grid services Annual Report 2017

Transcription

1 grid services Annual Report 2017

2 Gasunie Grid Services B.V annual report (as of 2 January 2018, legally merged with Gasunie Transport Services BV)

3 Contents Management... 3 Management Report... 4 Risk management... 6 Financial statements of Gasunie Grid Services B.V Balance sheet as at 31 December (before profit appropriation)... 8 Profit and loss account for the financial year... 9 Notes to the financial statements Accounting policies Notes to the balance sheet Notes to the profit and loss account Other information Provisions of the Articles of Association governing profit appropriation

4 Management B.J. Hoevers, Managing Director H.B. Botter, Commerce & Regulation Manager A.F. Elzinga, Finance & Control Manager R.W.J. Zanting, Gas Transport Manager & interim Network Development Manager D.L. Zelhorst, Asset Management Manager Ms A.J. Krist was Managing Director from 1 January until 28 February 2017, when she left the company. Mr I.M. Oudejans was designated interim Managing Director as of 28 February 2017, and on 1 September, B.J. Hoevers was appointed Managing Director. Mr K. Niemeijer was Commerce & Regulation Manager until 1 October 2017, when Ms H.B. Botter was appointed to this position. Mr B.J. Hoevers was Network Development Manager until 1 September Mr R.W.J. Zanting was appointed interim Network Development Manager as of 1 September Mr E.E. Lycklama à Nijeholt was Information Management Manager until 1 June This position no longer exists. 3

5 Management Report General Gasunie Grid Services B.V. (GGS B.V.) was established on 1 January 2016 and is the owner and operator of the RTL gas transport network that was split off by Gasunie Transport Services B.V. (GTS B.V.). The gas transport networks of GGS B.V. and GTS B.V. together form the national gas transport network as defined in the Dutch Gas Act. GGS B.V. provides network services to GTS B.V. and is responsible for the management and development of its gas transport network. Mission GGS B.V. delivers network services in a customeroriented and transparent way. Safety, reliability, sustainability and costeffectiveness are central in everything we do. We serve the public interest, and work as professionals to create value for our stakeholders. Vision GGS B.V. aims to be an organisation that supports the objectives of national network operator GTS B.V., responds flexibly to changes in its surroundings, enables new gas flows and facilitates the introduction of sustainable energy. GGS B.V. network The assets relating to the RTL network are owned by GGS B.V. and include the RTL pipelines, regional pipelines and metering and regulating stations. GGS also shares the use of a number of assets owned by GTS B.V., such as offices, buildings and IT facilities. GGS B.V. business model GGS B.V. s core services comprise the management and development of its gas transport network. GGS B.V. makes its network services available to GTS B.V. GGS B.V. receives a contractually agreed allowance for providing these network services to GTS B.V. This allowance is based on the gas transport revenues generated by GTS B.V. as national gas transport network operator at the network points in the GGS B.V. network. Merger of GTS and GGS The new method decision for has led to new agreements between ACM, market parties and GTS. One of these agreements is that GTS will reverse the split, and continue as the national network operator for both the main transport network (HTL) and the regional transport network (RTL). The continuance of GGS B.V. as an independent corporate entity therefore has no added value. Consequently, a decision has been made to merge GTS B.V. with GGS B.V. as of 2 January

6 Key figures In millions of euros Revenues Total expenses (207.6) (285.2) Operating result 1.0 (27.6) Finance income and expenses (0.9) (0.9) Result before taxation 0.1 (28.5) Taxes Result after taxation 0.1 (21.4) Revenues The net revenue of million reported in our financial statements represents income from network services provided. The decrease in total revenues is related to the reduced permitted revenues as determined by the Dutch regulator ACM in the Method Decision for the regulatory period Total expenses The total expenses of GGS B.V. amount to million, consisting entirely ( million) of regular expenses. In 2017, the expenses decreased by 78 million compared to This is the result of the impairment applied in 2016 to the valuation of the gas transport network. Financing As of 1 January 2016, GGS B.V. is financed entirely by equity. Investments In 2017, we focused on our multiyear replacement programme. Total investments in 2017 amounted to 94.7 million. HRM GGS B.V. employees are employed by N.V. Nederlandse Gasunie, and have been seconded to GGS B.V. for an indefinite period. Codes of Conduct and compliance with laws and regulations GGS B.V. complies with Codes of Conduct, laws and regulations in a manner consistent with that of its shareholders GTS B.V. and N.V. Nederlandse Gasunie. For more information, please refer to the extensive section on risk management in the annual report of GTS B.V. 5

