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GasTerra B.V. Annual Report 2012

Natural gas in perspective

GasTerra B.V. Annual Report 2012 Natural gas in perspective

2 | GAsTeRRA JAARVeRslAG 2012

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Mission, Vision and Strategy

GasTerra’s Company Profile, Mission, Vision, Core Values and Strategy

Company Profile

GasTerra BV is an international company trading in natural gas. From March 2013 on, it will be operating from its new premises at Stationsweg 1 in Groningen.

It operates on the European energy market and has

a significant share in the Dutch gas supply. The

company also provides services related to gas trading. The company has a strong purchasing position and

almost fifty years of experience in natural gas procurement and sales.

Mission

GasTerra’s mission is to maximise the value of natural gas reserves in the Netherlands.

It fulfils a public role with regard to the implementation of the Dutch government’s Small Field Policy. This policy is aimed at promoting natural gas production in smaller gas fields in the Netherlands.

Vision

GasTerra plays an important role in the utilisation of domestic gas reserves and energy supply in the Netherlands and the EU by virtue of natural gas’ economic value and public importance. GasTerra promotes the safe and efficient use of natural gas and is active in the development of innovative applications. The company pays particular attention to energy supply sustainability and initiates various related projects.

GasTerra endeavours to allow sustainability-related projects to be managed in an accountable fashion, i.e. taking both economic and ecological interests into account. Gas shall remain an indispensable source of energy in the energy transition process if we wish to safeguard energy supplies and reduce CO 2 emission levels. The Netherlands shall continue to be a major producer of natural gas for several decades to come.

Core Values

A focus on customers, results and improvement are GasTerra’s three core values. These are the values that GasTerra’s staff adopt as a premise for all their business dealings. GasTerra’s operations are based on a code of conduct in which integrity and respect serve as its guiding principles. The company strives to build long- lasting relations with the private sector and to enter into agreements that reflect natural gas and its associated services’ value. GasTerra is governed by principles coherent with those associated with corporate social responsibility (CSR). The three basic CSR principles of people, planet and profit have been expressed in terms of the company’s own spheres of influence – Gas, Green and Groningen. Where Gas stands for company operating results, Green stands for our mission to bring about socially responsible energy transmission and Groningen – our place of business – stands for the community of which we are a part.

Strategy

The company implements its mission and vision by utilising its position on the European market to the fullest extent possible – principally in those market segments where demand exists for natural gas in combination with supplemental services. In doing so, use is made of gas from Dutch natural resources, as well as the flexibility offered by gas usage. Gas from overseas sources is procured if and when this is coherent with the general supply and demand portfolio. As a proponent of a free energy market, GasTerra is continuously developing new products and services. In this respect, it believes that it is very important to be a reliable and competitive gas supplier to its customers. GasTerra aims to strengthen natural gas’ position within the overall energy mix.

Energy is a broad and complex term.All our stakeholders deal with energy in some form or another, but each from his/her own perspective and background.This annual report aims to depict the world of the energy expert for a variety of energy users by means of seven theme pages.What does the sale of 83.4 billion m³ of natural gas actually mean in terms of energy? In other words, what does the volume of natural gas sold by GasTerra in 2012 equate to in terms of other sources of energy such as wind power, solar power or biomass? This allows GasTerra to be viewed from an unusual perspective. Hence the title of GasTerra’s 2012 Annual Report – Natural Gas in Perspective.Appendix 3 contains the supporting technical data for these theme pages.This appendix has been published on our website www.gasterra.nl.

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Table of Contents

CEO’s Message

7

Annual Accounts 2012

67

Management Information

11

Message from the Board of Supervisory Directors

84

Reading Guide

15

 

Miscellaneous

86

Outline in Figures

17

Independent Auditor’s Report

86

 

Independent Assurance Report

88

Annual Report Summary

19

Report on Activities

23

Market Trends

23

Virtual Trading Point Sales

25

Energy Company and Industrial Sales

27

Overseas Sales

30

Procurement

31

Transmission

36

European Legislation

36

Dutch Legislation

39

Risk Management

41

Corporate Social Responsibility

43

Stakeholder Dialogue

44

Green Gas

49

Knowledge and Education

51

Innovation

53

Sponsorship and Advertising

55

Personnel and Organization

58

Codes of Conduct and Procedures

62

New Office Premises

63

This Annual Report is a translation of the original Dutch Annual Report. The Dutch Annual Report is adopted and approved by the General Meeting of shareholders as at 14 February 2013. This translation is for information purposes only and no rights can be derived from its content. The Dutch Annual Report takes precedence.

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7 CeO’s Message Once again, GasTerra has achieved excellent results. The company achieved higher turnover levels

CeO’s Message

Once again, GasTerra has achieved excellent results. The company achieved higher turnover levels than last year – despite slightly lower volumes of gas sold – due to higher average gas prices. Regardless of any prevailing market trends, GasTerra’s excellent performance in 2012 is primarily attributable to the merits of our staff. An expression of gratitude to everyone is certainly called for.

However, these positive results somewhat shroud current uncertainty on european gas markets. Gas production in the UsA has grown enormously due to shale gas extraction. Us power generation companies are thus switching from coal to gas en masse. surplus coal arising from this switch is mainly being exported to europe prompting a drop in coal prices. exactly the opposite of what is happening in the UsA is taking place in europe – power generation companies are switching from gas to coal. They are opting to minimise or even shut down gas-fired power station output because it is economically more viable to generate power using coal. This is not only bad news for the gas sector, but highly detrimental to european climate-control targets. Natural gas may be a fossil fuel, just as coal is, but its CO 2 emission levels are far lower per unit of energy. Consequently, it is now proving increasingly difficult to reduce CO 2 emission levels in europe.

This brings me to european energy and climate policies. Major strides have been made in recent years to fully liberalise gas markets. Gas trading points where gas can be freely traded have now been established across the continent in wake of similar developments in the United Kingdom. These gas hubs have grown considerably, especially the Dutch Title Transfer Facility (TTF) that traded no less than 775 billion m³ of gas in 2012. This represents an increase of over twenty per cent with respect to 2011. This made the TTF one of the foremost gas trading points in europe. Hub liquidity also increased. Gas volumes are being traded more frequently before being physically delivered to end users. This is a clear sign that the liberalised gas market is functioning properly. Free markets ultimately create optimal conditions for economic activity including critical investments in new energy production and infrastructure for our sector. Consequently, government can then concentrate on creating a framework within which the private sector is allowed to grow in an optimal fashion.

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every government policy measure should raise the same question – what problem are we actually trying to solve? Where supply security is concerned, the problem is one of supply lagging behind increasing global demand. Companies therefore need room to manoeuvre in order to invest economically and ecologically in the development of conventional and alternative sources of energy. Where climate targets are concerned, the problem is one of reducing greenhouse gas emissions. The best way to achieve this is to formulate a single, binding CO 2 objective. The emissions Trading scheme (eTs) is in theory the best tool currently available for achieving this goal. Not all sectors fall under the auspices of this scheme, hence supplementary goals also need to be set, e.g. energy savings. In addition to making conventional sources greener and improving energy efficiency, sustainable power generation is another means desperately needed in order to fulfil the mission that we set ourselves, this being twenty per cent reduction in CO 2 emission levels by 2020 and eighty to ninety-five per cent reduction by 2050 with respect to 1990.

This annual report differs from last year’s in one crucial aspect. last year, we dedicated a separate chapter to social aspects of our reporting. This year, the corporate social responsibility (CsR) theme is no longer a separate entity. This is a result of our vision concerning CsR, this being that CsR can no longer be viewed as a separate entity in terms of reporting our company’s operating results. Naturally, we wanted to express this in terms of the content of our annual report.

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Gertjan Lankhorst, CEO GasTerra B.V.

of our annual report. 9 Gertjan Lankhorst, CEO GasTerra B.V. GasTerra actively formulated its CsR policies

GasTerra actively formulated its CsR policies in 2010 with the principal aim that they would be fully integrated and embedded into the very fabric of our company. since then, we have made significant progress in this respect. You will be able to find examples of the progress made in this report.

As a seller of Dutch natural gas, GasTerra is fully aware of its social responsibilities, especially in terms of energy policies. GasTerra shall therefore continue to make every effort possible towards providing sustainable energy supplies. In order to achieve this goal in an accountable fashion, we shall also be continuing our participation in transition-related projects – such as green gas – in dialogue with our stakeholders. Our commitment to

ongoing projects targeting energy-related issues in the fields of knowledge, education and innovation shall also be unrelenting. Nor shall GasTerra’s commitment to supporting culture and sport diminish in any way – another of our social roles. GasTerra’s conviction in this respect has been clearly articulated in its vision and in this report.

in this respect has been clearly articulated in its vision and in this report. Gertjan lankhorst,

Gertjan lankhorst, CeO GasTerra B.V.

11 Management Information H CEO Gertjan Lankhorst Secretariat to the Board Kristel Klink D Legal

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Management Information

H CEO Gertjan Lankhorst Secretariat to the Board Kristel Klink D Legal and Regulatory Affairs
H
CEO
Gertjan Lankhorst
Secretariat to the Board
Kristel Klink
D
Legal and Regulatory Affairs
Herbert van Zijll de Jong
Human Resources
J
P
Bart Westmaas
Information Technology
Communication and Public Affairs
I
C
Johan Stäbler
Anton Buijs
F
O
M
Finance and Facilities
Maurice de Wilde
Strategy and Optimisation
Anton Broenink
Commercial Affairs
Jacob Kielman
Anton Broenink Commercial Affairs Jacob Kielman M.W.J. de Wilde From left to right: J.E. Kielman, A.E.M.

M.W.J. de Wilde

From left to right:

J.E. Kielman, A.E.M. Broenink, G.J. Lankhorst, A.J.P. Buijs, H.J. van Zijll de Jong, J.R.L.W. Stäbler, B.A. Westmaas.

Board of Management

G.J. lankhorst, Chief executive Officer

Other Management Team Members

Directors M. Blacquière, Chief Financial Officer (until 01 December 2012) M.J.W. de Wilde, Chief Financial Officer (from 15 January 2013) A.e.M. Broenink, executive Director strategy and Optimisation J.e. Kielman, Chief Commercial Officer

Heads of Department A.J.p. Buijs, Chief Communications & public Affairs Officer J.R.l.W. stäbler, Chief Information Officer B.A. Westmaas, Chief Human Resources Officer H.J. van Zijll de Jong, Chief legal Officer

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13 Board of Supervisory Directors (as of the end of 2012) C.W.M. Dessens, Chairperson* D.A. Benschop*

Board of Supervisory Directors (as of the end of 2012)

C.W.M. Dessens, Chairperson* D.A. Benschop* J.D. Bokhoven*

p. Dekker

M.e.p. Dierikx* J.C. De Groot J.M. Van Roost* A.p.N. van Veldhoven

* Also a member of the College of Delegate supervisory

Directors.

Appendix 1 contains information about the background of the members of the Board of Management and the Board of supervisory Directors. Appendices 1 to 9 can be found on our website at www.gasterra.nl.

Staff Council (as of the end of 2012)

e. lam, Chairperson

J.A.H. Boekhoudt

J.R. Honkoop

Y.N. Man

e.T.O. Medas

Z.D. Mulder-Wilts

R.A. slob

C. Weeda

A.H. Wijsbeek

De Wet Bestuur en Toezicht [Dutch Management and supervision (public and private Companies) Act] is effective as of 01 January 2013. The Wet Bestuur en Toezicht contains among others provisions concerning balanced participation of men and women on the Board of supervisory Directors. The company’s allocation does not yet comply with this provision. No vacancies emerged on the Board of Management or the Board of supervisory Directors during the reporting year. should any vacancies emerge, then the company shall examine options to achieve a more balanced participation.

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14 | GAsTeRRA JAARVeRslAG 2012 15 15 Gas GasTerra’s core business is the procurement and sale

Gas

GasTerra’s core business is the procurement and sale of natural gas. General, commercial and administrative developments within the gas sector, as well as GasTerra’s role and activities on the gas market, have been marked using this icon.

on the gas market, have been marked using this icon. Green Gas plays an indispensable role

Green

Gas plays an indispensable role in making the energy sector more sustainable. GasTerra has dedicated itself to promoting the responsible use of natural gas in order to fully utilise the benefits provided by gas as the cleanest fossil fuel. GasTerra’s foremost activities in this respect have been marked using this icon.

activities in this respect have been marked using this icon. Groningen GasTerra is a Groningen- based

Groningen

GasTerra is a Groningen- based company that invests in its staff and in society. GasTerra’s foremost activities and developments in terms of its staff policies and its major contribution to society have been marked using this icon.

