gas. Each of these three topics are highly relevant to Gasunie. Hans: “The most important thing to emerge from these letters is that the Dutch government sees a prominent role for gas in the future energy system. The Dutch government has explicitly taken the position that molecules, such as hydrogen, will continue to be required to meet a large part of our energy requirements. Although the Dutch government’s coalition agreement for the 2017-2021 period does deal with climate and energy to some degree, it makes no mention of hydrogen. In the letter to parliament, the government has now come out as a great advocate for hydrogen. Gasunie takes this move as an endorsement of our vision and our operations in this area. The government’s vision documents are intended to lead to specific policy. One of the action points that the Ministry of Economic Affairs and Climate Policy has set is the further elaboration of the plan for a hydrogen backbone. Furthermore, the advisory report that the government task force that analyses infrastructure needs in industry in light of the energy transition issued to the Ministry of Economic Affairs and Climate Policy in mid-May stresses that hydrogen infrastructure will play a crucial role for industry in the energy transition.
II3050 “The Integrale Infrastructuurverkenning 2030-2050 (2030-2050 Comprehensive Infrastructure Survey, II3050) is a scenario report by TenneT, Gasunie and the regional transmission system operators. This report is a direct result of the Dutch Climate Agreement and replaces the 2050 Infrastructure Outlook. As a first step, research firms Berenschot and Kalavasta put together four integrated scenarios for a climate-neutral energy supply by 2050. This scenario report was submitted to the Dutch House of Representatives in April 2020. The next step will see us work out what these scenarios mean for the infrastructure. The final report will be ready in 2021.”
Phase-out of gas extraction in Groningen
Over the past few years, major steps were taken in accelerating the phase-out of gas extraction from the Groningen field. Nitrogen plays a big part in these efforts. Helmie Botter explains what these measures entail. “While the Groningen field will be on standby until 2026, gas extraction from this field can, partly thanks to our measures, be wound down to zero in 2022. The most important and eye-catching measure is the construction of a new nitrogen installation near the village of Zuidbroek in Groningen province. This nitrogen installation takes nitrogen from the air and blends it with imported high-calorific gas. As soon as we have this installation up and running, we will no longer need to extract gas from the Groningen field, which marks a crucial step in solving a major problem in our society.”
Completed measures Thanks to other measures, which GTS has meanwhile completed on schedule, gas extraction from the Groningen field could be reduced from nearly 16 to under 11 billion m3 for an average gas year, while preserving security of supply. To be able to continue to ensure security of supply, seasonal storage facilities are going to be needed until at least 2030 and extra imports of high-calorific gas (mainly from Northern Germany) will need to be made possible.
Another measure concerned the additional procurement of nitrogen and the expansion of the Wieringermeer blending station, which was commissioned in late December 2019. This means there is now more capacity available to blend high-calorific gas with nitrogen to get the same quality gas as that from the Groningen field. After an adjustment to the network, this blended gas can now be used to serve part of the northern German market and fill part of the Norg gas storage facility.
13 2020 half-year report ·· N.V. Nederlandse Gasunie
Zuidbroek nitrogen installation Building work on the nitrogen installation in Zuidbroek is scheduled to be completed in April 2022. The installation is expected to be operational from April 2022. Helmie: “On 9 March, building work on the nitrogen installation started officially. However, we are having to deal with extra challenges due to the COVID-19 pandemic, especially in the supply chain. Some of the parts for the installation come from China and India, and this has now become a factor of uncertainty in the project. But since we have a robust schedule, we were able to absorb a number of setbacks. As things stand now, we still expect completion in April 2022 to be feasible.”
Switching industrial consumers to high-calorific gas “A recent development that we have been dealing with is the amendment to the Dutch Gas Act that came into force on 20 June this year. Under this amendment, the nine largest high-volume industrial low-calorific natural gas consumers in the Netherlands are required to either stop using gas altogether or switch from low- calorific gas to high-calorific gas. Not only was this new legislation postponed several times, forcing us to change our plans as well, the ruling by the Council of State on the Programma Aanpak Stikstof (the Dutch government’s Integrated Approach to Nitrogen programme, PAS) brought further delays. We now expect four of the high-volume industrial consumers to succeed in switching before 1 October 2022. For four of the other industrial consumers, the switch will have to be postponed to after the heating season in 2023. And for one high-volume industrial consumer, which uses gas as a resource in its operations, we can have the conversion done on time at our end, but their actual switching depends on measures the company itself is going to have to take.”
Green gas The national target is to facilitate 2 billion m3 of renewable gas in the Dutch gas grid every year by 2030. GTS focuses initially on high(er) capacities, as are expected to be produced by gasification technologies and fermentation. The expectation is that approximately 1 billion m3 of renewable gas will be fed into the national gas grid through a direct connection or as overflow from the regional network. Whether or not we will be able to achieve all goals depends partly on how the green gas market develops over the coming years.
Upscaling of hydrogen
The unveiling of HyStock in 2019 made the entire hydrogen supply chain tangible on a modest demo scale of 1 MW. Based on three developments, Hans Coenen outlines the path we have chosen to scale up the hydrogen market.
EU support for DJEWELS DJEWELS is an electrolysis unit of 20-30MW located at the Chemiepark industrial park in Delfzijl, for which Gasunie and Nouryon have made joint plans. Gasunie’s role in this project primarily involves facilitating and managing the hydrogen infrastructure and storage capacity. In January 2020, the consortium was awarded an € 11 million EU grant for this hydrogen project. Hans: “When developing new technology, you always need government support. Only with government support can we keep the cost curve under control and become profitable. Thanks to the grant we have received, we are now able to set up Europe’s largest electrolyser. This project constitutes a major leap forward in terms of scale and getting the hydrogen market off the ground.” Nouryon and Gasunie are scheduled to make a final investment decision on the plant in 2020.
NortH2: the world’’s largest green hydrogen project A project on an even bigger scale is the NortH2 project we announced in February 2020. NortH2 is a consortium of Groningen Seaports, Shell Nederland and Gasunie that is working on the world’s largest green hydrogen project: the production of green hydrogen using renewable power generated by a mega off-shore wind farm - up to 3 to 4 gigawatts by 2030.