7 Gas transport results Our network services and infrastructure activities are at the heart of our strategy. We carry out these activities as efficiently as possible. In collaboration with GTS B.V., we take care of the development of the gas transport network and ensure that it is functioning well. We achieve this by guaranteeing transport security, and by managing and developing our gas transport network. Safety, reliability, sustainability and costeffectiveness are central in everything we do. For more information on the national gas transport network operator, please refer to the 2017 annual report of Gasunie Transport Services B.V. Transport security The uninterrupted transport of gas is one of our main business goals. The gas transport is seldom disrupted. Through efficient operation of our network, and proper management and maintenance of our infrastructure, we create the best possible conditions for a high transport security. Within our company, the reliability of gas transport has a high priority. In 2017, we achieved almost 100% transport security. There was just one brief disruption in the gas supply to an industrial customer. Our investigation into the cause of this disruption concluded that the procedures were satisfactory, and in this case it was the result of human error. Risk management Every year, GTS s management performs a Strategic Risk Assessment, which is integrated into the business planning and control cycle. This assessment is based on a time horizon of 5 10 years. For more information on the national gas transport network operator, please refer to the 2017 annual report of Gasunie Transport Services B.V. Bart Jan Hoevers Groningen, 27 March

8 Financial statements of Gasunie Grid Services B.V. 7

9 Balance sheet as at 31 December (before profit appropriation) In millions of euros Notes Assets Fixed assets tangible fixed assets 1 1, ,164.8 deferred tax assets Total 1, ,334.3 Equity and liabilities Equity issued share capital share premium 4 1, revaluation reserve other reserves result for the year /21.4 1, ,278.9 Provisions Current liabilities 9 other debts 0.2 Total 1, ,

10 Profit and loss account for the financial year In millions of euros Notes Revenues Other operating revenues Total operating revenues Other operating expenses 14 (168.8) (169.4) Depreciation costs 2 (38.8) (37.6) Impairments (78.2) Total expenses (207.6) (285.2) Operating result 1.0 (27.6) Finance income and expenses 15 (0.9) (0.9) Result from normal business operations before taxation 0.1 (28.5) Taxes Result after taxation 0.1 (21.4) 9

11 Notes to the financial statements Preparation and adoption of the financial statements The 2017 financial statements were prepared by the Management on 27 February The financial statements as prepared were submitted for adoption to the General Meeting of Shareholders on 8 March Nature of business operations Gasunie Grid Services B.V. (GGS B.V.) was established on 1 January 2016 and is the owner and operator of the RTL gas transport network that was split off by Gasunie Transport Services B.V. (GTS B.V.). The gas transport networks of GGS B.V. and GTS B.V. together form the national gas transport network as defined in the Dutch Gas Act. GGS B.V. provides network services to GTS B.V. and is responsible for the management and development of its gas transport network. GGS B.V. s core services comprise the management and development of its gas transport network. GGS B.V. makes its network services available to GTS B.V. GGS B.V. receives a contractually agreed allowance for providing these network services to GTS B.V. This allowance is based on the gas transport revenues generated by GTS B.V. as national gas transport network operator at the network points in the GGS B.V. network. Gasunie Grid Services B.V. buys services from N.V. Nederlandse Gasunie and Gasunie Transport Services B.V. Gasunie Grid Services B.V., Gasunie Transport Services B.V. and N.V. Nederlandse Gasunie have laid down the agreements with respect to this collaboration in such a way that transport security and the safety of gas transport are guaranteed. The company has its registered office at Concourslaan 17, Groningen, the Netherlands, and is registered with the Chamber of Commerce under number GTS B.V. holds all outstanding shares with voting rights in GGS B.V. as at the balance sheet date, and N.V. Nederlandse Gasunie (Gasunie) holds all shares with profitsharing rights in GGS B.V. Basis of preparation The financial statements have been prepared in accordance with the statutory provisions regarding financial statements of Part 9 of Book 2 of the Dutch Civil Code. Management judgements and estimates In preparing the financial statements, management makes estimates and assessments which affect the assets and liabilities presented as at the balance sheet date and the result for the financial year. The judgements and estimates are particularly important for the valuation of fixed assets, the provision for abandonment costs and redevelopment, and deferred taxation. If relevant, the nature of these judgements and assessments, and the related assumptions, are stated in the notes to the items of the financial statements in questions. 10