Reading Guide

Corporate social responsibility (CSR) has been embedded into GasTerra’s day-to-day operations. Consequently, GasTerra has opted to fully integrate its CSR report into this year’s annual report. The annual accounts have been included as a separate section. Information has been provided in a hierarchical structure in order to make it accessible for anyone, regardless of how much time is available to them. The first page of the report contains the company profile, mission, vision and strategy followed by a table of contents, the CEO’s message, management information and an outline in figures. The annual report has then been summarised, followed by a detailed description of GasTerra’s activities over the past year. Reference has been made through- out to appendices with supplemental background information. These appendices can be found on GasTerra’s website at www.gasterra.nl.

As a guide for readers, all content has been marked with an icon indicating one of the three GasTerra cornerstones – Gas, Green and Groningen (see adjacent). These cornerstones have been based on the better-known principles underlying corporate social responsibility – people, planet and profit.

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17 Outline in Figures   2012 2011 Income and Expenditure (in millions of Euros) Net Turnover

Outline in Figures

 

2012

2011

Income and Expenditure (in millions of Euros)

Net Turnover

23,381

21,095

Gas purchases

22,861

20,283

Transmission Costs

505

708

Results (in millions of Euros)

Result before tax

48

48

Net profit

36

36

Dividend

36

36

Other Financial Information

Investments (in millions of Euros)

13

11

liquidity Ratio

1.1

1.0

Balance Sheet Data (year-end, in millions of Euros)

Total Assets

3,734

4,121

shareholders’ equity

216

216

Current liabilities

3,518

3,905

Volumes Sold (in billion m 3 )

Total sales

83.4

86.7

- The Netherlands

34.8

38.1

- Rest of europe

48.6

48.6

Personnel (year-end, in fulltime-equivalenten)

Company employees

189

197

Health and Safety

Absenteeism (%)

1.4

2.3

Average Absenteeism Rate

1.2

1.4

Natural Gas 83 billion m 3 Solar Power 17 seconds
Natural Gas
83 billion m 3
Solar Power
17 seconds

What is the equivalent of the total volume of natural gas (83 billion m 3 ) supplied by GasTerra, when expressed in terms of solar energy?

The energy content of 83 billion m 3 of natural gas is the same as the amount of solar energy reaching Earth in 17 seconds.

83 billion m 3 of natural gas = 17 seconds of sunlight

83 billion m 3 of natural gas = 17 seconds of sunlight In 17 seconds 19

In 17 seconds

19

Annual Report summary

seconds of sunlight In 17 seconds 19 Annual Report summary Sales Volumes GasTerra procured 83.4 billion

Sales

Volumes

GasTerra procured 83.4 billion m³ of gas in 2012. This is

four per cent less than in the previous year. However, the

portion of the total volume of gas sold by GasTerra that

was traded on the Dutch TTF trading point decreased only

slightly. GasTerra sold 27.3 billion m³ of gas on the TTF.

GasTerra also expanded its operations still further in 2012

at several foreign trading points. see page 25.

Procurement
Procurement

Groningen Gas Field

The major portion (57%) of the gas procured in 2012

originated from the Groningen gas field (47.2 billion m³).

This was 2.4 billion m³ more gas than was purchased

from this field with respect to 2011. This can be

attributed to rising demand for Groningen gas caused by

lower temperatures in 2012 with respect to 2011.

see page 31.

Energy Company and Industrial Sales

sales to national energy companies and industrial

customers in 2012 were marked by high supply levels and

heavy competition. GasTerra supplied a total of

11.5 billion m³ of gas to these customer segments in

2012 – 4 billion m³ of which on the TTF – a decrease of

3.9 billion m³ with respect to 2011. see page 27.

Export

supply to foreign customers in 2012 remained constant

with respect to 2011 at 48.6 billion m³. These stable

export figures can be attributed to long-term contracts

that GasTerra signed with these customers. see page 30.

Small Fields

GasTerra procured 25.9 billion m³ from small fields in

2012, a decrease of 1.5 billion m³ with respect to 2011.

This decrease can be attributed to declining production

levels from existing fields. In 2013, GasTerra aims to

offer producers the option to link supply to production

capacity, as well as demand, in order to provide small field

producers greater flexibility regarding volumes to be

supplied. see page 32.

Sundry Procurement

In 2012, GasTerra procured a total of 10.3 billion m³ of

gas from Norway, Russia and other virtual trading points.

procurement from all supply sources dropped with respect

to 2011. see page 33.

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Green Gas

GasTerra started trading in green gas in 2012. In 2011, GasTerra signed declarations of intent with suiker Unie and bio-fuel producer BioMCN. In 2012, these declarations were converted into procurement and sales contracts. Green gas procurement contracts were also signed in 2012 with HVC and Greenchoice. see page 49.

also signed in 2012 with HVC and Greenchoice. see page 49. Corporate Social Responsibility CSR Policies

Corporate Social Responsibility

CSR Policies

In 2012, GasTerra opted to fully integrate its 2013 CsR objectives into its business plan. This means that there is no longer any form of differentiation between GasTerra policy and CsR policy as of 2013. see page 43.

Stakeholder Analysis

In 2012, GasTerra performed its second stakeholder analysis. No major changes were noted with respect to the previous year. see page 45.

Knowledge and Education

In 2012, GasTerra invested €2.4 million into knowledge and education, the largest portion of which was dedicated to the energy Transition Model (eTM). The energy Academy europe (eAe) was also officially opened on 20 september 2012. see page 51.

Innovation

GasTerra is closely involved in fuel cell testing in several built environments. GasTerra, eneco, Joulz and stedin have also been testing the effects of mixing hydrogen into the gas supply in fourteen homes. Results for this pilot project were presented on 20 september 2012. see page 53.

Sponsorship

premier division basketball club GasTerra Flames, the GasTerra ladies Run, the Groninger Museum, the prince Claus Conservatoire and many other organizations were once again able to rely on GasTerra’s support as in previous years. In 2012, GasTerra engaged in several other new sponsorship activities including the Tour for life and a youth chess tournament. see page 55.

Personnel and Organization

GasTerra’s workforce is characterised by its stability. low numbers of employees entering and leaving employment counteract one another meaning that the staff complement has changed very little in recent years. see page 58.

Codes of Conduct and Procedures

GasTerra has had a code of conduct in place since its inception that incorporates standards intended to promote and safeguard the quality and integrity of the way GasTerra’s employees do business. The company has also developed various rules and procedures in addition to external legislation and regulations. see page 62.

Natural Gas 83 billion m 3 Coniferous Forest 290.000 km 2
Natural Gas
83 billion m 3
Coniferous
Forest
290.000 km 2

What is the equivalent of the total volume of natural gas (83 billion m³) supplied by GasTerra when expressed in terms of the energy stored in forests?

The energy content of 83 billion m³ of natural gas is the same as the amount of energy stored in sustainably managed coniferous forest covering an area comparable to 80% of the size of Germany.

83 billion m 3 of natural gas = 290.000 km 2 of coniferous forest

3 of natural gas = 290.000 km 2 of coniferous forest 23 Report on Activities Market

23

Report on Activities

km 2 of coniferous forest 23 Report on Activities Market Trends GasTerra operates against a backdrop

Market Trends

GasTerra operates against a backdrop of trends that

affect the north-west European gas market. Demand

for gas in north-west Europe has dropped in recent

years. Demand from gas-fired power stations is under

pressure due to low coal and CO 2 prices – as

compared to gas prices.

Virtual Trading Points

The Dutch virtual trading point, TTF, continued to grow

in 2012. This became evident in the form of improved

liquidity and increased trading volumes. Trading points

also grew in neighbouring countries. price differences

between the TTF and other virtual trading points in north-

Natural gas sales

in billion m 3

2012 2011 2010 2009 2008 0 10 20 30 40 50 60 70 80 90
2012
2011
2010
2009
2008
0
10
20
30
40
50
60
70
80
90
100

west europe decreased still further in 2012. This is an

indication of good gas market integration. It is also

anticipated that the trend for matching supply and

demand at virtual trading points will continue in the years

ahead.

It is predicted that growth in trading on the TTF will also

continue, consolidating its position as one of the most

dynamic trading points in europe. The merger announced

between leading international energy exchanges –

Intercontinental exchange (ICe) and the Anglo-Dutch ApX

eNDeX – reinforces these predictions. ICe hereby acquired

a majority shareholding in derivatives and gas spot trading

on the ApX-eNDeX. Consequently, the position of both

exchanges on the TTF will be strengthened.

Gas-Fired Power Stations

GasTerra views gas as the ideal fuel for use alongside

renewable sources of energy. Gas-fired power stations

can be deployed flexibly. They can be put online and

taken offline very rapidly and are the least polluting form

of fossil fuel-powered power station. However, european

power generation companies are increasingly opting

for coal instead of gas to generate electricity because

of current pricing levels. Gas-fired power stations have

therefore only been used to a limited extent in recent

years. Companies in neighbouring countries are even

considering shutting down gas-fired power stations.

Governments are concerned that this move will jeopardise

the security of electricity supply if these flexibly deployable

power stations are closed down. Moreover, their closure

24 | GAsTeRRA ANNUAl RepORT 2012

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constitutes a threat to the deployment of sustainable, less predictable sources of energy. This is why regulators in these countries are currently investigating how delivery security can be safeguarded.

Liquid Gas

supply of liquefied natural gas (lNG) also affects gas markets. european lNG terminal utilisation was low in 2012. lNG – originating principally from the Middle east and Africa – was mainly exported to Asia due to pricing levels. Demand for lNG rose significantly in Japan because nuclear power stations were decommissioned in 2011 after the Fukushima nuclear disaster. Australia is also expected to become a more prominent lNG exporter in the years ahead. The UsA is investigating options to export lNG in response to large-scale shale gas production levels. This gas will probably also be exported to Asia given current pricing levels.

Title Transfer Facility (TTF)

Nominated and physical volumes per month (in million m 3 natural gas, 2008 - 2012)

per month (in million m 3 natural gas, 2008 - 2012) 21,000 20,000 19,000 18,000 17,000
21,000 20,000 19,000 18,000 17,000 16,000 15,000 14,000 13,000 12,000 11,000 10,000 9,000 8,000 7,000
21,000
20,000
19,000
18,000
17,000
16,000
15,000
14,000
13,000
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2008
2009
2010
2011
2012
nominated volume
physical volume
Source: Gas Transport Services

Virtual Trading Point Sales

The total physical volume of gas traded on the TTF in 2012 was 42.7 billion m³. This is over 11 per cent more than in 2011.

TTF

GasTerra physically procured 27.3 billion m³ of gas in 2012 on the TTF. sales on the TTF dropped by 1.8 billion m³ (6%) with respect to 2011. The TTFs role in european gas trading grew still further throughout 2012. The portion of the total volume of gas sold by GasTerra and traded on the TTF decreased. However, the number of contracts signed increased. TTF’s position as one of the most liquid trading points in europe was strengthened still further in 2012. Trading at other european trading points also grew, e.g. on the NCG (NetConnect Germany) and GAspOOl (Germany). Graphs on this page and 26 and 27 show how trade on the TTF, NCG and the NBp (National Balancing point – UK) has grown in recent years. spot trade products such as Day Ahead (DA) and Within Day (WD) grew at German trading points in particular. Futures trading played a prominent role on the TTF. large numbers of transactions in principally monthly, quarterly, seasonal and annual products strengthened the TTF’s position.

26 | GAsTeRRA ANNUAl RepORT 2012

Net Connect Germany (NCG)

Traded and physical volumes per month (in million m 3 natural gas, 2008 - 2012)

19,000 18,000 17,000 16,000 15,000 14,000 13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000
19,000
18,000
17,000
16,000
15,000
14,000
13,000
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2008
2009
2010
2011
2012
traded volume
physical volume
Source: Net Connect Germany

Foreign Trading Point Activity

GasTerra also traded at several foreign trading points in 2012, in addition to the NBp. This provided us greater opportunity to balance and optimise our procurement and sales portfolios. Half way through the year, GasTerra started trading at the Zeebrugge hub followed by the Belgian ZTp trading point that opened in October 2012. since December 2012, GasTerra has also been selling gas on the NCG and GAspOOl.

procedures for international trading are still subject to change due to new european regulations intended to harmonise european gas trading markets still further.

27

National Balancing Point (NBP)

Traded and physical volumes per month (in million m 3 natural gas, 2008 - 2012)

per month (in million m 3 natural gas, 2008 - 2012) 170,000 160,000 150,000 140,000 130,000
170,000 160,000 150,000 140,000 130,000 120,000 110,000 100,000 90,000 80,000 70,000 60,000 50,000 40,000
170,000
160,000
150,000
140,000
130,000
120,000
110,000
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
2008
2009
2010
2011
2012
traded volume
physical volume
Source: National Grid

Energy Company and Industrial Sales

Dutch domestic sales to energy companies and industrial companies in 2012 were marked by high supply levels and heavy competition. The number of large-volume gas suppliers grew.

liberalisation of the north-west european gas market has meant that suppliers that traditionally traded overseas have been operating in the Netherlands for some time now. GasTerra maintained its position well in response to this new competition. GasTerra supplied a total of 11.5 billion m³ of gas to energy companies and industrial customers in 2012 – 4 billion m³ of which on the TTF – a decrease of 3.9 billion m³ with respect to 2011. This drop was mainly caused by relatively high temperatures at the end of 2012 and the weak position of gas compared to that of coal for generating electricity. Volumes contracted in 2012 for upcoming delivery years grew nonetheless with respect to the year before. By the end of 2012, contracted volumes for 2013 were 1.5 billion m³ higher than those contracted for 2012 at the end of 2011.