14 2020 half-year report ·· N.V. Nederlandse Gasunie
With capacity projected to be somewhere in the region of 800,000 metric tons of green hydrogen per year, NortH2 will significantly decarbonise Dutch industry in one fell swoop. Estimates are that it will reduce carbon emissions by seven megatons on an annual basis by around 2040. Hans: “If you want to develop a new market, you need to look at the entire supply chain, from beginning to end. With NortH2, we are building an entire supply chain for the hydrogen market from the ground up and on a large scale: from production, through infrastructure, and right up to the consumer. NortH2 is therefore not exclusively a project of the three consortium partners. Quite the contrary, other potential partners can join us as we develop the value chain for hydrogen together. Based on current electricity consumption levels, the capacity NortH2 will provide will be able to meet the energy needs of approximately 5 million Dutch domestic households.”
HyWay 27 The Ministry of Economic Affairs and Climate Policy, Gasunie and TenneT are exploring ways and conditions for the use of the national gas grid for the transport of hydrogen in the future.
The outcomes of this research will be used as input for timely decision-making on the creation of infrastructure for hydrogen transport and storage. The final report is due to be completed in late 2020.
Carbon storage
Porthos and Athos When it comes to decarbonising industry, the development of Porthos and Athos is a major leap forward.
These projects are all about capturing, transporting and storing CO2. Hans Coenen: “These projects, too, would not be possible without grants. For Porthos, we are currently in the process of working out the tariffs, so that customers will be able to enter the autumn round of the SDE++ incentive scheme for a sustainable energy transition. As far as Athos is concerned, a project team has meanwhile run a feasibility study. The project turns out to be feasible and a project director has meanwhile been appointed, who will be further fleshing out the case.”
Heat grid
In the province of Zuid-Holland, work is under way on preparations for a heat grid that will be using residual heat from companies in the port of Rotterdam to provide heating to the greenhouse horticulture and other sectors, as well as to residential districts in The Hague. This project, which is called WarmtelinQ, and in particular the infrastructure between Vlaardingen and The Hague, is on schedule,” says Hans Coenen. “Hard work is currently going into all the technical and commercial preparations. We expect to be able to start building in 2021 and complete it in 2023.”
15 2020 half-year report ·· N.V. Nederlandse Gasunie
Other developments
16 2020 half-year report ·· N.V. Nederlandse Gasunie
Regulatory developments
In the regulatory domain, there are two important developments in the Netherlands. In September 2020, the Authority for Consumers and Markets (ACM) will present a draft method decision. We have furthermore worked on an investment plan for the coming 10 years, which is a new obligation under the Dutch Gas Act.
The ACM’’s draft method decision Helmie Botter explains the importance of the draft method decision: “For GTS, the method decision is a highly important decision, because the regulatory authority we answer to, the Authority for Consumers and Markets (ACM), sets the level of GTS’ permitted revenues from 2022 onwards based on this decision. It is, therefore, key for GTS that we can recover our efficient costs with reasonable returns. The ACM makes the method decision after consultations with all stakeholders. Needless to say, GTS also actively takes part in these preparations. I am satisfied with our cost-cutting efforts, such as our success in structurally reducing our replacement investments. Our personnel expenses are now also structurally lower.”
Investment plan “Following the amendment to the Dutch Gas Act, we are now under an obligation to compile an investment plan,” Helmie continues. “In it, we detail the investments that are needed, based on developments in the gas market over the coming decade. These developments include the energy transition, the extent to which our network can be reused for hydrogen transport, measures to wind down gas extraction from the Groningen field, conditions for the import of high-calorific gas and sufficient gas storage to be able to close the Groningen field once and for all.
In late May 2020, we submitted the draft version of our plan to the market for consultation, while we also kept market parties involved as we worked on the plan. We received responses from seven market parties and incorporated these into the plan. It is a great way of working for us to get feedback from our customers on developments that we have identified. On 30 June 2020, the draft version of the plan was submitted to the Authority for Consumers and Markets (ACM) and the Minister of Economic Affairs and Climate Policy for review. The final ‘2020 IP’ will be adopted and published on our website no later than on 1 October 2020.”
The 2021 tariff decision In the second quarter of 2020, the Authority for Consumers and Markets (ACM) published the GTS tariff decisions for 2021. In the tariff decision, the ACM has updated the rate of inflation from previous estimates (1.6% instead of 2%). As a result, the final tariffs that will apply from 1 January 2021 will be slightly lower than estimated previously.
Business Development developments
The national hydrogen backbone will be built in phases from the following 5 industrial regions: Northern Netherlands, North Sea Canal area, Rotterdam/Moerdijk, Zeeland province, and the Chemelot chemical industry park in Limburg. The ambition is to have the infrastructure operational in the northern Netherlands by mid-2025, while it may be operational sooner than that in the North Sea Canal area and Rotterdam/Moerdijk. In correlation with the activities for the national backbone, regional projects have now also been launched.
HEAVENN project In the context of the development of hydrogen in the northern Netherlands, the previously approved grant application for Hydrogen Valley by the Fuel Cells and Hydrogen Joint Undertaking (FCH JU) has been delayed due to the COVID-19 pandemic and other circumstances. This project has a total scope of approximately € 90 million. The consortium is made up of 31 public-sector and private-sector parties from 6 European countries.
17 2020 half-year report ·· N.V. Nederlandse Gasunie
Magnum power station The consortium with Vattenfall and Equinor for the production and purchase of carbon-neutral hydrogen in the Eemsdelta region is set to be continued. Gasunie will be focusing mainly on transport and storage.
North Sea Wind Power Hub Gasunie is partnering with TenneT and Denmark’s Energinet on the North Sea Wind Power Hub programme. On 28 January 2020, this consortium presented a roadmap to the European Union’s North Sea Energy Cooperation (NSEC) group. The roadmap covers 6 subject areas: regional planning policy, main principles, scope, costs & revenues, regulatory & commercial framework, and legal framework. In these areas, the North Sea Wind Power Hub programme can facilitate authorities in connecting to energy systems using a hub-and- spoke concept. Given the scale and ambitions beyond 2030, the expectation is that so much energy will be produced that it will not be possible to transport it through the electricity grid alone. Some of it will be converted into hydrogen or other gas forms. The hydrogen can subsequently be transported further onshore using the envisaged hydrogen backbone.
Developments in Germany
Trading Hub Europe By 1 April 2022, the two remaining German market areas, GASPOOL and NCG, will need to have merged into one single market area, the Trading Hub Europe (THE). GUD plays an active role in making this happen, alongside the other TSOs. Progress is on schedule, and the current targeted go-live date is 1 October 2021.