12 Fixed assets Fixed assets relate to the gas transport network. Tangible fixed assets are valued at cost less straightline depreciation, based on their expected useful life, and taking into account residual value and impairments. To this end, assumptions were made about the useful life, the residual value and the future cash flows of the transport pipelines in particular. For more information, see note 1 to the balance sheet. Provision for abandonment costs and redevelopment A provision for abandonment costs and redevelopment is recognised in response to management decisions to decommission, remove or redevelop specific assets within the foreseeable future, for instance due to new legislation. Initially, the size of the provision was determined on the basis of general key figures, such as unit costs plus a generic project management surcharge. The size of the provision was reassessed in 2014 on the basis of experience figures derived from completed projects. For more information, see note 13 to the balance sheet. A provision for longterm general abandonment costs is not recognised because it is currently considered unlikely that the removal of transport pipelines and appurtenances will be needed. The income from alternative use (in the longer term) less the costs of conservation is anticipated to offset the costs of removal, including societal costs. Deferred tax assets A deferred tax asset is recognised for all deductible temporary differences and available carryforward losses, to the extent that it is likely that taxable profit will be available for setoff. To this end, assumptions have been made about future taxable profits. Gasunie Group The company is part of the Gasunie Group. The Group is headed by N.V. Nederlandse Gasunie, sole shareholder of the company s shares with profitsharing rights, whose sole shareholder is the Dutch State. The shares with voting rights in GGS B.V. are held by GTS B.V., a 100% subsidiary of N.V. Nederlandse Gasunie. The financial data of Gasunie Grid Services B.V. is consolidated into the financial statements of N.V. Nederlandse Gasunie. Cash flow statement Based on Dutch Guideline for Annual Reporting , Gasunie Grid Services B.V. does not prepare a separate cash flow statement. N.V. Nederlandse Gasunie, which is the sole shareholder in the company, includes the figures for Gasunie Grid Services B.V. in its consolidated financial statements. The Gasunie Grid Services B.V. data is therefore included within the consolidated cash flow statement, which is part of these annual financial statements. The financial statements of N.V. Nederlandse Gasunie have been filed at the Dutch Chamber of Commerce. Continuity With effect from 2 January 2018, the company merged with Gasunie Transport Services B.V., as defined in Part 7 of Book 2 of the Dutch Civil Code. As a result, Gasunie Transport Services B.V. acquired the shares without voting rights from N.V. Nederlandse Gasunie on 1 January Gasunie 11

13 Grid Services B.V. s entire equity therefore passed to Gasunie Transport Services B.V. by universal title on 2 January 2018, and Gasunie Grid Services B.V. legally ceased to exist. Gasunie Transport Services B.V. will continue the activities of Gasunie Grid Services B.V. in the same manner. Gasunie Transport Services B.V. is and remains the operator of the national gas transport network. This merger was initiated as a result of agreements between ACM, market parties and GTS ensuing from the new method decision for One of these agreements is that GTS will reverse the split, and continue as the national network operator for both the main transport network (HTL) and the regional transport network (RTL). The continuance of GGS B.V. as an independent corporate entity therefore has no added value. Consequently, a decision has been made to merge GTS B.V. with GGS B.V. as of 2 January Given that Gasunie Transport Services B.V. will continue the activities of Gasunie Grid Services B.V., this legal merger gives no grounds for any changes to Gasunie Grid Services B.V. s accounting policies. 12

14 Accounting policies General Unless stated otherwise, assets and liabilities are valued at acquisition or manufacturing cost. Financial instruments Financial instruments include primary financial instruments such as receivables, securities and debts, as well as financial derivatives. All purchases and sales in accordance with standard market conventions of financial assets are included as of the transaction date, i.e. the date on which the company enters into a binding agreement. For the accounting policies with regard to the primary financial instruments, see the explanation per balance sheet item. Setoff An asset and a debt item may be set off in the financial statements only insofar as: a sound legal instrument is available to set the asset off against the debt and settle both items simultaneously; and there is an emphatic intention to simultaneously financially settle the resulting balance or both items. Foreign currency The euro is the functional and reporting currency of the company. The financial statements have been prepared in euros. Transactions in foreign currencies are recognised at the rate of exchange of the functional currency on the transaction date. Monetary assets and liabilities denominated in foreign currencies are converted at the exchange rate as at the balance sheet date. Any resulting differences are recognised in the profit and loss account. Fixed assets Tangible fixed assets Tangible fixed assets are valued at cost less straightline depreciation, based on their expected useful life, and taking into account residual value and impairments. The residual value of the asset, the useful life and the valuation methods are reviewed and adjusted if necessary at the end of the financial year. Thirdparty contributions to the cost of construction of the gas transport network are deducted from the investments. The costs of major repairs are recognised in the carrying amount of the asset. Tangible fixed assets not yet completed as at the balance sheet date are recognised as fixed assets under construction. On commissioning, the relevant assets are classified according to their nature in one of the main categories. The volumes of gas and nitrogen permanently present in the pipelines and caverns needed for gas transportation and related services are included under other fixed operating assets. 13