Natural Gas 83 billion m 3 Road Vehicles (NL) 6-year fuel supply
Natural Gas
83 billion m 3
Road
Vehicles (NL)
6-year
fuel supply

What is the equivalent of the total volume of natural gas (83 billion m³) supplied by GasTerra when expressed in terms of vehicle fuel?

The energy content of 83 billion m³ of natural gas is the same as that of the fuel required to keep all road vehicles in the Netherlands running.

Approximately 14 billion litres of fuel is used in the Netherlands annually
Approximately 14 billion litres
of fuel is used in
the Netherlands annually

83 billion m 3 of natural gas = 6-year supply of fuel for all road vehicles in the Netherlands

29

Energy Companies

Volumes contracted by GasTerra in 2012 for 2013 to

energy companies for domestic supply in the Netherlands

rose by forty per cent with respect to contracted volumes

in 2011 for 2012. The number of customers also grew

substantially in 2012. Ongoing product and contract

development aimed at meeting the market’s needs –

principally the shift towards trading on the TTF – formed

the basis for this growth. For instance, GasTerra intro-

duced a product in 2012 that allowed smaller energy

companies to make their portfolio procurements on the

TTF via GasTerra. This product allowed customers who are

not yet active on the TTF to procure TTF-traded products.

GasTerra adopts standard european Federation of energy

Traders (eFeT) procurement and sales terms & conditions

for the supply of non-standard products, e.g. profile or

flexible supply. Both developments were well received

by the market. In the years ahead, GasTerra shall remain

active in the field of product and contract development

in order to increase sales in this segment. In doing so,

GasTerra will be making major strides towards achieving

one of its main CsR objectives – Gas 2 – to develop

commercially appealing products (see p. 47).

Industry

sales to industrial customers decreased in 2012 with

respect to 2011 due to declining industrial production

and increasing competition. Nevertheless, GasTerra

successfully maintained a good market position across the

full spectrum of the sector by continuing to respond to

pricing concepts requested by the sector and by

continuing to improve its service levels. A broader spread

was also achieved with respect to previous years in terms

of contract term and contracting moments throughout

the whole year. Numerous industrial organizations are

attempting to consolidate their international energy

procurement requirements. GasTerra therefore targeted

these multi-site organizations by capitalising on its

position on foreign hubs. In 2012, we significantly

expanded our operations with green gas producers and

other parties. This resulted in several new agreements

being signed for the procurement and sale of green gas

(see p. 49 e.v.).

Environmental Plan for Industry (EPI)

In 2012, GasTerra carried out various projects on behalf

of its industrial customers as part of its environmental

plan for Industry (epI) that aims to contribute towards

increased efficiency concerning gas usage. This

programme helps industrial customers gain a better

insight into their energy consumption and provides them

with technical expertise for improved energy efficiency

and process optimisation purposes. In doing so, we are

making strides towards achieving one of our main CsR

objectives – Green 3 – to promote sustainable business

practices (see p. 47). GasTerra has been running this

programme since the 1990s. Consultancy activities in the

field of sustainability have expanded in recent years. For

instance, the spectrum of consultancy services was

extended in 2011 to include emission level readings,

certification and environmental reporting. In doing so,

GasTerra was responding to market needs. In 2012,

30 | GAsTeRRA ANNUAl RepORT 2012

31

GasTerra’s account managers actively promoted this broader range of epI options to their customers. This resulted in a growing number of projects initiated on behalf of various industrial customers in 2012. In doing so, GasTerra has been demonstrating supply chain management accountability to its users. The stakeholder analysis conducted by GasTerra in 2012 revealed that stakeholders appreciated GasTerra playing a leading role in this respect (see p. 45).

Provision of Information and Contracting

energy companies in GasTerra’s customer portfolio have had access to a customer portal where they can view pricing and contract bulk volumes since 2011. GasTerra will be providing wider access to this service by opening it up to its export and industrial customers. particular attention is being paid to currency of information and user-friendliness. In 2013, GasTerra intends to improve the information available on its website about its products and services. Other options to inform its customers more fully and more quickly about products and market trends, e.g. newsletters, will be addressed in more detail in 2013.

e.g. newsletters, will be addressed in more detail in 2013. Overseas Sales GasTerra sold 48.6 billion

Overseas Sales

GasTerra sold 48.6 billion m³ of gas to foreign customers in 2012. This volume remained the same as that sold last year. Gas trading points such as the TTF were established as a result of the liberalisation of the natural gas market. Oil price linking – a characteristic of long-term export contracts – has thereby been joined by gas index linking. Pricing formulas often result in a mix of oil and gas index- linked prices during regenotiations scheduled throughout long-term contracts. Increased trading levels at virtual trading points and the intensified competition and price volatility that ensued has put pressure on export prices.

GasTerra’s long-term contracts have resulted in stable export figures. This phenomenon was fittingly illustrated in 2012 with the celebration of the 50th anniversary of export relations with the German energy company eWe. An export contract was signed by eWe and staatsgas- bedrijf in April 1962 – the latter being the predecessor to Gasunie. Over the past fifty years, some 40 billion m³ of gas have been traded between these two companies.

Eni Arbitration

It is common practice for interim price renegotiations to be held for long-term contracts. These contracts include a provision allowing both parties to submit their dispute for arbitration in the event that parties are unable to reach a mutually acceptable agreement. In 2007, GasTerra requested arbitration following failed negotiations with the Italian company eni. GasTerra was of the opinion that

it was entitled to increase its prices for gas supplied from

2006

on, based on market trends for the period from

2003

to 2006. This price increase was awarded by the

arbitrator in 2012. Another arbitration case relating to

another eni contract has not yet been adjudicated.

Natural gas by country of destination

in billion m 3

2012

2011

The Netherlands

34.8

38.1

Belgium

4.7

4.7

France

6.1

6.7

Germany

19.3

18.8

Italy

8.2

7.1

UK

9.6

10.6

Switzerland

0.7

0.7

Total

83.4

86.7

Total exclusive the Netherlands

48.6

48.6

Procurement
Procurement

GasTerra procured a total of 83.4 billion m³ of gas in 2012. This is 3.3 billion m³ less than in 2011 (86.7 billion m³).

Groningen Gas Field

GasTerra procured 47.2 billion m³ of gas from the Groningen gas field. This constitutes fifty-seven per cent of total procurement. This was 2.4 billion m³ more gas than was purchased from this field with respect to 2011. This can be attributed to rising demand for Groningen gas caused by lower temperatures in 2012 with respect to 2011. The Dutch government has set a ceiling for the Groningen gas field of 425 billion m³ for the period from 2006 up to and including 2015 in light of public interests underlying legal duties imposed on GasTerra. GasTerra procured 281 billion m³ of gas in the period from 2006 up to and including 2012.

Gas from the Groningen gas field contains relatively high levels of nitrogen compared to gas from other fields. This results in Groningen gas having a lower calorific value. When the Groningen gas field was discovered, all gas appliances in the Netherlands were adapted for its use. later, smaller natural gas fields were discovered containing gas with a higher calorific value – high-caloric gas. Gasunie Transport services (GTs) mixes in nitrogen

32 | GAsTeRRA ANNUAl RepORT 2012

33

at special-purpose processing facilities in order to make high-calorific gas suitable for appliances designed to be used with Groningen gas.

production levels in the Groningen gas field will gradually be declining over the next few decades. This will partly result in increased supplies of high-calorific gas including lNG. The question then arises as to whether nitrogen still needs to be added or whether it is wiser to modify gas appliances for use with higher-calorific gas. The Dutch Ministry of economic Affairs, GTs, Nederlandse Aardolie Maatschappij (NAM) and GasTerra have commissioned the energy Delta Gas Research (eDGaR) consortium to investigate whether the period for which gas composition will remain unchanged for low-volume users can be extended for as long as possible. studies revealed that the period for which gas composition will remain unchanged can be extended to 2030. Consequently, it is essential to monitor Groningen/high-calorific gas supply and demand very closely and if necessary to prepare an appropriate package of measures to respond accordingly.

Small Fields

GasTerra is a major purchaser of gas from the small Dutch fields. In 2012, GasTerra procured 25.9 billion m³ from these fields. This is a decrease with respect to 2011 in which 27.4 billion m³ were purchased. GasTerra anticipates that this trend will continue, as pressure is dropping in existing small fields. This is causing a decline in production that cannot currently be compensated for by the discovery of new small fields.

In 2012, GasTerra investigated a package of improvement measures for its supply terms & conditions in order to provide small field producers greater flexibility in volumes supplied. Firstly, GasTerra aims to provide producers the option to supply gas based on production capacity, as well as on the demand for gas from GasTerra. In other words, producers would – to a certain extent – be able to supply as much gas as they could produce rather than as much gas as GasTerra demanded. GasTerra would then match any differences in supply and demand by utilising underground storage options. GasTerra anticipates that producers will be able to produce natural gas more effectively and in greater volumes with this new, flexible procurement arrangement in place. secondly, GasTerra aims to match gas prices more closely with hub prices. GasTerra discussed these new concepts with producers in 2012 and will be finalising plans with them in early 2013.

These new concepts allow GasTerra to adhere more fully with the Gaswet [Dutch Gas Act] that stipulates GasTerra’s public duty to place a bid for procurement of gas from small Dutch fields, if requested to do so. Consequently, every producer exploring for and exploiting gas reserves in the Netherlands is assured of a market for any gas actually found at market-standard prices and reasonable conditions. In doing so, GasTerra mitigates the producers’ risks and stimulates the development of smaller fields.

Shale Gas

shale gas may well lead to an increase in europe’s future natural gas reserves. shale gas is natural gas extracted from shale. The major difference between sandstone and shale extraction lies in the porosity of the gas-bearing rock layer. sandstone is more porous than shale allowing natural gas to flow more freely and to be extracted more easily. Additional measures need to be taken to make shale gas economically viable once the well has been drilled. The rock needs to be fractured in order to make it permeable enough for a gas flow to be established. This process is called hydraulic fracturing or fracking. This process involves pumping water, sand and other additives into the borehole under pressure. GasTerra views shale gas as an interesting future development, but attaches great importance to safety issues and public support for such activities. studies will be conducted in the Netherlands in early 2013 to assess the risks and impact of shale gas exploration and extraction in terms of public and environmental safety. No test wells may be drilled in the Netherlands until the results of the study have been published. GasTerra will be following developments closely and will continue to attach great importance to total transparency in this respect. In these early stages, it is uncertain what role shale gas extraction will play in the Netherlands in the years ahead. Given the value of natural gas to Dutch society, it is important that opportunities remain available to invest in responsible exploration and extraction.

Sundry Procurement

In 2012, GasTerra procured a total of 10.3 billion m³ from other sources. This principally comprised gas imported from Norway and Russia, procurement from virtual trading points, e.g. the TTF and NBp. This is 4 billion m³ less than in 2011. This is attributable to a drop in procurement levels across the board from all supply sources mentioned. Norway and Russia were once again the largest foreign importers in 2012. GasTerra also imported smaller volumes from other countries. procurement contracts also contain provisions for interim renegotiations in a similar way to sales contracts in order to keep them in line with market conditions. For some time now, supply and demand in the Netherlands have been matched on the TTF. prices at this virtual trading point set the prices for the Netherlands as a whole.

VSS

GasTerra has been providing the private sector with options to contract out the storage of natural gas for volumes of up to 1.95 billion m³. This service is known as its virtual storage service (Vss). Vss provides the private sector an option to organise its physical portfolio more easily and/or to make trading profits by procuring gas at

a relatively low price, to store it virtually and then to sell

it at a later stage at a higher price. This product is sold in the form of standard bundled units (sBUs) that remain valid for one storage year (April to April). Gas to be injected or produced is supplied on the TTF. Available sBUs – a total of over 13.2 million – are offered via an

Natural Gas 83 billion m 3 Food 1 billion people
Natural Gas
83 billion m 3
Food
1 billion people

What is the equivalent of the total volume of natural gas (83 billion m³) supplied by GasTerra when expressed in terms of food?

The energy content of 83 billion m³ of natural gas is the same as the amount of energy consumed in the form of food and drink by one billion people.