Hydrogen network vision for Germany In June 2020, the German government published Germany’s national hydrogen strategy. With this strategy, Germany intends to create a framework for the development and utilisation of the economic potential and it is to be a pillar of the energy transition. Along with other German TSOs, GUD has welcomed this step in the country’s energy policy. They had previously already published a joint paper on their vision for a future hydrogen network.
Conversion from L-gas to H-gas In Germany, GUD has already converted over 50% of its L-gas exit capacity from low-calorific to high-calorific gas since 2015. For the years 2020 and 2021, the focus in Germany will be on the conversion areas of Braunschweig, Wolfsburg, Cuxhaven and Bremen. So far, the COVID-19 pandemic has not had a major impact on the overall schedule.
EUGAL GUD holds a 16.5% stake in a joint venture with GASCADE, ONTRAS and FLUXYS for the laying of the EUGAL pipeline. With the first pipeline completed in late 2019, the first half-year of EUGAL’s transport capacity became available from 1 January 2020. Once the parallel pipeline and the Radeland 2 compressor station have been commissioned, EUGAL will reach its full capacity. This is scheduled for late 2020/early 2021.
18 2020 half-year report ·· N.V. Nederlandse Gasunie
Results for the first half-year of 2020
19 2020 half-year report ·· N.V. Nederlandse Gasunie
Safety
When it comes to safety, one of our ambitions is to keep reducing the Total Reportable Frequency Index (TRFI). The TRFI is a measure of safety performance based on a ratio between ‘reportable’ accidents and total hours worked. In late 2019, the TRFI dropped to well below the signal value of 3.0. The signal value for 2020 is 2.7. The current value for the period from July 2019 to the end of June 2020 inclusive is 2.1.
Uncontrolled events The number of cases of pipeline damage has been replaced as an indicator by the number of uncontrolled events. The signal value for 2020 has been set at 3. Uncontrolled events are incidents involving gas leaks ((natural) gas, hydrogen, nitrogen, air) of over 14,000m3 from a Gasunie-operated pressure holder with a rated pressure of 8 bar or higher). So far in 2020, there have been no uncontrolled events.
Gas transport in the Netherlands
Transport The total volume of gas transported during the first half-year of 2020 was 441 TWh. This is over 7% less than the 476 TWh transported during the first half-year of 2019. This reduction in transport volume is almost entirely due to reduced transports to other countries. The effect was attenuated somewhat by an increase in transport for the filling of gas storage facilities.
Quality conversion In the first half-year of 2020, 193 TWh of high-calorific gas was blended with nitrogen to produce Groningen- quality gas. This is nearly 14% more than in the first half-year of 2019 (170 TWh). The amount of nitrogen used for conversion increased by nearly 18% to 1.7 billion m3. In the first half-year of 2019, 1.4 billion m3 of nitrogen was used. This increase was made possible by the expansion of our nitrogen and conversion installations.
Title Transfer Facility (TTF) gas trading platform Market parties can trade the gas in our Dutch gas transport network on the TTF virtual gas trading platform. Over the first five months of 2020, the TTF has further added to its edge over other European hubs. In the period from January to the end of May 2020 inclusive, market parties traded a total of 21,507 TWh of gas on the TTF, which is almost 30% more than the 16,565 TWh traded during the same period in 2019. Although a further reduction in production from the Groningen field took place, TTF’s role as a gas trading platform grew once again. This underscores the importance of a liquid hub for a properly functioning gas market.
Gas transport in Germany
Transport In the first half-year of 2020, GUD transported 138 TWh of gas (2019: 101 TWh). This is an increase of nearly 37%.
GASPOOL In the period from January to the end of May 2020 inclusive, a total volume of 748 TWh of gas was traded on the GASPOOL virtual gas trading platform. This is a drop of roughly 10% on the same period in 2019 (831 TWh).
20 2020 half-year report ·· N.V. Nederlandse Gasunie
Participations
Collaboration between new initiatives and the existing organisation is part of Gasunie’s unique knowledge proposition. The Participations business units sees to it that these collaborations run smoothly and maintains an investment programme based on demand from the market.
BBL The reverse flow capability that became available in 2019, which means that the BBL pipeline can now also accommodate physical gas flows from the United Kingdom to the Netherlands, will be used at full capacity in 2020. This reverse flow helps ensure security of supply.
EnergyStock Almost all the available capacity at EnergyStock, which is a storage facility for natural gas, green gas, and in the future also for hydrogen, has meanwhile been sold for 2020. Storage capacity at Zuidwending is currently being expanded by the addition of another cavern, which will allow for better utilisation of the installation’s existing functionality and pave the way for growth of EnergyStock’s market share. Even though work on the project to build this additional cavern has been delayed slightly, the additional cavern is expected to be operational before the end of 2020.
In June, EnergyStock was granted a permit for the first underground hydrogen tests at Zuidwending. The first test is scheduled for after the summer. These tests will be conducted in close collaboration with the permit authority, knowledge institutes, the local communities, suppliers and support services.
Gate terminal Given the ample supply of LNG in the global market, Gate yet again saw the number of ships unloaded and throughput to the GTS network increase in the first half-year of 2020. The fact that so much LNG is supplied to Gate confirms the attractiveness of the TTF market area and Gate’s service offering. The number of lorries loaded also continued to rise in the first half-year of 2020.
21 2020 half-year report ·· N.V. Nederlandse Gasunie
Risk management
22 2020 half-year report ·· N.V. Nederlandse Gasunie
Risks in a general sense and specific risks as a result of the COVID-19 pandemic are intensively monitored by Gasunie’s Executive Board and senior management. The focus is specifically on safety risks for our workers, the progress of the energy transition and phase-out of extraction from the Groningen field, consequences for the supply of goods, and our and our partners’ financial stability. Partly thanks to the measures that have been taken, we do currently not see any material threats to our operations as a result of the COVID-19 pandemic.
The risk appetite, as specified in the 2019 Annual Report, has not changed over the past six months and the main risks are still present.
23 2020 half-year report ·· N.V. Nederlandse Gasunie
Statement of the Executive Board
24 2020 half-year report ·· N.V. Nederlandse Gasunie
(as defined in Article 5:25d, paragraph 2(c) of the Dutch Financial Supervision Act)
The members of the Executive Board hereby declare that, to the best of their knowledge,
1. the interim financial statements give a true and fair view of the assets, liabilities, financial position and result of the company and the undertakings included in the consolidation taken as a whole; and that
2. the half-year report gives a true and fair view of material events that occurred in the first six months of the year and the impact of such events on the interim financial statements, and provides a description of the principal risks and uncertainties faced in the remaining six months of the financial year in question.