15 Tangible fixed assets are classified in the following categories: Installations Regional transmission lines and related plant and equipment Other fixed operating assets Depreciation periods Transport pipelines will be depreciated until The depreciation period for installations is 30 years (on average). Gas stocks are not depreciated. Impairments of tangible fixed assets The company regularly (or with due cause) investigates whether an impairment should be applied to the value of tangible fixed assets. This involves determining the recoverable amount of the assets. The recoverable amount is the greater of its fair value less cost of disposal, and its value in use. If the recoverable amount is less than the current carrying amount, the difference is taken to the profit and loss account. Due to the nature of the assets, it is often not possible to determine the recoverable amount of each asset. In such cases, the recoverable amount is determined for the cashgenerating unit to which the asset belongs. If there is reason to do so, the company investigates whether the impairment recognised in previous periods no longer exists or has decreased. Revaluation reserve for tangible fixed assets On 1 January 2014, Gasunie Transport Services B.V. acquired ownership at book value from N.V. Nederlandse Gasunie of the gas transport network in the Netherlands and the associated assets, liabilities and operations. The revaluation reserve for tangible fixed assets was part of this transfer. This revaluation reserve came into being because on the date of the transition to IFRS, N.V. Nederlandse Gasunie chose fair value as assumed cost price to value the tangible fixed assets. This action applied one of the optional exceptions in IFRS 1 Firsttime Adoption of International Financial Reporting Standards. The management of N.V. Nederlandse Gasunie determined the fair value as at 1 January This value was then adjusted retroactively to 1 January 2004, the date of transition to IFRS. This led to a revaluation reserve for tangible fixed assets and a provision for deferred tax liabilities. The part of this revaluation reserve and provision that relates to the assets of Gasunie Grid Services B.V. was transferred to Gasunie Grid Services B.V. at the time of the split. The part of the revaluation reserve realised annually due to depreciation is transferred to equity under other reserves. Provisions The amount recognised as a provision is the best possible estimate as at the balance sheet date of the expenditure required to meet the existing commitment, taking into account the probability of the possible outcome of the event. If the time value of money is material, a provision is recognised based on the present value of the expenditure deemed necessary to settle the commitment. The discount rate is determined before taxation and takes into account the prevailing market assessments of the time value of money and the risks inherent in the commitment. 14

16 Provision for abandonment costs and redevelopment This provision is recognised due to management decisions to decommission, remove or redevelop specific assets within the foreseeable future, for instance due to new legislation. Longterm liabilities These are liabilities with a remaining term to maturity of more than one year, as well as repayment obligations on longterm liabilities falling due within one year. Interestbearing loans are initially recognised at the fair value of the proceeds less transaction costs. After initial recognition, interestbearing loans are subsequently carried at amortised cost based on the effective interest method. Current liabilities These are liabilities with a term of one year or less. Current liabilities are stated at amortised cost. Profits or losses are recognised in the profit and loss account as soon as the liabilities are no longer included in the balance sheet. Amortised cost Amortised cost is the amount for which a financial asset or financial liability is included in the balance sheet at initial recognition less principal repayments, and adjusted for any cumulative amortisation of the difference between the initial amount and the repayment amount calculated using the effective interest method, less any deduction for impairments or bad debts. Net revenue Net revenue is the sum of revenues earned by GGS B.V. for the supply of network services to GTS B.V. after deduction of discounts and taxes on these revenues, such as VAT. If the result of a transaction involving the provision of a service can be estimated reliably, the revenues relating to the service are recognised in proportion to the services performed in the financial year. Services relating to the provision of transport capacity are separate from actual use. They are deemed to have been supplied if the capacity was at the customer s disposal for the duration of the agreed period. Other operating expenses These costs are determined on a historical basis, taking into account the accounting policies set out above, and are allocated to the reporting period to which they relate. Losses are recognised in the reporting period in which they are foreseen. Finance expenses Included in this item are income and expenses relating to financing. Interest expenses are recognised in the profit and loss account on a straightline basis, taking into account the effective interest rate for the liability concerned. 15