83 billion m 3 of natural gas = food for 1 billion people

Total

World Population

One billion

people

people Total World Population One billion people 35 independent entity, the ApX eNDeX. In February 2012,

35

independent entity, the ApX eNDeX. In February 2012, all

sBUs were fully sold for the second year in a row. In

November 2012, the ApX eNDeX organised its first

auction for the period April 2013 to April 2014. Two

million sBUs were sold at this auction. The second auction

for the year 2013/2014 will be held in February 2013.

Gas Procurement Footprint

GasTerra has conducted studies into its gas procurement

footprint as part of its CsR policies. This involved

examining CO 2 emission levels per m³ of natural gas

produced, processed and transmitted to neighbouring

countries. This study revealed that Dutch gas is extracted

to the highest international standards and transmitted

the shortest distances. Gas produced in the Netherlands

therefore has a smaller footprint than gas that europe

imports from other countries. Gas traded by GasTerra

therefore has a favourable footprint given that GasTerra’s

portfolio largely consists of Dutch gas. Gas’ footprint with

regard to extraction and transmission is relatively low

compared to usage.

Climate Studies

A portion of the demand for gas is temperature

dependent. In order to guarantee its contractual supply

obligations, GasTerra evaluates its planning with respect

to various climate scenarios. In doing so, it bases its

studies on pre-defined, standard climate scenarios

published in 2006 by the Koninklijk Nederlands

Meteorologisch Instituut (KNMI) [Royal Netherlands

Meteorological Institute]. These climate scenarios are

however relatively general, whereas GasTerra is

principally interested in peak winter demand for its gas.

In 2009, GasTerra and NAM requested that the KNMI

study current and future lower-temperature scenarios.

These studies were completed in 2012. The study also

confirmed global warming, in line with previous

expectations. Consequently, there is no reason for

GasTerra to alter the basic assumptions currently being

adopted. Furthermore, the KNMI also concluded that

future cold spells would follow current patterns in terms

of both progression and duration. Recent winters may

therefore be used as good examples on which to base

forecasts. In 2013, the KNMI will be presenting its next

set of climate scenarios. GasTerra will determine whether

any reasons exist to adjust its planning assumptions based

on these scenarios.

36 | GAsTeRRA ANNUAl RepORT 2012

37

Transmission Capacity Allocation Balancing
Transmission Capacity Allocation Balancing

Transmission Capacity Allocation

Balancing

The european Commission and eU member states are

A

draft code for harmonising european balancing systems

 

also addressing the Capacity Allocation Mechanism (CAM)

is

currently being assessed by the european regulators.

Transmission

European Legislation

network code that is aimed at allocating new and existing

The balancing system arranges how gas entry and exit is

Tariffs

GasTerra acquires the right to feed gas into transmis- sion networks at entry points and to extract gas from exit points by procuring transmission capacity.

The Third Energy Package took effect in the Netherlands in 2011. This package is aimed at promoting cross-border competition, greater

transmission capacity more efficiently. One of the components of the proposed network code is that transmission capacity should be consolidated at border points.

managed by network users and, if necessary, the network operators themselves. The Dutch balancing system was drastically overhauled in 2011. This system can largely be retained based on the proposed draft code. GasTerra

Transmission capacity is provided by the transmission system operators (TsOs). GasTerra’s principal TsO is GTs,

customer choice and more competitive rates. This was implemented still further in 2012.

Congestion The european Commission finalised its Congestion

agrees to the proposal.

the operator of the Dutch national gas transmission

Internal Energy Market

Management procedures (CMp) guidelines in 2012. parties

A

start has been made on drafting a network code

network. GTstariffs are regulated by the Netherlands Competition Authority (NMa). GasTerra also procures

european government leaders are heralding 2014 as the year in which the internal european energy market comes

legislation concerning access to transmission systems is

have to reserve the transmission capacity in advance that they anticipate using. sometimes, capacity shortfalls arise

containing guidelines for transmission tariffs. Tariff systems are intended to reflect the costs of transmission

transmission capacity from BBl Company and National Grid

into full effect. With this in mind, european legislative

and at other times, shippers’ reserved capacity is not fully

to

the greatest extent possible. Cost structures do

for export to the United Kingdom. Total costs for procuring

activities in 2012 focused on strengthening the position

utilised. These guidelines are intended to resolve

however vary from country to country. GasTerra is of the

transmission capacity in 2012 were €505 million. This is a decrease of €203 million with respect to 2011. This is a

of the consumer, on achieving greater liquidity on wholesale markets and on harmonising access to inter-

contractual congestion problems at border points. The first measures will be implemented on 1 October 2013. The

opinion that a one-size-fits-all approach will not work. Initial proposals appear to have made some compromises

continuation of the trend that emerged in previous years. This drop can partially be attributed to increased trading levels on the TTF. GasTerra only pays for entry costs when trading at virtual points. The purchasing party pays the exit costs. In addition to structural tariff reductions, temporary

national transmission systems. The last category of measure potentially has the greatest implications in store for GasTerra.

CMp guidelines contain various procedures including those for sale of greater capacity than is available (overbooking and repurchasing arrangements), return of contracted capacity, and fixed day-ahead and long-term use it or lose it mechanisms. The last mechanisms are drastic measures

in

this respect.

Investment Procedures The capacity allocation code regulates the allocation of existing transmission capacity, but does not address how

GTs tariff reductions also contributed to lower transmission

being drafted in greater detail in the form of european

that GasTerra believes should only be used as a last resort.

or

when investments are needed in additional capacity or

costs in 2012. These were the result of GTscommitment to retroactively reimburse the market approximately €400 million for the years 2012 and 2013.

network codes. Transmission companies, network users and regulatory bodies have been involved in drafting these network codes. The european Commission shall

It is still unclear what these guidelines hold in store for the Netherlands. The principal question for the Dutch regulator is whether contractual congestion exists at Dutch

what signs on the market might prompt new investments. These issues may potentially be addressed in a new code as a supplement to existing codes. GasTerra places great

formalise these codes on approval by the member states and once member states have made their opinions known.

border points and if so, what measures are the most suitable for tackling this congestion.

importance on the role played by the private sector with regard to consumers not having to foot the bill for unnecessary investments. In the Netherlands, the open- season procedure has been adopted whereby private-

38 | GAsTeRRA ANNUAl RepORT 2012

39

sector companies are free to register for any additional transmission capacity. GasTerra prefers this arrangement, as long as it is adapted to match existing best practice models.

Energy Transition in Europe

At the end of 2011, the european Commission presented its energy Roadmap 2050. This document discussed possible paths to reducing greenhouse gas emission levels in europe by eighty to ninety-five per cent by 2050 with respect to 1990. This roadmap forms the basis for several of the Commission’s policy-making activities that may affect the role of gas in the future energy supply. For instance, studies are being conducted to investigate how the CO 2 emissions trading system can be improved. This system aims to reduce greenhouse gas emission levels at the lowest cost possible. An essential question in this respect is the extent to which this system is affected by alternative policy-making tools that are specifically aimed at promoting renewable energy sources and energy efficiency. An interim european goal needs to be formulated for the period up to 2030. GasTerra is a pro- ponent of an ambitious goal aimed solely at CO 2 emission level reductions. GasTerra is an active member of several platforms involved in gas advocacy activities. Its aim in this respect is not only to make it clear that gas can play a major facilitative role in the transition to more sustainable energy sources, but that it also plays a continuing role in an economy in which greenhouse gas emissions have largely been eliminated.

Financial Regulation

europe is currently amending its financial regulations as a result of the global financial crisis. A sector-specific regulation was approved in 2011 for the energy sector – Regulation in energy Markets Integrity and Transparency (ReMIT). This includes a prohibition on insider dealing and market manipulation. GasTerra has established a compliance programme to prevent insider trading and market manipulation (see p. 62). In 2012, GasTerra placed

a ReMIT announcement on its website on one occasion.

The regulation also stipulates that traders have to report their deals to european regulators. The regulators are still working on the details of this reporting system. Regulation on OTC derivatives, central counterparties

and trade repositories – known as the european Market Infrastructure Regulation (eMIR) – also came into effect

in 2012. The Markets in Financial Instruments Directive

(MiFID) is also currently being discussed by european bodies. The applicability of this financial regulation to GasTerra depends on the definition of the term financial instrument and options for indemnity. GasTerra’s products are physically supplied to end users and therefore are not covered by the definition of a financial instrument. This is why it is not anticipated that this regulation will be applicable to GasTerra.

that this regulation will be applicable to GasTerra. Dutch Legislation Energy policy was also a topic

Dutch Legislation

Energy policy was also a topic of discussion at a national level in 2012.

Energy Transition in the Netherlands

The Dutch government aims to promote production of renewable energy supplies and has raised its goals for the share of renewable energy by 2020 from fourteen to sixteen per cent. The question as to which policy tools will be used to achieve these goals has yet to be answered – continuation of subsidy-based policies or the commitment from suppliers to produce a certain percentage of their total energy supply from renewable sources? The Dutch government also aims to make small-scale, localised power generation more viable. The Dutch government is endeavouring to achieve wider public support for its energy plans for sustainable growth. The social and economic Council of the Netherlands (seR) is providing a platform for implementing these plans in 2013. GasTerra would be glad to contribute towards implementing such an agreement.

Legislative Streamlining

The Dutch government is currently revising the elektriciteitswet [Dutch electricity Act] and the Gaswet [Dutch Gas Act] to achieve simplification, fewer rules and less ambiguity. GasTerra is positive about this initiative.

Market Competition

In 2011, the Netherlands Competition Authority (NMa) and GasTerra agreed to a package of measures aimed at improving market competition. These measures have been very successful, e.g. GasTerra’s virtual storage service has been met with great interest and trade on the TTF has grown spectacularly. In GasTerra’s opinion, market intervention is unnecessary other than implementation of european network codes.

Natural Gas 83 billion m 3 Work 2.2 billion people
Natural Gas
83 billion m 3
Work
2.2 billion people

What is the equivalent of the total volume of natural gas (83 billion m³) supplied by GasTerra when expressed in terms of human work?

The energy content of 83 billion m³ of natural gas is the same as the amount of energy generated by 2.2 billion people cycling non-stop for the duration of one year.

people cycling non-stop for the duration of one year. Approximately 2.2 billion people cycle non-stop for

Approximately 2.2 billion people cycle non-stop for one year

83 billion m 3 of natural gas = work output of 2.2 billion people

41

3 of natural gas = work output of 2.2 billion people 41 Risk Management Risk management

Risk Management

Risk management plays a crucial role at GasTerra.

Sound risk policies allow our company to concentrate

fully on its core business, i.e. trading in natural gas,

without being faced with any unpleasant surprises.

Risk management is firmly embedded within our

company’s processes and is an integral part of

management control processes. This manifests itself in

the form of a planning and control cycle and a system of

business controls.

documentation and reporting. The basic premise is that

line management throughout the entire organization is

responsible for identifying risks and responding

appropriately to mitigate these risks.

Review

GasTerra regularly reviews the effectiveness of its risk

management policies and procedures by carrying out

internal audits. Activities are assessed across all

departments and at all levels on an annual basis. These

assessments are summarised in the Document of

Representation. All these risk-related activities are

supervised by the Audit Committee appointed by the

Board of supervisory Directors.

Principal Risks and Uncertainties

Planning and Control Cycle

At regular risk meetings, we pinpoint the principal risks

GasTerra drafts a strategic plan every year for its planning

and uncertainties facing GasTerra. In doing so, strategic,

and control cycle. This plan is based on anticipated

operational and financial risks are examined, as well as

developments on the european gas market and

financial reporting, legislative and regulatory risks.

incorporates strategic long-term decisions. We then

principal risks and uncertainties include the following

translate these into short-term and medium-term business

issues:

plans and budgets. Results are compared to targets set

in the business plan in monthly and quarterly reports.

Price Risks

This is carried out in a structured fashion based on

Turnover from gas sales and natural gas procurement

management control standards that require risk and

costs are closely related to gas and oil prices. These gas

management measures be analysed at various levels.

and oil prices are set on free trade commodity markets

Business Controls

The business control system also has a set structure. It

consists of risk analyses, control measures,

and can vary greatly in response to supply and demand

forecasts. Gas supply and procurement prices are set at

various instants prior to delivery. It is essential that these

price risks be monitored carefully. In doing so, GasTerra

42 | GAsTeRRA ANNUAl RepORT 2012

43

uses a system whereby prices set in contracts are reviewed against various price references. This allows the type of price-fixing and the moment of pricing to be monitored carefully and to be adjusted, if necessary.

Customer Creditworthiness GasTerra has implemented credit policies that require customers to provide additional security if deemed insufficiently creditworthy, as it is common practice to pay in arrears for gas supply contracts.