The Executive Board,
Mr J.J. Fennema*, chair, Ms J. Hermes* Mr B.J. Hoevers Mr U. Vermeulen
Groningen, 21 July 2020
* Director under the Articles of Association
25 2020 half-year report ·· N.V. Nederlandse Gasunie
2020 consolidated interim financial statements
26 2020 half-year report ·· N.V. Nederlandse Gasunie
Condensed consolidated statement of financial position as at 30 June 2020
(before profit appropriation)
In millions of euros Notes 30 June 2020 31 Dec. 2019
Assets
Fixed assets - tangible fixed assets 2 8,803.6 8,766.5 - investments in joint ventures 1, 3 218.0 212.2 - investments in associates 0.5 0.5 - other participating interests 6 506.2 515.1 - deferred tax assets 307.3 323.1
Total fixed assets 9,835.6 9,817.4
Total current assets 200.7 308.7
Total assets 10,036.3 10,126.1
27 2020 half-year report ·· N.V. Nederlandse Gasunie
In millions of euros Notes 30 June 2020 31 Dec. 2019
Liabilities
Total equity attributable to shareholder 1 5,896.4 5,935.4
Non-current liabilities - interest-bearing loans 4, 6 2,792.6 3,091.9 - lease liabilities 95.5 90.2 - deferred tax liabilities 177.0 175.3 - contract liabilities 46.8 46.9 - other non-current liabilities and provisions 155.1 153.7
Total non-current liabilities 3,267.0 3,558.0
Current liabilities - current financing liabilities 5 623.9 416.4 - lease liabilities 3.8 6.8 - trade payables, corporate income tax, other 245.2 209.5 payables and contract liabilities
Total current liabilities 872.9 632.7
Total liabilities 10,036.3 10,126.1
28 2020 half-year report ·· N.V. Nederlandse Gasunie
Condensed consolidated statement of profit and loss
In millions of euros Notes First half- First half- year of 2020 year of 2019 Continuing operations Revenues 7, 8 711.6 682.5
Capitalised expenses 27.2 26.1 Personnel expenses and other -246.5 -239.2 operating expenses Depreciation expenses -160.0 -160.9 Total expenses -379.3 -374.0
Operating result 332.3 308.5
Finance income and expenses -34.9 -37.5 Share in result of joint ventures 3 15.7 15.0 Dividend received from participating 6 20.3 38.9 interests
Result before taxation 333.4 324.9
Income taxes -76.0 -70.8
Result after taxation 257.4 254.1
29 2020 half-year report ·· N.V. Nederlandse Gasunie
Consolidated statement of comprehensive income
In millions of euros Notes First half- First half- year of 2020 year of 2019
Result after taxation according to 257.4 254.1 statement of profit and loss
Sum of actuarial gains and losses on -2.7 -10.8 employee benefits, of which corporate tax 0.8 3.2
Total of result taken to equity which -1.9 -7.6 will not subsequently be reclassified to profit and loss
Changes in other participating 6 -8.9 -21.2 interests measured at fair value
Changes in the cash flow hedge -0.5 -0.4 reserve, of which corporate tax 0.1 0.1
Changes in the cash flow hedge 3 3.2 -3.2 reserve concerning joint ventures and associates
Total of results taken to equity which -6.1 -24.7 will subsequently be reclassified to profit and loss
Total comprehensive income for the 249.4 221.8 year
Attributable to shareholder 249.4 221.8
30 2020 half-year report ·· N.V. Nederlandse Gasunie
Consolidated statement of changes in equity
In millions of euros Share Cash flow Fair value Other Unappropriated Total capital hedge reserve reserve reserves result First half-year of 2020 Balance as at 1 January 2020 0.2 0.9 342.2 5,180.1 412 5,935.4
Total of comprehensive - -0.3 -8.9 1.3 257.4 249.5 income for the financial year
Dividend paid for 2019 - - - - -288.4 -288.4
Added to other reserves - - - 123.6 -123.6 0
Balance as at 30 June 2020 0.2 0.6 333.3 5,305.0 257.4 5,896.5
First half-year of 2019 Balance as at 1 January 2019 0.2 1.6 323.5 5,056.9 325.2 5,707.4
Total of comprehensive - -0.3 -21.2 -10.8 254.1 221.8 income for the financial year
Dividend paid for 2018 - - - - ‑228 ‑228
Added to other reserves - - - 97.2 -97.2 -
Balance as at 30 June 2019 0.2 1.3 302.3 5,143.3 254.1 5,701.2
31 2020 half-year report ·· N.V. Nederlandse Gasunie
Condensed consolidated statement of cash flows
In millions of euros Notes First half- First half- year of 2020 year of 2019
Cash flow from business operations 556.7 436.4
Net amount of interest paid and 3 -22.6 -19.7 received, corporate income tax and dividends received
Cash flow from operating activities 534.1 416.7
Cash flow from investing activities 2 -173.1 -184.8
Cash flow from financing activities Repayment of long-term loans 4 -10.7 -10.7 Lease payments -3.7 -3.7 Change in short-term financing 5 -81.8 28.7 Dividends paid 1 -288.4 -228.0
Cash flow from financing activities -384.6 -213.7
Net cash flow for the half-year -23.6 18.2
Cash and cash equivalents at previous 45.3 27.3 year-end Cash and cash equivalents at half year- 21.8 45.5 end
Change in cash and cash equivalents -23.6 18.2
32 2020 half-year report ·· N.V. Nederlandse Gasunie
Notes to the 2020 consolidated interim financial statements
General
Reporting entity N.V. Nederlandse Gasunie (hereafter: ‘Gasunie’ or ‘the Company’) is a European energy infrastructure company. Gasunie provides regulated transport services in the Netherlands and Germany. In addition, Gasunie jointly operates pipelines that connect the Gasunie transport network to foreign markets. Gasunie also provides other energy infrastructure services, including gas storage and the certification of green gas. In addition, Gasunie increasingly seeks to deploy its infrastructure and knowledge for the ongoing development and integration of alternative energy sources, such as hydrogen, heat and green gas and the development of CC(U)S.
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.