Commercial Renegotiations long-term gas procurement and sales contracts generally contain renegotiation clauses that allow the contract’s terms & conditions to be amended under certain conditions during the contract’s term. GasTerra conducts regular negotiations and renegotiations with suppliers and customers concerning its long-term gas procurement and sales contracts. It is not possible to arrive at a reliable estimate of the outcomes of these renegotiations.

Increasing Planning Uncertainty Gas procurement from the Groningen gas field is highly temperature-dependent, but other factors also play a role. Market liberalisation and developments on the TTF offer GasTerra’s customers a wider range of options to procure gas from other suppliers. It has therefore become more difficult to predict how customers will utilise the volume flexibility provided for in our gas contracts. This has prompted GasTerra to hold back additional resources in

order to be able safeguard delivery security as stipulated in its contracts. GasTerra has been adapting its planning procedures in response to these trends, so that delivery security can be safeguarded in the future based on contractual obligations and efficient operations. In doing so, GasTerra is making major strides towards achieving one of its main CsR objectives – Gas 3 – to safeguard delivery security (see p. 47).

Financial Energy Market Regulations Financial regulations are currently being amended at a european level (see p. 38). A portion of the sector-specific ReMIT regulation took effect in 2011. The remainder of these regulations and their impact on GasTerra’s processes and systems are still highly uncertain, which is why GasTerra will continue to follow these developments very closely.

Borrowing Requirements

GasTerra only has short-term borrowing requirements that are hedged by GasTerra’s commercial paper programme of €1 billion and committed credit lines of €50 million.

Governance

Governance at GasTerra has been outlined in Appendix 4 on its website.

at GasTerra has been outlined in Appendix 4 on its website. Corporate Social Responsibility GasTerra’s mission

Corporate Social Responsibility

GasTerra’s mission states that GasTerra shall endeavour to maximise the value of Dutch natural gas reserves. This mission statement serves as the basic premise for setting goals, including its corporate social responsibility-related objectives.

Consolidation

The word ‘value’ in our mission statement relates to the public, economic and ecological importance of natural gas as a source of energy. public and economic interests manifest themselves as the sale of Dutch gas and the performance of legal public obligations to promote small- field production as part of Dutch small fields policies. ecological interests arise from the fact that gas is the least polluting fossil fuel and that it plays an important role in the transition to more sustainable energy sources, as well as a continuing role in an economy in which greenhouse gas emissions have largely been eliminated. At GasTerra, these public, economic and ecological interests have been embedded into the company cornerstones – Gas, Green and Groningen.

Objectives in 2012

In 2012, GasTerra translated its main CsR objectives (see p. 47) into twenty-eight tangible sub-objectives. These included actively informing its employees about legislation

and regulations. This sub-objective formed part of one of its main CsR objectives – Gas 5 (see p.47). GasTerra also wanted to map out gas’ production and transmission footprints. This formed part of another of its main CsR objectives – Green 1 (see p. 47). progress towards achieving these objectives was reported each quarter to the Board of Management and shareholders. The objectives mentioned above, as well as the majority of the other sub-objectives, were achieved. The CsR board established in 2010 monitored the progress and integration of CsR policies into GasTerra’s total business cycle. This report is based on the Global Reporting Initiative’s third-generation guidelines (G3.1). A GRI Table has been included in the index (see Appendix 2) that lists which GRI indicators can be found in this report. GasTerra has only reported on those tangible sustainability issues that are applicable to the company in accordance with GRI guide- lines. These were selected in consultation with the various layers of management involved.

GasTerra opted to have its report assessed against GRI guidelines by an external party. According to the assessment, we met the C+ standard as we did last year. setting a higher standard is not realistic at this moment. A large portion of the GRI guideline indicators are aimed at companies with physical production processes requiring raw materials, consuming high levels of energy, and thus producing waste and emitting harmful gases. These were not all applicable to GasTerra. We are a trading organization and were unable to report on these indicators.

44 | GAsTeRRA ANNUAl RepORT 2012

44 | GAsTeRRA ANNUAl RepORT 2012 Stakeholder Dialogue Businesses maintain relations with countless groups and individuals

Stakeholder Dialogue

Businesses maintain relations with countless groups and individuals who have an interest in these businesses’ activities for one reason or another – these are the stakeholders. In addition to the obvious stakeholders such as shareholders, customers and employees, stakeholders also include organizations and bodies with specific interests, e.g. national and European governments and associated political bodies, especially governing bodies, NGOs and the media. The company’s very existence is directly linked

NGO's

NMa/DTe

Media Government, politicians, parliamentaries Environment Trade Customers organizations Shareholders Producers
Media
Government, politicians,
parliamentaries
Environment
Trade
Customers
organizations
Shareholders
Producers &
suppliers
Personnel

to these stakeholders’ actions and they therefore play an essential role in GasTerra’s policy-making. Meaningful interaction with stakeholders can only be achieved if we actually listen to them. This conviction forms the basis for GasTerra’s annual stakeholder dialogue.

In 2012, GasTerra consulted with its stakeholders (see diagram) for the second time about tangible issues. last year’s questionnaire on tangible issues and their associated definitions were used as the basis for the stakeholder dialogue. The term supply chain management was split into upstream supply chain management (from source to GasTerra) and downstream supply chain management (from GasTerra to the customer). We also critically examined the definitions, clarifying them wherever necessary in response to feedback from stakeholders on the 2011 dialogue.

six stakeholder groups were consulted in 2012. As in 2011, the questionnaire was presented to shareholders and customers – two stakeholder groups important to GasTerra. Various departmental employees, producers and policy-makers also took part in the stakeholder dialogue. GasTerra also approached two media parties, but they indicated that they did not wish to participate in the 2012 dialogue. In 2011, one NGO was consulted. No signi- ficant shifts had been anticipated within this particular stakeholder group, which is why it was not approached in 2012. These organizations will be approached again in 2013 and asked to participate in the stakeholder

45

dialogue. Given our relocation, it was also deemed essential to approach local residents. Industrial associations have not yet been involved in stakeholder dialogues because it is believed that the industry’s opinions are very closely aligned with those of GasTerra.

Stakeholder Analysis Results

The stakeholders approached explained their choices to a GasTerra employee using the completed questionnaire. They were also given the opportunity to present their own supplementary tangible issues, but no use was made of this option. As in 2011, all stakeholders felt that GasTerra’s social and economic contributions were very important. principally the shareholders, suppliers and employees felt that it was important for GasTerra to capitalise mineral resources as fully as possible. This is aligned with our mission statement. The stakeholders interviewed also foresaw a major role for GasTerra in the process of energy transition – primarily in the fields of research, knowledge sharing and promoting natural gas’ role. GasTerra has been working on these areas with its educational and knowledge-sharing projects, its environmental plan for Industry and projects focusing on local applications. As part of the energy transition process, accountability of GasTerra’s supply chain management towards customers and users was felt to be very important. The parties consulted also indicated that they felt it to be very important that GasTerra invest in the local community (Groningen). Upstream supply chain management was not deemed to be GasTerra’s responsibility. The same applied to

security of supply and delivery. Both issues were felt to be important, but stakeholders indicated that they thought GasTerra’s role in this respect was limited. According to stakeholders, responsibility for long-term supply security rested with the market. In terms of short-term delivery security, GasTerra only had to fulfil its contractual obligations. It is the direct supplier’s responsibility to ensure delivery security in the event of a serious incident or cold weather. GasTerra was generally not the direct supplier and therefore had very little contribution to make in this respect.

The stakeholders interviewed also indicated that they felt it to be important that GasTerra adhere to regulations and that it operate transparently. Diversity on the work floor, equal opportunities and career advancement were also felt to be important issues, as were GasTerra’s efforts to minimise its burden on the environment as a result of its operations. No significant shifts in opinion are expected with regard to these topics.

The foremost tangible issues arising from the stakeholder analysis were linked to the main CsR objectives and incorporated into the matrix at p. 47.

Stakeholder Analysis Evaluation

The stakeholder dialogue is one of the cornerstones upon which policies, the annual report and the business plan are based. Given that no major shifts in opinion arose as compared to the 2011 stakeholder analysis, no significant alterations shall be made in these respects. GasTerra

46 | GAsTeRRA ANNUAl RepORT 2012

hereby concludes that it is charting the correct course.

stakeholders will once again be asked for their opinions in

2013 and subsequent years.

CSR/Business Plan Integration

every year, GasTerra drafts a business plan. This contains

GasTerra’s foremost activities for the years ahead cast in

the light of current and anticipated developments on the

north-west european gas market. GasTerra endeavours

to operate in a proactive, structured and socially

responsible manner with regard to all its activities. This is

why we opted to fully integrate our CsR objectives into

our business plan in 2013. GasTerra will therefore no

longer refer to a CsR policy as a separate entity. Reporting

forms an important part of monitoring the objectives set

in the business plan, so that it is possible to determine if

and to what extent progress is being made.

Tangible Issues Main CSR Objectives for 2012
Tangible Issues
Main CSR Objectives for 2012

Financial Results/ Impact on Natural Gas Revenues

Energy Transition,

Research and

Development

Compliance/

Competition Law

Supply Chain

Management

Accountability

Security of Supply and Delivery

Community

Investments

Gas 1

Contributing to natural gas revenues

x

Gas 2

Developing commercially appealing products

x

x

Gas 3

Safeguarding customers’ delivery security in line with market standards and legislation

x

x

Gas 4

Promoting gas as a relevant fuel in the future energy mix

x

x

x

Gas 5

Adhering to external legislation and regulations, as well as internal codes of conduct and procedures

 

x

Green 1

Promoting efficient use of gas

 

x

x

Green 2

Sharing knowledge about making energy supplies more sustainable and increasing understanding of natural gas’ role in the energy transition

 

x

x

Green 3

Promoting sustainable business practices

x

Groningen 1

Establishing a pre-eminent knowledge centre for energy supply sustainability in Groningen

 

x

x

Groningen 2

Actively and visibly participating in Groningen society

 

x

x

Natural Gas 83 billion m 3
Natural Gas
83 billion m 3
Natural Gas 83 billion m 3 Wind Turbines 24.000 turbines What is the equivalent of the

Wind Turbines

24.000 turbines

What is the equivalent of the total volume of natural gas (83 billion m³) supplied by GasTerra when expressed in terms of wind power?

The energy content of 83 billion m³ of natural gas when converted to electricity is the same as the amount of energy generated by 24,000 5-MW wind turbines.

the amount of energy generated by 24,000 5-MW wind turbines. 24,000 offshore wind turbines 83 billion

24,000 offshore

wind turbines

83 billion m 3 of natural gas = 24,000 wind turbines

49

Green Gas
Green Gas

GasTerra started actively trading in green gas in 2012.

Reading the market, it would appear that demand for

green gas currently outstrips supply. GasTerra is actively

looking to expand its green gas portfolio by approaching

parties with a positive ReIs programme (Renewable

energy Incentive scheme) for green gas production

projects. sugar producer suiker Unie, waste management

and energy utility company HVC and energy supplier

Green gas is produced by means of waste or manure

Greenchoice all started supplying GasTerra with green gas

fermentation, or biomass gasification. enriching this gas

in 2012.

allows gas to be produced with the same quality and

properties of natural gas. Hence, it can be supplied to

Suiker Unie

customers via the existing transmission network. The

In 2011, GasTerra signed declarations of intent with

major advantage of green gas is that it is a renewable

suiker Unie and bio-fuel producer BioMCN for the annual

energy source. It is therefore a fully renewable alternative

procurement and sale of over 10 million m³ of green gas.

to natural gas. This is why GasTerra is an advocate of

In 2012, these declarations were converted into

green gas production. Currently, relatively low volumes of

procurement and sales contracts. suiker Unie will be

green gas are being produced, but production capacity

producing 10 to 12.5 million m³ of green gas per year by

over the next few years will grow rapidly. To help promote

fermenting leftover sugar beet. We will be purchasing this

this process, GasTerra entered into a Green Deal

green gas and delivering it to BioMCN with a Vertogas

agreement with the Dutch government and the private

green gas certificate. This company will be using the

sector in 2011 specifically for green gas. GasTerra has

gas to produce second-generation bio-methanol. suiker

committed itself to trading all the green gas transmitted

Unie’s biomass fermentation plant officially started pro-

via national transmission networks as long as it is at a

duction on 21 November 2012.

going market price and is certified (see p. 50).

Supply and Demand

As mentioned, the supply of green gas has until now

been fairly limited in terms of both volume and the

number of suppliers. Green gas production costs are

significantly higher than current market prices for natural

gas. As well as that the supply of biomass is also limited.

HVC

HVC also started supplying green gas to GasTerra in

2012. In doing so, this waste management and energy

utility company became both a customer and a supplier

to GasTerra. In its first year, HVC supplied approximately

1 million m³ of green gas. HVC uses an entry point on

the high-pressure transmission network in Zwolle (unique

50 | GAsTeRRA ANNUAl RepORT 2012

51

in the Netherlands) and the low-pressure transmission

network in Middenmeer. In 2013, it is anticipated that HVC’s production will be ramped up to over 4 million m³. GasTerra will also be procuring the green gas produced by HVC in 2013 and 2014.

Greenchoice

A green gas procurement contract was also signed with

Greenchoice in 2012. This agreement covers the procurement of green gas from six production facilities. GasTerra absorbs variations in Greenchoice’s green gas production levels in its own portfolio and then supplies gas back to them in the required profile.

Certification

GasTerra does not want to procure any green gas that cannot be adequately verified as being green in origin. This is why we have imposed four conditions in this respect (see Appendix 6 on our website). GasTerra is prepared to procure gas labelled as green gas if its

producer or the production facility satisfies one or more

of these conditions.

Stichting Groen Gas Nederland

The stichting Groen Gas Nederland (GGNl) [Dutch Green Gas Foundation] signed a partnership agreement with the energy Delta Institute (eDI) in 2012. These organizations – partly financed by GasTerra – together aim to make knowledge about green gas more accessible 1by holding seminars, producing educational material and publishing online. GasTerra also actively contributes to sharing knowledge about sustainable gas supplies. In 2012, we published a book about green gas in the series De Wereld van Aardgas [‘The World of Natural Gas’].

De Wereld van Aardgas [‘The World of Natural Gas’]. Knowledge and Education Knowledge and education enable

Knowledge and Education

Knowledge and education enable the energy sector and society to find answers to current and future energy-related issues. GasTerra views it as its duty to help spread and add to this knowledge, and to support educational activities in this field. This is not only important to the energy sector as a whole, but also provides a service to society at large. Society can only tackle its energy-related challenges if it can make responsible decisions based on sufficient information and unbiased consideration of economic and ecological interests. This is why GasTerra has included the provision of information about sustainable energy supplies as one of its main CSR objectives (see p. 47).

In order to continue building a future based on renewable energy supplies, GasTerra aims to broaden knowledge about energy among young people, policy-makers, executives, decision-makers and other stakeholders. This is a subject area that stakeholders felt was an important role for GasTerra to play (see p. 46). GasTerra has been fulfilling this role with initiatives including television programmes Green Dream District and Watt Nu? [‘Watt Now?’], and educational material for HAVO [Dutch senior general secondary education] and VWO [Dutch pre- university education] curriculums. In 2012, GasTerra invested €2.4 million into knowledge and education,

the largest portion of which was allocated to the energy Transition Model (eTM). The foremost projects under- taken in 2012 have been outlined below. A listing of all knowledge-based and educational projects can be found in Appendix 7 on our website.

Energy Transition Model

GasTerra is the main sponsor of the eTM developed by Quintel Intelligence. This model allows the effects of energy-related choices to be visualised. The eTM is accessible online at www.energietransitiemodel.nl.

Energy Podium Debate and Energy Podium Dinners

The debating site www.energiepodium.nl – a GasTerra initiative established in 2011 to promote energy sector dialogue – appears to be a great springboard for initiating other activities that are aligned with GasTerra’s knowledge-based and educational objectives. In 2012, the second energy podium Debate was held in the presence of a hundred energy experts. At various locations throughout the Netherlands, twelve energy podium Dinners were also organised at which a group of energy-sector executives, politicians, business owners, scientists and environmental experts discussed a pre-defined topic aided by the energy Transition Model. To date, 134 people have participated in these dinners.

52 | GAsTeRRA ANNUAl RepORT 2012

53

Energy Academy Europe

GasTerra is actively involved in the energy Academy europe (eAe) and thereby works very closely with the University of Groningen, the Hanze University of Applied sciences Groningen and the energy Valley Foundation. The eAe plays an important role in achieving one of GasTerra’s main CsR objectives – Groningen 1 – to establish a pre-eminent knowledge centre for energy supply sustainability in Groningen (see p. 47). The eAe opened its doors in september 2012 admitting three hundred students looking to follow energy-related study programmes. The aim is to expand this number to three thousand students in ten years’ time by admitting overseas students as well. Consequently, the eAe will be growing in the years ahead to become a pre-eminent international institute of education for energy-related studies – an internationally respected centre of excellence. It aims to achieve this by investing in education, research and innovation.

Ameland Hydrogen Convention

The energy sector has been experimenting for some time now with techniques to produce hydrogen using sustainably generated electricity. energy surpluses can then be stored or deployed differently in a quick and timely fashion. GasTerra, eneco, Joulz and stedin have been testing the effects of mixing hydrogen into the gas supply in fourteen homes at the Noorderlicht apartment complex in Nes (Ameland). Hydrogen has been injected into natural gas mains there since 2007. Results for this pilot project were presented at the Ameland Hydrogen

Convention on 20 september 2012. project partners noted that users experienced no negative effects even at levels of up to twenty per cent hydrogen. The mixture also appeared to have had no detrimental effects on various types of piping and gas appliances in use, e.g. He boilers and stoves.

World Gas Conference

GasTerra is a member of the International Gas Union (IGU). The IGU promotes knowledge sharing between members to advance the gas sector’s technical and economic progress, and to act as a sector lobbyist. Once every three years, the IGU organises a World Gas Conference (WGC) somewhere in the world. The event consists of a convention and a trade fair. In 2012, the theme was Gas: sustaining Future Global Growth. Various natural gas-related topics were addressed during discus- sions, presentations and workshops. GasTerra participated in the trade fair together with Dutch companies A. Hak, ApX-eNDeX, DNV Kema, eBN, energy Delta Institute, Gasunie and TNO. Joint staffing on the stand was aimed to demonstrate that the Netherlands is a true natural gas nation and that we have a lot of expertise relating to various aspects of the natural gas supply chain. This was put into words under a joint banner – The power of Dutch Gas.

Project Delta Group

The project Delta Group (pDG) is a public-private partner- ship. The Dutch Ministry of economic Affairs, Dutch knowledge institutes and the Dutch business world joined forces as part of this partnership, as did GasTerra. For two years now, the pDG and the Russian natural gas company Gazprom have been working together to promote technological innovation and project-based cooperation between both nations aimed at advancing sustainable energy sector development. Gazprom has been applying the results of this partnership by reducing the environmental impact of new projects in terms of their CO 2 emissions, landscape pollution, burn-off and light/ noise emissions. In 2012, the independent Clingendael International energy programme (CIep) published a briefing paper about this partnership programme under the title energiediplomatie nieuwe stijl: publiek private samenwerking [‘New-style energy Diplomacy – public- private partnership’]. This acknowledged the benefits of public-private partnerships and postulated that a similar approach would also be applicable to partnerships with other countries.

Innovation
Innovation

GasTerra has gained extensive experience and expertise relating to natural gas’ role in the Dutch energy supply. Consequently, we can guarantee the quality of our products and services. However, this expertise also allows us to explore the energy sector for other sustainable options that have hitherto remained unexplored. In doing so, we promote the efficient usage of natural gas – one of our main CSR objectives – Green 1 (see p. 47).

As the driving force behind various innovative projects, we look to find new insights and energy applications for ourselves and our sector partners. This is just one way in which GasTerra is contributing to the future of energy. The most innovative development in recent years has been the further refinement of the fuel cell. A listing of all the innovative projects in which GasTerra was involved in 2012 can be found in Appendix 7 on our website.

Fuel Cells

GasTerra aims to test fuel cells on a wider scale and in various built and residential environments. These cells are small-scale CHp plants that use natural gas to generate heat and electricity in a particularly efficient fashion. The Apeldoorn-based research institute Kiwa will be performing studies on this type of fuel cell on GasTerra’s

Natural Gas 83 billion m 3 Solar panels 3100 m 2
Natural Gas
83 billion m 3
Solar panels
3100 m 2

What is the equivalent of the total volume of natural gas (83 billion m³) supplied by GasTerra when expressed in terms of solar panels?

The energy content of 83 billion m³ of natural gas, when converted to electricity, is the same as the amount of energy generated by 3100 km² of solar panels.

This is an area approximately comparable to the size of the Province of South Holland.

comparable to the size of the Province of South Holland. 83 billion m 3 of natural

83 billion m 3 of natural gas = 3100 km 2 of solar panels

55

behalf until the end of 2013. The aim of this research is

to determine which fuel cells are the most suitable for use

in Dutch built environments. Fuel cells are being sent to

Apeldoorn from all over the world and adapted for use

with Groningen natural gas. Fuel cells will then be tested

for efficiency and emissions. If fuel cells prove to be

suitable for use in Dutch homes, then they will be

subjected to long-term trials. If these trials prove positive,

then a pilot project will follow in homes.

Fuel cells have already been installed in homes in Haren

(Groningen), Amsterdam and more recently – in 2012 –

at the enTranCe energy test bed at the Hanze University

of Applied sciences Groningen (ten units). GasTerra is

also making preparations to connect fifty fuel cells to the

electricity grid in Ameland in 2013. This is part of a virtual

power plant project that also incorporates a solar panel

farm. Fuel cells are intended to balance the electricity

grid supply. For example, if the solar panels are producing

too little electricity, e.g. at night or in cloudy conditions,

then the fuel cells will be activated to cover the shortfall.

Comparable pilot projects are being prepared for 2013

and 2014 in Heerhugowaard, Groningse Veenkoloniën

and Hooghalen.

in Heerhugowaard, Groningse Veenkoloniën and Hooghalen. Sponsorship Businesses sponsor worthy causes and GasTerra is

Sponsorship

Businesses sponsor worthy causes and GasTerra is no

exception in this respect. In doing so, we primarily

focus on the city and region of Groningen – and

for good reason. The major portion of GasTerra’s

portfolio consists of Groningen gas and our office

is located in Groningen. In short, although we are a

major player on the European gas market, we remain

primarily a Groningen company. In doing so,

GasTerra aims to achieve one of its main CSR

objectives – Groningen 2 – to actively and visibly

participate in Groningen society (see p. 47). By

sponsoring, we aim to achieve four objectives – to

improve our name recognition and company image,

to establish a network of business relations, to

contribute to cultural, social and sporting life in the

city and the region, and to broaden knowledge about

energy-related issues. In total, GasTerra spends €1.3

million on sponsorship.

sponsorship of the premier division basketball club

GasTerra Flames is the most prominent of our sponsorship

activities, but the GasTerra ladies Run, the Groninger

Museum and the swingin’ Groningen jazz festival have

also attracted a lot of attention in recent years. GasTerra is

also the main sponsor of the prince Claus Conservatoire

and the peter the Great Festival. In 2012, GasTerra

56 | GAsTeRRA ANNUAl RepORT 2012

engaged in several other new sponsorship activities. One of these new activities was the Tour for life – a 1,200-km charity cycle tour from the Italian alps to Cauberg in south limburg (Nl). GasTerra entered its own team of employees who raised over €40,000 for Doctors Without Borders.

who raised over €40,000 for Doctors Without Borders. Tour for Life – a 1,200-km charity cycle

Tour for Life – a 1,200-km charity cycle tour from the Italian alps to Cauberg in South Limburg (NL).

A listing of all the organizations and initiatives that

GasTerra supported in 2012 can be found in Appendix 8

on our website.

Name Recognition Study

In 2012, we investigated the effectiveness of GasTerra’s

first sponsorship objective – improved name recognition and company image – among specific company target groups. This study was performed by research firm Newcom. The study focused on the general public in the city of Groningen, the province of Groningen, the Netherlands as a whole, NGO policy officers and representatives from the media. The study’s results became known in February. The conclusion was that GasTerra’s name recognition had grown significantly in recent years in the city of Groningen. seven years after its inception, fifty-three per cent of respondents knew GasTerra. Across the whole of the Netherlands, this figure was much lower – a mere eight per cent. This should be

no surprise given that our sponsorship activities are aimed

at

Groningen. The foremost source of name recognition

is

the GasTerra Flames basketball club (77%), but by

no means the only source. sponsorship of the swingin’ Groningen jazz festival and eurovoetbal account for thirty-two per cent, as well as the GasTerra ladies Run

(26%) and exhibitions at the Groninger Museum (30%). Few, however, know what GasTerra is or does, even in Groningen. Nevertheless, the company’s image is positive

– GasTerra’s involvement in the community is appreciated and its motives for doing so are trusted.

57
57

In November, we also organised a youth chess tournament for the first time ever. Some 94 children aged 6 to 15 came to GasTerra’s offices to compete in various age categories.