Financial reporting period These condensed consolidated interim financial statements (hereafter: ‘interim financial statements’) cover the first half-year of 2020, which ended on the balance sheet date of 30 June 2020.
Functional and presentation currency The interim financial statements are presented in euros, which is also the Company’s functional currency. All amounts have been rounded off to the nearest million, unless stated otherwise.
Going concern These interim financial statements have been prepared on the basis of the going concern assumption.
The Company has analysed the impact of the COVID-19 pandemic on the business operations and the financial position, and expects that the COVID-19 pandemic will have little impact on the balance sheet accounts, the results and the Company’s liquidity and solvency. Our expectations are explained in further detail in note 1 ‘Significant events and transactions in the first half-year of 2020’.
In our opinion, there is no uncertainty about the use of the going concern assumption.
Seasonality Gasunie’s revenues and operating expenses are not recorded evenly over the year, due to factors such as meteorological effects. Both the revenues and the operating expenses are affected by seasonality. The Company’s core activity is the transport of natural gas through the gas transport network. Revenues comprise the sale of available transport capacity and transport-related services. During the winter, shippers contract a substantially greater capacity than during the summer, so revenues are substantially higher in winter months than in other months. Part of the cost of network operations depends on the volumes of gas transported, while the other part is fixed. A higher volume of gas transported in the winter months results in higher operating expenses for Gasunie in this period compared to other months.
33 2020 half-year report ·· N.V. Nederlandse Gasunie
Use of estimates and management judgements In preparing the interim 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 first six months of the financial year. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed each reporting period. Revisions to estimates are accounted for upon identification and are recognised prospectively in the periods to which the revision relates.
The judgements and estimates are significant for the measurement of fixed assets, trade receivables, other equity interests and pension liabilities, for the classification of participating interests and for the measurement of the provision for abandonment costs and redevelopment.
Basis for preparation
Statement of compliance The interim financial statements have been prepared in accordance with IAS 34 ‘Interim Financial Reporting’, as endorsed by the European Union. These interim financial statements do not contain all disclosures normally required in a complete set of annual financial statements. For this reason, the interim financial statements must be read in conjunction with N.V. Nederlandse Gasunie’s 2019 annual report.
The interim financial statements have been reviewed by an independent auditor. The independent auditor’s review report can be found after the interim financial statements.
Accounting policies for consolidation and the measurement of assets and liabilities and the determination of the result The Company prepares its consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS), as endorsed by the European Union. In this context, IFRS comprises the IFRS standards and the International Accounting Standards (IAS) published 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.
The accounting policies applied in preparing the 2020 interim financial statements are consistent with the accounting policies applied in preparing the 2019 annual report, with the exception of the new and amended standards for financial reporting that are disclosed in the next paragraph. In the cash flow statement, the comparative figures for the first half-year of 2019 have been reclassified to improve comparability with the first half-year of 2020. This is a minor reclassification of the presentation of lease payments and interest and investment cash flows. The reclassifications do not affect the net cash flow nor the reported profit or equity over the first half-year of 2019.
New and amended standards for financial reporting
The following amendments to financial reporting standards are effective from the 2020 financial year onwards:
Amendment to IAS 1 and IAS 8: Definition of Material Amendment to IFRS 3 Business Combinations Amendments to References to the Conceptual Framework in IFRS Standards Amendments to IFRS 9, IAS 39 and IFRS 17: Interest Rate Benchmark Reform
34 2020 half-year report ·· N.V. Nederlandse Gasunie
In addition, the following standards or amendments are expected to come into force in the near future.EU endorsement is still pending for these standards.
Amendment to IFRS 16 Leases COVID-19-Related Rent Concessions (2020 financial year) Amendments to IFRS 4 Insurance Contracts – deferral of IFRS 9 (2021 financial year) Amendments to IFRS 3 Business Combinations, IAS 16 Property, Plant and Equipment and IAS 37 Provisions, Contingent Liabilities and Contingent Assets (2022 financial year) Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current (2022 financial year) Annual Improvements 2018-2020 (2022 financial year) IFRS 17 Insurance Contracts (2023 financial year)
Based on analysis by the Company, both the endorsed and the non-endorsed standards do not have a material impact on the Company’s equity and result, and do not require significant additional disclosures. The impact of these amendments on the Company is therefore not disclosed in detail in these interim financial statements.
35 2020 half-year report ·· N.V. Nederlandse Gasunie
Explanatory notes to the condensed consolidated financial statements
36 2020 half-year report ·· N.V. Nederlandse Gasunie
1. Significant events and transactions in the first half-year of 2020
COVID-19 pandemic
In the first quarter of 2020, the COVID-19 pandemic also spread throughout the Netherlands and the rest of Europe. As a European energy infrastructure company, Gasunie has analysed the impact of the pandemic on the business and on the financial position. In this analysis, management contemplated various scenarios. Additional measures have been taken to safeguard our operating activities, among other things including the continuity of gas transport, in a safe and reliable way.
Management expects that the pandemic will not have a significant adverse impact on the 2020 financial results. No business activities have been stopped and major construction projects are continuing for now, taking into account adjustments due to updated safety measures where necessary. For the time being, the pandemic has little impact on the schedule for our major construction projects.
In the first half-year of 2020, the revenues and operational expenses from both the regulated and the non- regulated and/or exempt activities did not deviate significantly from the business plan due to the pandemic. No adjustments were made in the accounting of revenue, purchase and lease contracts. Current contracts also do not prompt the inclusion of new obligations or provisions in the balance sheet. The refinancing calendar has not changed due to the pandemic. Our liquidity is also good, including access to the money and capital markets. Gasunie has not requested governmental emergency financial support in the Netherlands or Germany.
In particular, management has analysed the impact of the COVID-19 pandemic on the transactions that are accounted for in accordance with the following standards:
Revenues Property, plant and equipment (impairments) Financial instruments Leases Provisions Income taxes
Management concludes that the application of the accounting policies mentioned above need not be revised at the balance sheet date of 30 June 2020 compared to the accounting policies as applied in preparing the 2019 annual report.
Dividend distribution and related party transactions
In the first half of 2020, Gasunie distributed € 288.4 million (first half-year of 2019: € 228.0 million) in dividends to its sole shareholder, the Dutch State. This concerned the appropriation of result over the 2019 financial year in accordance with the resolution of the General Meeting of Shareholders.
The nature of Gasunie’s related parties transactions is disclosed in the 2019 annual report. No related party transaction with a different nature took place in the first half-year of 2020. Related party transactions in the first half-year of 2020 were performed at arm’s length.