Advertising

In 2011 and 2012, GasTerra added form to its ‘I am part of the solution’ advertising campaign. As part of this campaign, people from various back- grounds explained how they are part of the solution in their worlds of sport, music or GasTerra itself. Their messages were linked to a central message that natural gas is also part of the solution because it forms an indispensable link in the transition to renewable energy supplies. please visit the www.iampartofthesolution.nl website for more information. GasTerra also uses the slogan I am part of the solution internally. For instance, employees could vote for a series of pre-selected charities under the slogan Vote for a solution. The winner was stichting Hulphond [Dutch Assistance Dog Foundation]. The campaign is being continued in 2013. Waste management and energy utility company HVC will be explaining how they are part of the solution in partner- ship with GasTerra. An unusual form of advertising has been joint participation in production of television programmes with specific themes closely aligned to those of GasTerra’s CsR objectives. A prime example is Watt Nu?

[‘Watt Now?’], a quiz programme broadcasted on RTlZ in which well-known and lesser-known experts discussed future sustainable energy sources for the Netherlands. policy-makers, captains of industry and leading scientists explained what measures Dutch government and the business world need to take now in order to achieve these goals in the future. every sunday, two guests were asked to defend their points of view. Discussions were hosted by Dutch presenter Joris putman. GasTerra and four industry partners contributed to the broadcasts in terms of both finances and content.

58 | GAsTeRRA ANNUAl RepORT 2012

58 | GAsTeRRA ANNUAl RepORT 2012 Personnel and Organization GasTerra strives for optimal professional development for

Personnel and Organization

GasTerra strives for optimal professional development for all its employees as part of its staff policies. We encourage employees to develop themselves professionally and to acquire skills that are relevant to our field of work. In this respect, GasTerra creates opportunities and options for career and skill development. We also encourage on-the-job coaching and allow employees to study, to take courses and to receive coaching regardless of their position or age.

Age structure and m/f distribution

Numbers per age group Number of women (58) Number of men (142) 25-29 30-34 35-39
Numbers per age group
Number of women (58)
Number of men (142)
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-65
>65
25
20
15
10
5
0
0
5
10
15
20
25
30
35
40

Staffing Levels and Composition

GasTerra’s workforce is characterised by its stability. Two hundred people worked at GasTerra in 2012. Four employees entered employment at GasTerra in 2012 and nine employees left its employment. GasTerra attributes low numbers of employees leaving employment to high employee satisfaction levels (see p. 61).

GasTerra’s management team (MT) comprised four directors and four heads of department in 2012. Their average age was 52.5. One change took place within the management team in 2012. Maarten Blacquière stepped down as Chief Financial Officer as of 01 December 2012. He was succeeded on 15 January 2013 by Maurice de Wilde. De Wilde was previously finance manager for shell in Gabon. GasTerra’s middle management comprised twenty staff members including three women. Their average age was 47.1.

Total number of employees (200)

Average employees age (40.47)

Permanent employment contract (96%)

Fulltime-equivalents incl. temp. staff (211.8 fte in 2012)

Fulltime-equivalents ex. temp. staff (189 in 2012)

59

Training and Career Development

The 2012 training budget equated to 3.2% of the wage sum. GasTerra provided a wide range of individual training schemes using this budget. Training courses that GasTerra deems essential for its staff are fully reimbursed. Numerous employees followed a course of study in 2012 at the energy Delta Institute that GasTerra helped establish. GasTerra reimburses ninety per cent of tuition fees – assuming successful course completion – for study programmes that it deems less directly relevant, but that nonetheless are of added value in terms of career development. large-scale training and/or development programmes instigated by GasTerra were put on hold in 2012 in order to prepare for and to relocate its office premises in March, and to prepare for new-style working. GasTerra also continued its active job rotation policies whereby staff are

Personnel and Organization

policies whereby staff are Personnel and Organization Entering Leaving Changing External Absenteeism

Entering

Leaving

Changing

External

Absenteeism

Absenteeism

Number of

employment

employment

job position

secondment

percentage

rate

accidents

4

9

18%

3

1.4

1.2

0

encouraged to change job and/or department after a set period. In 2012, eighteen per cent of staff changed jobs within GasTerra. external secondment is also an available option. Three employees made use of this option in 2012.

New-Style Working

Following initial steps towards relocation and new-style working in 2011, we continued investment in 2012 in internal awareness for and about the changes already underway and those still to come. examples included the migration to a new ICT environment, far-reaching digitalisation (read paperless) operations and gradual transition to flexible, device-assisted working. Before the summer, employees were provided with additional information in various forms about the relocation, changes within GasTerra and implications for our work activities. Various resources were deployed to achieve this including newsletters, intranet, presentations and project team visits to various departments. The 2013 training and development programme will largely be defined by the switch to new-style working.

Staff Recruitment

staff recruitment remains limited due to the stability of the organization’s workforce. Very few employees left GasTerra’s employment due in part to high employee satisfaction levels (see p. 61). Despite major benefits such as retention of knowledge and experience, GasTerra also foresees a downside in this respect. low influx will ultimately result in an imbalance in staff composition. One objective of GasTerra’s HRM policies is to establish a

60 | GAsTeRRA ANNUAl RepORT 2012

61

gradual turnover of its staff. GasTerra also endeavours to maintain a balanced staff composition in terms of gender and ethnic origin, and to recruit locally. This can be seen in GasTerra’s participation in Noorderlink – a joint initiative in which various large employers across the northern Netherlands have joined forces to advertise job vacancies on the Noorderlink website. GasTerra has not adopted any target figures for women in management positions or other specific target groups, but aims for a well-balanced composition within the organization when recruiting and selecting new personnel. In 2013, GasTerra actively used linkedIn for staff recruitment purposes. We also placed news, reports and interesting energy-related insights on our linkedIn page.

Employment Terms & Conditions

The applicable collective labour agreement expired on 01 January 2012. GasTerra and company trade union VpG² agreed on a new collective labour agreement for the period from 01 January 2012 to 01 January 2013. Discussions about a new collective labour agreement started at the end of October 2012. VpG² has a very high level of membership within GasTerra – approximately eighty-five per cent of its employees are union members. last year, the collective labour agreement applied to 176 employees. Twenty-four employees were not covered by this agreement.

In 2012, GasTerra joined the stichting pensioenfonds Gasunie [Gasunie pension Fund]. At year end 2012, its coverage ratio was 105%. In the course of 2013, it will be

announced whether a funding deficit exists or whether an additional payment is required for the GasTerra ring fence. The short-term recovery plan implemented in 2011 shall remain in force.

The original association agreement between GasTerra and the stichting pensioenfonds Gasunie was terminated as of 01 January 2013 when Gasunie announced that it intended to alter the pension scheme. GasTerra shall continue its participation in the fund in accordance with the original pension scheme’s terms until January 2014 by means of a temporary association agreement. In this time, GasTerra will be exploring options for a new pension scheme.

Health and Safety

The mandatory Risk Inventory and evaluation (RI&e) revealed that the risks at GasTerra as an office organization were very limited. personal health, safety and the environment nonetheless remain the highest priority at GasTerra. In October 2012, GasTerra therefore held an evacuation drill to test its company emergency response team’s (CeRT) readiness and its company contingency plan. staff should be able to carry out their work as safely as possible and are obliged to report unsafe situations immediately. In mid-2012, work started on drafting an RI&e for the new office premises. It is anticipated that this inventory will be completed and approved by the staff council by April 2013. The CeRT organization is also preparing itself for the pending relocation.

The staff council evaluates working conditions within the company on an annual basis together with the company medical officer. GasTerra also discusses various working condition-related themes on a regular basis with a special staff council committee. In 2012, six meetings were held. stress (burn-out) and RsI symptoms form the most relevant risks for GasTerra’s employees. GasTerra also wants to ensure its employees’ safety on the road. employees who travel by car for business purposes receive a driving skills course every other year. The last training course was held in October 2012. It is prohibited for GasTerra employees to make telephone calls while driving, as studies have shown that even hands-free calling results in a higher likelihood of an accident.

In 2012, no accidents were reported to GasTerra. Absenteeism is also encouragingly low at 1.4%. In 2012, the absenteeism rate, i.e. the average no. of incidents of employees reporting sick per employee per year, was 1.2.

Employee Satisfaction

GasTerra attaches great importance to employee satisfaction in terms of their work activities and opportunities. Up until now, an employee satisfaction survey has been held every other year. In 2012, this survey was held in the autumn. Results were made known in December. The survey revealed that compared to similar organizations GasTerra’s employee satisfaction levels are above average. GasTerra staff are generally satisfied with their work activities, working conditions and management. They gave their employer an average score of 7.5.

This was an increase of 0.1 with respect to 2011. In order to assess the impact of relocation and new-style working, it has been decided to hold another employee satisfaction survey at the end of 2013.

Objections, Complaints and Abuses

GasTerra implemented a system of confidants, complaints procedures and a whistleblower scheme for any objections, complaints and abuses that cannot be resolved among colleagues and managers.

In 2012, no use was made of the whistleblower scheme and no abuses were reported. None of the confidants was approached in the past year and no complaints were submitted to the committee.

62 | GAsTeRRA ANNUAl RepORT 2012

63

62 | GAsTeRRA ANNUAl RepORT 2012 63 Codes of Conduct and Procedures GasTerra has had a

Codes of Conduct and Procedures

GasTerra has had a Board of Management-defined code of conduct in place since its inception that includes standards intended to promote and safeguard the quality and integrity of the way GasTerra’s employees do business. These standards are based on two core values – integrity and respect.

All GasTerra employees receive the code of conduct on joining the company that they are expected to endorse. The code of conduct is also brought to everybody’s attention within the organization on a regular basis. GasTerra has drafted various supplementary rules and procedures designed to ensure compliance with external legislation and regulations. These form part of one of GasTerra’s main CsR objectives – Gas 5 (see p. 47). The most important of these rules and procedures have been listed below:

Competition Law Compliance The code of conduct explicitly states that employees adhere to Dutch and european rules of conduct. These were elaborated upon for GasTerra’s purposes in 2009 as part of its Competition law Compliance programme. A compliance officer was appointed who is responsible for implementing this programme. A component of this programme involves a mandatory course that is held every

year and is intended to make staff more aware of the importance and the company’s obligations to adhere to legislative and other regulatory requirements applicable to GasTerra. The code of conduct and procedures discussed below are also addressed. potentially problematic situations are pinpointed and staff are made aware of what they may and may not do in any given situation. In 2012, ninety-six per cent of employees took the compliance course. GasTerra also holds regular internal audits to ensure compliance with legislation and regulations. GasTerra employees may not share any competitively sensitive information with third parties and have to explicitly distance themselves from any competitively sensitive information that third parties may try to impart. This ruling forms part of the Competition law Compliance programme.

Ancillary Activity Ruling employees must ensure that their interests or business activities do not conflict with the company’s interests in compliance with the code of conduct.

Anti-Bribery and Corruption Procedures The basic principles for giving and receiving gifts have been incorporated into the code of conduct. These principles have been defined in greater detail in several additional rulings that are intended to serve as guidelines for employees when deciding whether to give or receive a gift, what sort of gift this may be and what it may cost.

REMIT Compliance Procedures european regulations prohibit insider trading and stipulate that information that might constitute insider information be made public as quickly as possible. If GasTerra is privy to insider information, then it immediately ceases trading. Only once the information has been made public, e.g. via the GasTerra website, shall GasTerra reconvene trading (see p. 38).

Whistleblower Scheme A whistleblower scheme has been in force at GasTerra since 2007. employees who uncover severe abuses and whose reports fall on deaf ears within the organization can report abuses to the Chair of the Board of supervisory Directors or the Chief Financial Officer (CFO) in complete confidentiality. By doing so, they need not fear reprisal or unfair treatment.

doing so, they need not fear reprisal or unfair treatment. New Office Premises GasTerra is relocating

New Office Premises

GasTerra is relocating to new office premises in Groningen city centre in 2013. The building – dating back to the 1980s – was fully refurbished and modernised in 2012. A characteristic trait of the lease agreement with the building’s owner, Triodos Vastgoed BV, is its Green Lease construction. Investments in energy efficiency will result in significantly lower energy bills that will ultimately pay for the costs of refurbishment.

The installation of solar panels, triple-layer glass, thermal energy storage and leD screens raised the building’s energy label from the lowest G rating to the highest A+ rating. This is in line with GasTerra’s efforts to minimise its burden on the environment as a result of its operations, i.e. one of its main CsR objectives – Green 3 (see p. 47). This is also an objective that stakeholders appreciate as revealed during the stakeholder dialogue held in 2012 (see p. 45). The building has also been laid out for new- style working, i.e. no separate work areas, but an open office, where colleagues can communicate with one another in an optimal fashion and work flexibly in a less location- and time-constricted fashion. As part of the relocation, major strides were made in 2012 in terms of digitalisation. Departmental archives were first digitalised followed by personal archives.

64 | GAsTeRRA ANNUAl RepORT 2012

Countless administrative processes have also been digitalised. This resulted in reduced paper usage in 2012 of forty-one per cent with respect to 2011. GasTerra anticipates that usage will decrease still further in 2013.