37 2020 half-year report ·· N.V. Nederlandse Gasunie
Business combinations
No business combinations were entered into in the first half-year of 2020. However, two new entities were incorporated in that period. These entities focus on the further development of existing and future CC(U)S activities. N.V. Nederlandse Gasunie holds 100% of the shares in these new entities. As at 30 June 2020, the amounts involved in these entities are not yet regarded as significant and for this reason, no additional disclosures have been included in these interim financial statements.
38 2020 half-year report ·· N.V. Nederlandse Gasunie
2. Tangible fixed assets
Investments
Investments in tangible fixed assets in the first half-year of 2020 amounted to € 191.0 million (first half-year of 2019: € 179.6 million). This amount does not include the effect of investments in right-of-use assets. The investments mainly relate to the development of Gasunie Transport Services’ (GTS) nitrogen installation in Zuidbroek and to phase 2 of the development of the EUGAL pipeline in Germany. As at 30 June 2020, Gasunie entered into conditional investment obligations of € 325.9 million (year-end 2019: € 395.0 million). These obligations mainly relate to the aforementioned construction projects.
Impairment of fixed assets
Management assesses periodically whether there is an indication or an event that fixed assets may be impaired. As explained in note 1 ‘Significant events and transactions in the first half-year of 2020’, the COVID- 19 pandemic has no impact on the valuation of fixed assets as at 30 June 2020. For the most important cash- generating units, our further analysis is included below.
Gas transport network in the Netherlands Valuation of the gas transport network in the Netherlands depends among other things on the Company’s income from regulated services. In recent months, the Dutch regulatory authority (ACM) conducted several studies regarding future regulation of GTS and regional network companies. In the first half-year of 2020, dialogue meetings were held between ACM and the network companies. During these sessions, ACM presented the outcome of their studies for further consultation.
Any changes in the regulatory framework based on the studies performed and dialogue meetings may possibly be incorporated in the new method decision for the period 2022 and beyond. The draft version of the new method decision is expected in the second half of 2020. The possible impact of ACM’s studies on the new regulatory framework cannot be predicted at this moment.
Management’s review did not identify events or indications that the gas transport network in the Netherlands may be impaired as at 30 June 2020.
Gas transport network in Germany Valuation of the gas transport network in Germany depends among other things on the Company’s income from regulated services. In 2019, a bill was adopted in relation to the amendment of the regime for investment measures (the ‘AregV’). The German Ministry for Economic Affairs is currently investigating whether the present regulatory regime should be amended in this regard in the future. Gasunie Deutschland’s participation in this process includes among other things taking part in dialogue meetings together with other German network companies. These dialogue meetings were concluded in June 2020 and the points of view of the parties involved were documented for future follow-up. Further results of the possible decision- making process of the Ministry for Economic Affairs are expected later in 2020. The implementation of the bill and the impact on the regulatory framework is currently still unknown.
Management’s review did not identify events or indications that the gas transport network in Germany may be impaired as at 30 June 2020.
39 2020 half-year report ·· N.V. Nederlandse Gasunie
BBL Company Management tested the valuation of BBL Company’s tangible fixed assets at year-end 2019 and concluded that no impairment loss was to be recognised. No events or circumstances were identified in the first half-year of 2020 that may give rise to significant changes in estimates and judgements made as at year-end 2019.
Management’s review did not identify events or indications that BBL Company’s assets may be impaired as at 30 June 2020.
EnergyStock Management’s review did not identify events or indications that EnergyStock’s assets may be impaired as at 30 June 2020.
Other tangible and financial fixed assets Management’s review did not identify events or indications that other tangible and financial fixed assets may be impaired as at 30 June 2020.
40 2020 half-year report ·· N.V. Nederlandse Gasunie
3. Investments in joint ventures
The movements in joint ventures in the first half-year of 2020 are as follows:
In millions of euros First half-year of 2020 2019
Balance as at 1 January 212.2 197.7
Investments 2.0 6.9 Changes in equity 3.2 -2.9 Result from joint ventures 15.7 35.2 Dividends received -15.1 -24.7
Closing balance as at 30 June and 31 December 218.0 212.2 respectively
In the first half-year of 2020, Gasunie invested mainly in joint ventures that focus on establishing infrastructure for the ongoing development and integration of alternative energy sources. Other movements mainly relate to Gasunie’s 50% interest in Gate terminal. The changes in equity concern the remeasurement of the participation in Gate terminal as a result of the fair value change of Gate terminal’s cash flow hedge. Gasunie recorded this change in equity in comprehensive income.
41 2020 half-year report ·· N.V. Nederlandse Gasunie
4. Interest-bearing loans
The principle value of interest-bearing loans as at 30 June 2020 amounts to € 3,113.1 million (year-end 2019: € 3,132.8 million) and consists of € 2,552.4 million (year-end 2019: € 2,552.4 million) in bond loans and of € 560.7 million (year-end 2019: € 571.4 million) in private loans. Costs and discounts on loans to be amortised amount to € 9.8 million (year-end 2019: € 10.7 million).
The movements in interest-bearing loans are as follows:
In millions of euros First half-year of 2020
Principle amount as at 31 December 2019 3,450.0 Total repayments as at 31 December 2019 -326.2
Remaining principle amount as at 31 December 2019 3,123.8 Costs and discounts on loans to be amortised -10.5
Balance as at 31 December 2019 3,113.3
Movements in the first half-year of 2020: Repayments -10.7 Loans and bonds issued - Amortisation of costs and discounts on loans 0.7 Addition of costs and discounts on loans -
Principle amount as at 30 June 2020 3,450.0 Total repayments as at 30 June 2020 -336.9
Remaining principle amount as at 30 June 2020 3,113.1 Costs and discounts on loans to be amortised -9.8
Balance as at 30 June 2020 3,103.3
Non-current as at 30 June 2020 310.7 Current as at 30 June 2020 2,792.6
Total interest-bearing loans 3,103.3
In the first half-year of 2020, the Company repaid € 10.7 million (first half-year of 2019: € 10.7 million) in long- term loans.
No securities have been provided by N.V. Nederlandse Gasunie to lenders for the interest-bearing loans and other facilities. Loan agreements are unchanged compared to 2019.
42 2020 half-year report ·· N.V. Nederlandse Gasunie
Future repayment obligations are as follows:
In millions of euros First half-year Second half-year Total
Repayment in 2020 10.7 10.7 2021 300.0 433.2 733.2 2022 369.2 125.0 494.2 2023 - 125.0 125.0 2024 50.0 125.0 175.0 after 2024 1,575.0
Total repayment obligations 3,113.1
The Company has a current account overdraft facility of € 45 million (year-end 2019: € 45 million), a committed credit facility of € 600 million (year-end 2019: € 680 million), a Euro Commercial Paper programme of € 750 million (year-end 2019: € 750 million) and a € 7.5 billion European Medium-Term Note (EMTN) programme (year-end 2019: € 7.5 billion). Under the EMTN programme, € 4.9 billion was available for new issues as at 30 June 2020 (year-end 2019: € 4.9 billion). The committed credit facility was renewed on 16 April 2020 for a period of five years and can be extended twice for one year.
In addition, on 3 March 2020 an agreement was entered into with the European Investment Bank (EIB) regarding the grant of a long-term loan for the development of GTS’ nitrogen installation in Zuidbroek. The loan granted by the EIB amounts to € 240 million. This loan was not yet drawn as at 30 June 2020. The applicable interest rate will be determined when Gasunie actually draws the loan.
The long-term and short-term credit ratings by S&P and Moody’s have not changed in the first half-year of 2020.
43 2020 half-year report ·· N.V. Nederlandse Gasunie
5. Current financing liabilities
Current financing liabilities are as follows:
In millions of euros 30 June 2020 31 Dec. 2019
Repayment obligation on non-current loans 310.7 21.4 Short-term loans 300.0 395.0 Short-term loans from joint ventures 13.2 -
Total current financing liabilities 623.9 416.4
Short-term loans comprise deposit loans and Euro Commercial Paper and have a term of less than one year. Short-term loans from joint ventures comprise the liabilities Gasunie has towards joint ventures regarding cash-pool arrangements with these joint ventures. These amounts may be drawn by the joint ventures on a daily basis.
44 2020 half-year report ·· N.V. Nederlandse Gasunie
6. Financial instruments
These interim financial statements contain the following financial instruments:
Other participating interests Interest-bearing loans Other primary financial instruments
Gasunie applies the following hierarchy of valuation techniques to determine and measure the fair value of financial instruments:
Level 1: Based on quoted prices in active markets for an identical instrument.
Level 2: Based on quoted prices in active markets for similar instruments, or based on other measurement methods, with all required key data being derived from publicly available market information.
Level 3: Based on other measurement methods, in which all required key data is not derived from publicly available market information.
Other participating interests
Other participating interests consist of financial interests in Nord Stream AG (9.0%), PRISMA European Capacity Platform (Prisma) GmbH (12.7%) and Energie Data Services Nederland (EDSN) B.V. (12.5%). The fair value of the other participating interests as at 30 June 2020 totals € 506.2 million (year-end 2019: € 515.1 million). The decrease in fair value of € 8.9 million (first half-year of 2019: decrease of € 21.2 million) is taken directly to the fair value reserve. The result from dividend payments by Nord Stream amounted to € 20.3 million (first half-year of 2019: € 38.9 million). The decrease in dividend payments by Nord Stream is caused by timing. Besides the standard dividend payments, an additional dividend payment for a previous financial year was made in the first half-year of 2019. Prisma and EDSN did not distribute dividend.
The fair value of other participating interests is based on the present value of the expected cash flows. This is considered a level 3 valuation (year-end 2019: level 3). When determining the fair value of the aforementioned other participating interests, Gasunie applies a discount rate based on the risk-free yield, plus credit and liquidity surcharges. This discount rate varies between 3% and 6% after tax, depending on the risk profile of the other participating interest to be measured.
The valuation of the interest in Nord Stream is based on the present value of the expected future cash flows. A calculation model is used and this model is updated annually by Nord Stream based on the most recent business plan. This model is submitted for review and approval to the shareholders of Nord Stream, including Gasunie. The model is subsequently tested by Gasunie’s management on the basis of Nord Stream’s periodic financial reports. The expected cash flows are based on contractual agreements, among other things. All things being equal, if the discount rate changes by 0.5% points, this will result in a change in the fair value amount of approximately € 21.3 million (year-end 2019: € 22.0 million).
The cumulative book value of the interests in Prisma and EDSN amounts to less than € 0.1 million (year-end 2019: less than € 0.1 million). Given this low value, it is assumed that the book value approximates the fair value and the fair value calculation and a sensitivity analysis for these interests have not been included in these interim financial statements.
45 2020 half-year report ·· N.V. Nederlandse Gasunie
Interest-bearing loans
Interest-bearing loans (including current repayment obligations) relate to bond loans listed on Euronext in Amsterdam and to private loans.
The fair value of listed bond loans is the same as the exit price on the reporting date. This is a level 1 fair value measurement (year-end 2019: level 1). The fair value of the private loans is measured by calculating the present value of the expected future cash flows at a discount rate equal to the applicable risk-free market yield for the remaining term, plus credit and liquidity surcharges. The Company’s risk profile is also taken into account in this calculation. This is a level 3 fair value measurement (year-end 2019: level 3).
The book value and the fair value of interest-bearing loans as at 30 June 2020 is as follows:
In millions of euros 30 June 31 Dec. 2019 2020 Carrying Fair value Difference Carrying Fair value Difference amount amount
Bond loans 2,552.4 2,668.5 116.1 2,552.4 2,679.8 127.4 Private loans 560.7 656.0 95.3 571.4 669.6 98.2
Total loans 3,113.1 3,324.5 211.4 3,123.8 3,349.4 225.6
Other primary financial instruments
Other primary financial instruments comprise trade and other receivables, cash and cash equivalents, current financing liabilities (excluding current repayment obligations on long-term loans) and trade and other payables.
Given the short term of these instruments, their fair value approximates the carrying amount.
Cash and cash equivalents as at 30 June 2020 amount to € 21.8 million (year-end 2019: € 45.3 million).
46 2020 half-year report ·· N.V. Nederlandse Gasunie
7. Information about operating segments
Determining operating segments
Financial information is segmented in line with the group’s activities. The operating segments reflect the group’s management structure. The following segments are distinguished by Gasunie:
Gasunie Transport Services This segment covers network management in the Netherlands and is responsible for managing gas transport and developing the transport network and related assets, as well as promoting the market mechanism.