Footprint Compensation

GasTerra anticipates that energy consumption in 2013 will decrease with respect to 2012 thanks to the energy- efficiency of the new office premises. In the building on the Rozenburglaan, GasTerra used 2,119 m³ of gas from December 2011 up to and including November 2012. electricity consumption in 2012 was 777 MWh. last year, GasTerra compensated for its travel-related CO 2 emissions with assistance from the Climate Neutral Group. In 2011, compensation was made for approximately 110 tons of CO 2 . GasTerra compensated for its CO 2 emissions via the Climate Neutral Group by financing a biogas project in Cambodia. GasTerra also anticipates that car usage will also decrease next year. The new premises – close to Groningen Central station and the limited number of parking spaces at this location – should encourage employees to make greater use of public transport and bicycles.

Procurement of Goods and Services

Relocation to new premises also prompted expiring facility management service contracts to be re-examined. As one of its bid criteria, GasTerra’s tender requested a statement about how suppliers dealt with CsR-related issues. GasTerra also made agreements about the employment of people with challenges finding suitable work, e.g. people with an occupational handicap or the long-term unemployed.

Response

If you should have any queries or comments in relation to this annual report, then please contact GasTerra’s Communications department. Contact details can be found on p. 90.

to this annual report, then please contact GasTerra’s Communications department. Contact details can be found on

66 | GAsTeRRA JAARVeRslAG 2012

67

Annual Accounts 2012

The 2012 annual accounts comprise the following:

Balance sheet as on December 31 (before profit appropriation)

68

profit and loss account

69

statement of cash flows

70

explanatory notes to the annual accounts

71

68

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Balance sheet as on December 31(before profit appropriation)

69

69

profit and loss account

in millions of Euros Assets

note

2012

2011

in millions of Euros

note

2012

2011

Fixed assets

 

Net turnover

(5)

23,381.4

21,095.0

-

tangible fixed assets

(1)

36.6

32.9

Cost of sales

(6)

-/-23,366.4

-/-20,991.0

Current assets

(2)

Gross profits

15.0

104.0

- receivables

 

3,437.9

3,512.8

Operating expenses

(7)

-/-63.6

-/-60.0

- cash and bank

 

259.2

575.2

 

Operating profit

-/-48.6

44.0

 

Total

3,733.7

4,120.9

Net financial income and expenses

(8)

96.6

4.0

Liabilities

 

Results on ordinary activities before tax

48.0

48.0

shareholders’ equity

(3)

216.0

216.0

Taxation

(9)

-/-12.0

-/-12.0

Current liabilities

(4)

3,517.7

3,904.9

 

Results after tax

36.0

36.0

 

Total

3,733.7

4,120.9

70

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statement of cash flows

71

71

explanatory notes to the annual accounts

in millions of Euros Cash flow from operating activities

2012

2011

Principles for valuation and determination of results

1

Foreign currencies GasTerra B.V. (hereinafter referred to as GasTerra) limits its foreign exchange risk by concluding short-term forward exchange contracts.

Operating profit

-/-48.6

44.0

Adjustments for

General The annual accounts have been drawn up in accordance with the statutory provisions of Title 9, Book 2 of the Dutch Civil Code (BW). Unless otherwise stated, assets and liabilities are recognised at nominal value. The principles applied as the general basis for the valuation for assets and liabilities and the determination of results, are the historical costs.

- depreciation and impairment losses

9.4

7.8

 

- movements in receivables

74.9

1,035.3

Cash and bank balances, trade receivables and current liabilities in foreign currency are stated at the prevailing exchange rate as on the balance sheet date.

- movements in current liabilities (excluding short-term financing)

-/-387.2

-/-191.5

Cash flow from operations

-/-351.6

895.6

 
 

The exchange rate differences for gas exports and gas imports are recorded under gas sales and gas purchases respectively. Other exchange rate differences are recorded under financial income and expenses.

Interest received

98.0

11.9

Interest paid & financing costs

-/-1.4

-/-7.9

Tax paid

-/-12.0

-/-12.0

Comparative figures have been adjusted where required to improve comparison.

 

84.6

-/-8.0

 
 

Fixed assets Tangible fixed assets Tangible fixed assets are valued at the historical purchase price or production cost, less straight-line depreciation over the economic life of the asset.

Cash flow from operating activities

-/-266.9

887.6

Estimates and uncertainties In preparing these annual accounts, assessments, estimates and assumptions were made that affect the recorded amounts. These relate in particular to the net turnover and the costs of sales (including transport costs). The assessments, estimates and assumptions that have been made are based on market data, knowledge and experience and other factors that are considered reasonable in the given circumstances. Any details relating to estimates and evaluations are, if relevant, included in the explanatory notes to the balance sheet and the profit and loss account below.

Cash flow from investment activities

Investments in tangible fixed assets

-/-13.1

-/-11.3

Cash flow from investment activities

-/-13.1

-/-11.3

 

Cash flow from financing activities

Tangible fixed assets that have not been completed as on the balance sheet date are included under ‘Fixed assets under construction’. After the relevant asset has been put into use, it will be classified under the main category ‘Fixed assets’, that includes primarily software.

Movements in short-term financing

0.0

-/-270.0

Dividends paid

-/-36.0

-/-36.0

Cash flow from financing activities

-/-36.0

-/-306.0

Movements in cash and bank balance

-/-316.0

570.3

The depreciation periods applied are between five and ten years. Any impairment of assets that is expected to be permanent is taken into account.

 

Cash and bank at year-end

259.2

575.2

Cash and bank at preceding year-end

575.2

4.9

Movements in cash and bank balance

-/-316.0

570.3

72

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| GAsTeRRA JAARVeRslAG 2012

Current assets Receivables The receivables are valued at the amortised cost taking collectability risks into account. Trade receivable also include sales that have not yet been invoiced.

Pensions GasTerra has adopted a defined benefit pension scheme.

The starting point is that pension charges to be processed

in the reporting period are equal to the pension premiums

owed to the pension fund during the same period.

A provision is also included as on the balance sheet date

for existing additional obligations with respect to the fund

and the employees if it is likely that an outflow of resources will be required in order to settle these obligations, and the scope of the obligations may be reliably estimated. The presence or absence of additional obligations is assessed based on the administration agreement decided on with the fund, the pension agreement concluded with the employees, and other commitments made to the employees. The provision

is valued at the best estimate of the cash value of the

amounts that will be required to settle the obligations on the balance sheet date. To the extent this obligation relates to the upcoming financial year, this is recorded in the current liabilities account.

Current liabilities The current liabilities are valued at the amortised cost, and involve liabilities with a term of no more than one year. Amounts payable also include purchases that have not yet been invoiced. Amounts received from, or to be charged to, clients due to a decreased purchase of gas under ‘take-or-pay’ agreements are recorded under current liabilities as an obligation to deliver. The obligation to deliver arising from the receipt of gas in the storage service is also recorded under current liabilities.

Derivative financial instruments (derivatives) The company uses derivative financial instruments within the course of its normal business activities. These are forward exchange contracts for hedging the foreign exchange risk of receivables and payables in foreign currencies, and gas price swaps to hedge the price risk of gas contracts with a fixed price.

The company applies cost hedge accounting techniques in order to incorporate the results from value adjustments of the forward exchange contracts and the gas price swaps, simultaneously with the hedged receivable or payable, in the profit and loss account. Forward exchange contracts and gas price swaps are initially valued at cost. As long as the forward exchange contract or the gas price swap relates to an expected future transaction, the forward exchange contract or the gas price swap will not be revalued. As soon as the hedged position of the expected future transaction leads to the processing of a financially active or a financial obligation, the profits or

73

73

losses tied to the forward exchange contract or the gas price swap will be recorded in the profit and loss account during the same period as that in which the active obligation or obligation entered into has an effect on the profit or loss.

GasTerra concludes gas purchase contracts and gas sale contracts as part of its business operations. These contracts are concluded for the actual physical delivery and receipt of gas in accordance with the company’s expected purchases or sales levels, or usage requirements. For this reason, these fall outside of the scope of RJ 290 (reporting standard).

Gas sales and gas purchases The pricing of natural gas for both the sales and purchasing sides is influenced to a significant degree by the prices of other energy carriers, as well as by developments in the spot market price for natural gas.

In addition, GasTerra’s shareholders have decided on an agreement that relates to the potential after-tax profits GasTerra can earn. This agreement stipulates that the price of the natural gas from Groningen sold by the Nederlandse Aardolie Maatschappij B.V. (NAM) to GasTerra during the year has been set such that GasTerra will retain the after-tax profits determined for that year by the shareholders.

Net turnover Net turnover is divided into gas sales and other net turnover.

Gas sales represent the income from the supply of gas and the income from the corresponding services provided, after deducting the tax assessed on the turnover. Other net turnover is represented primarily by the income from the delivery of services to third parties. This income results primarily from flexibility services.

The income is recorded during the reporting period in which the gas was delivered and the services were provided.

A distinction is made between services related to making transport capacity and flexibility available and actual usage. The services are considered to have been provided if they were made available to the client during the agreed time period.

Cost of sales The cost of sales consist mainly of the cost of the purchase of gas and the associated services, the transport costs and the costs related to underground gas storage.

74

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75

75

Operating expenses The expenses are determined on a historical basis, taking into account the principles for valuation mentioned previously, and are allocated to the reporting period to which they relate. losses are recorded during the reporting period in which provisions for them may be made.

Statement of cash flows This report provides a statement of the cash flows generated. The indirect method is used to determine the cash flow from operating activities, based on the operating results in the profit and loss account.

2

Explanatory notes to the balance sheet

 

Tangible fixed assets (1)

In millions of Euros

Book value as on 1 Jan. 2012

Investments

Depreciation

Book value as on 31 Dec. 2012

 

equipment

26.6

11.7

9.4

28.9

 

Assets under construction

6.3

1.4

-

7.6

Net financial income and expenses This item includes the income and expenses related to financing.

 

Total

32.9

13.1

9.4

36.6

In millions of Euros

Purchase value as on 31 Dec. 2012

Cumulative depreciation as on 31 Dec. 2012

Corporation tax The amount of corporation tax to be included in the

equipment

64.1

35.1

Assets under construction

7.6

-

profit and loss account is calculated based on the results determined according to this account, in due observance

Total

71.7

35.1

 

of the valid tax-related provisions and rates.

 

Current assets (2) Receivables (in millions of Euros)

31 Dec. 2012

31 Dec. 2011

A provision is made for deferred taxes for temporary

Trade receivables

3,351.3

3,167.1

discrepancies between the book value of the assets and

Taxation

-

325.9

liabilities for financial reporting purposes and the tax base.

Other receivable amounts

86.6

19.8

A

deferred tax asset will only be recorded to the extent

Total

3,437.9

3,512.8

in

which it is likely that taxable profits will be available in

the future that may be applied towards the temporary discrepancy.

None of the receivables have a term longer than one year.

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77

77

Shareholders’ equity (3) Issued capital The authorised and issued capital totals €180 million, and is divided into 40,000 shares, each of €4,500 nominal value. The issued capital, that is paid in full, is divided as follows:

Unappropriated profit In millions of Euros

Financial instruments General The company uses derivative financial instruments within the course of its normal business activities. These are forward exchange contracts for hedging the foreign exchange risk of receivables and payables in foreign currencies, and gas price swaps to hedge the price risk of gas contracts with a fixed price.

Interest rate risk The interest rate risk is limited to potential changes in the market value of funds withdrawn and issued. It is company policy not to use derivative financial instruments to manage fluctuations in interest rates (on an interim basis or otherwise).

Balance as on 1 January 2012

36.0

 

Appropriation of the results for the 2011 financial year in accordance with the resolution of the General Meeting of shareholders

-/- 36.0

eBN B.V.

40%

Liquidity risk To limit its liquidity risk GasTerra has at its disposal a commercial paper programme of €1.0 billion and a committed credit line of €50 million at the end of 2012.

esso Nederland B.V.

25%

Unappropriated profit for the 2012 financial year

36.0

shell Nederland B.V.

25%

The company does not trade in derivative financial instruments.

staat der Nederlanden

10%

Balance as on 31 December 2012

36.0

Current liabilities (4) In millions of Euros

31 Dec. 2012

31 Dec. 2011

Credit risk The credit risk consists of the loss that would be generated if customers or other parties were to remain in default as of the reporting date and fail to fulfil their contract obligations. The company has drawn up guidelines to which customers or other parties must comply. These guidelines limit the risk associated with possible credit concentrations and market risks. If customers or other parties fail to comply with these guidelines, they will be asked to furnish additional security. This prevents the company from running any major credit risks in respect of any individual customer or counterparty.

Foreign currency risk GasTerra’s policy is to fully hedge the currency risks that arise from purchases and sales at the time the receivables or payables manifest themselves.

Amounts payable for gas purchases

1,798.8