Gasunie Deutschland This segment covers network management in Germany and is responsible for managing gas transport and developing the transport network and related assets, as well as promoting the market mechanism.
Participations This segment focuses on developing projects for the energy transition, ensuring an optimum utilisation of existing participations and facilitating access to the new gas flows for north-western Europe through an LNG-connection and long-distance pipelines. This segment also includes jointly operated pipelines that connect the Gasunie transport network with foreign markets, such as the BBL pipeline to the United Kingdom.
The accounting policies for the measurement of assets and liabilities and the determination of the result used for these segments are the same as those applied in preparing these 2020 interim financial statements and the 2019 consolidated annual report.
The assets, revenues and results of a segment comprise both items directly related to the segments and items that can reasonably be attributed to the segments. Because the Company is funded at a corporate level, no segment information is prepared and reported for the Company’s equity and liabilities. Inter-segment transactions are performed at arm’s length.
47 2020 half-year report ·· N.V. Nederlandse Gasunie
Information about revenues and results per segment
Revenues and results per segment are as follows:
In millions of euros Revenue per Result per segment segment First half-year First half-year First half-year First half-year of 2020 of 2019 of 2020 of 2019 Operating segments - Gasunie Transport Services 495.0 505.4 214.0 221.3 - Gasunie Deutschland 158.0 119.2 91.9 61.4 - Participations 77.8 75.7 26.4 25.7 Inter-segment adjustments -19.2 -17.8 - 0.1
Operating segments total 711.6 682.5 332.3 308.5
Unallocated financial income and 1.1 16.4 expenses
Result before taxation 333.4 324.9
Income taxes -76.0 -70.8
Revenues and result after taxation for 711.6 682.5 257.4 254.1 the year
The increase in revenue for the Gasunie Deutschland segment can be attributed mainly to the commissioning of the first pipeline of the EUGAL pipeline project and to changes in gas flows in Germany, resulting in a higher demand for transport capacity from Gasunie Deutschland.
Inter-segment services amounted to € 19.2 million in total in the first half-year of 2020 (first half-year of 2019: € 17.8 million). During the first half-year of 2020, the Gasunie Transport Services segment rendered inter- segment services of € 5.5 million (first half-year of 2019: € 4.5 million), the Gasunie Deutschland segment rendered inter-segment services of € 0.1 million (first half-year of 2019: € 0.1 million) and the Participations segment rendered inter-segment services of € 13.6 million (first half-year of 2019: € 13.2 million).
48 2020 half-year report ·· N.V. Nederlandse Gasunie
Information about assets per segment
The assets for each operating segment are as follows:
In millions of euros Assets 30 June 2020 31 Dec. 2019 Operating segments - Gasunie Transport Services 6,587.0 6,572.6 - Gasunie Deutschland 1,581.1 1,553.8 - Participations 1362.1 1,369.9
Operating segments total 9,530.2 9,496.3
Unallocated assets 506.1 629.8
Total consolidated assets 10,036.3 10,126.1
Unallocated assets comprise deferred tax assets and current assets. The most important investments are further disclosed in note 2 ‘Tangible fixed assets’.
49 2020 half-year report ·· N.V. Nederlandse Gasunie
8. Revenue disaggregation
Information about operating activities
The Company categorises its revenues according to the way in which economic factors influence the nature, amount, timing and uncertainty of the cash flows. We have divided Gasunie’s revenue into two categories. The first revenue category concerns revenue from regulated transport and related services as generated by the Gasunie Transport Services and Gasunie Deutschland segments. For these revenues, the permitted revenues are controlled for a multi-year period by the regulatory authorities in the Netherlands and Germany.
The second revenue category concerns non-regulated and/or exempt services. These revenues are determined by market forces based on supply and demand. Usually these revenues are more volatile compared to revenues from regulated services. The revenue from non-regulated and/or exempt services is almost completely generated by the Participations segment.
Revenues from inter-segment services have been eliminated.
The following table summarises the revenue per operating activity:
In millions of euros First half-year of 2020 First half-year of 2019 Regulated services 644.0 624.6 Non-regulated and/or exempt services 86.9 75.7 Inter-segment -19.2 -17.8
Total revenue 711.6 682.5
Information about products and services
Revenues can be divided into revenues from gas transport and related services, and other activities. Gas transport and associated services covers both revenues from regulated gas transport and revenues from non- regulated and/or exempt gas transport. The breakdown is as follows:
In millions of euros First half-year of 2020 First half-year of 2019
Gas transport and related services 668.9 641.0 Other services 42.8 41.5
Total revenue 711.6 682.5
50 2020 half-year report ·· N.V. Nederlandse Gasunie
Information about geographical areas
Revenues by geographical area are determined on the basis of the area where the activities take place (within the Netherlands or outside the Netherlands). The geographical distribution of revenues is as follows:
In millions of euros First half-year of 2020 First half-year of 2019
Netherlands 530.2 533.1 Outside the Netherlands 181.4 149.4
Total revenue 711.6 682.5
The increase in revenue from gas transport and related services can be attributed mainly to the commissioning of the first pipeline of the EUGAL pipeline project and to changes in gas flows in Germany. This resulted in a higher demand for transport capacity from Gasunie Deutschland, which also largely explains the increase in revenue from outside the Netherlands and the increase in revenue from regulated services.
51 2020 half-year report ·· N.V. Nederlandse Gasunie
9. Events after the balance sheet date
No significant events occurred between the balance sheet date and the date of these interim financial statements that could give rise to an adjustment of the interim financial statements or the addition of a disclosure in the interim financial statements.
52 2020 half-year report ·· N.V. Nederlandse Gasunie
Signature
The Executive Board,
Mr J.J. Fennema*, chair Ms J. Hermes* Mr B.J. Hoevers Mr U. Vermeulen
Groningen, 21 July 2020
* Director under the Articles of Association
53 2020 half-year report ·· N.V. Nederlandse Gasunie
Review report
54 2020 half-year report ·· N.V. Nederlandse Gasunie
The accompanying 2020 interim financial statements have been reviewed by an independent auditor. The review report is included in the Dutch version of the 2020 half-year report. Refer to the section entitled ‘Beoordelingsverklaring’.
55 2020 half-year report ·· N.V. Nederlandse Gasunie
Disclaimer
56 2020 half-year report ·· N.V. Nederlandse Gasunie
In the event of inconsistencies or differences of interpretation between the original Dutch report and the translated English report, the Dutch report shall prevail.
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