17 Corporate income tax N.V. Nederlandse Gasunie and Gasunie Transport Services B.V. form a fiscal unity. These two parties have agreed that corporate income tax will be assigned to Gasunie Grid Services B.V. based on the fiscal result, as if Gasunie Grid Services B.V. were independently liable for tax. The immediate tax position of Gasunie Grid Services B.V. (based on the fiscal result) is settled directly with N.V. Nederlandse Gasunie. A deferred tax liability is recognised for all taxable temporary differences. A deferred tax asset is recognised for all deductible temporary differences and available carryforward losses, to the extent that it is likely that taxable profit will be available for setoff. Deferred tax liabilities and assets are stated at the undiscounted value. The tax rates used for the valuation are those that are expected to apply in the period in which the deferred tax items will be realised based on the tax rates and tax legislation in force as at the balance sheet date. The movements arising from tax rate changes are taken to the profit and loss account, except for movements relating to the revaluation of the tangible fixed assets as at 1 January 2004, the tax treatment of the purchase price paid by the Dutch State, actuarial gains and losses and the cash flow hedge reserve. These movements are recognised directly in equity. Tax assets and liabilities (deferred or otherwise) are netted, provided the general conditions for setting off tax items have been met. 16

18 Notes to the balance sheet 1. Impairment tests Whenever there is a triggering event, the company tests whether there is any impairment of tangible, intangible and financial fixed assets. When carrying out an impairment test, management makes assumptions, including assumptions regarding short and longterm developments in the relevant regulatory framework, makes estimates of aspects such as future cash flows, and determines the discount rate. These assumptions, estimates and judgements significantly affect the value in use. There is an impairment if the recoverable amount of an asset or group of assets is less than the carrying amount. The recoverable amount is the higher of its fair value less costs of disposal and its value in use. In 2016, the management treated the effective date of the Method Decision for (on which GTS rates are based, and thus also GGS revenues) as a triggering event. Based on the subsequent impairment test, management concluded that the impairment of the gas transport network in the Netherlands as at 31 December 2016 amounted to 450 million million of this impairment relates to Gasunie Grid Services B.V. The remaining part totalling million relates to Gasunie Transport Services B.V. Management has concluded that at yearend 2017, there was no indication of any need to conduct an impairment test on the tangible, intangible and financial fixed assets. 2. Tangible fixed assets In millions of euros Carrying amount as at 1 Jan Investments Disposals Depreciation Carrying amount as at 31 Dec Installations (0.5) (16.5) Regional transmission lines and related plant and equipment Other fixed operating assets Fixed assets under construction (2.5) (22.3) (26.7) 46.0 Total for 2017 financial year 1, ,

19 In millions of euros Carrying Splitoff of Investmen Disposals Depreciati Impairme Carrying amount regional ts on nts amount as at 1 gas as at 31 Jan transport Dec network Installations (0.7) (16.7) (22.9) Regional transmission lines and related plant (4.1) (20.9) (55.3) and equipment Other fixed operating assets Fixed assets under construction Total for 2017 financial year 1, (4.8) (37.6) (78.2) 1,164.8 In millions of euros Cost as at 31 Accumulated Cost as at 31 Accumulated Dec depreciation *) Dec depreciation *) as at 31 Dec. as at 31 Dec Installations Regional transmission lines and 1, , related plant and equipment Other fixed operating assets Fixed assets under construction Total 1, , *) Including any impairments 3. Deferred tax assets The temporary differences between the valuation in the financial statements and the fiscal annual accounts of Gasunie Grid Services B.V. give rise to the inclusion of deferred tax assets. They can be broken down as follows: In millions of euros 31 Dec Dec Tax treatment of the purchase price paid by the Dutch State Tangible fixed assets (115.6) (119.9) Total deferred tax assets

20 Tax treatment of the purchase price paid by the Dutch State When N.V. Nederlandse Gasunie was restructured, the Dutch State made a deemed capital contribution to the company for tax purposes in the form of a revaluation of the network for tax purposes. As a result, N.V. Nederlandse Gasunie applies additional depreciation for tax purposes applied with effect from The part of this deferred tax asset that is based on the revaluation of the assets of Gasunie Grid Services B.V. was transferred by Gasunie Transport Services B.V. to Gasunie Grid Services B.V. on 1 January 2017, as part of the splitoff of the regional gas transport network in the Netherlands. The movements in deferred tax assets are as follows: In millions of euros Balance as at 1 January Splitoff of regional gas transport network Movements taken to the profit and loss account (6.0) 8.8 Balance as at 31 December Issued share capital The authorised share capital amounts to 5.0 million, consisting of 2.5 million A shares of 1 each and 2.5 million B shares of 1 each. The A shares are without voting rights, and are held by N.V. Nederlandse Gasunie. The B shares are without profitsharing rights, and are held by GTS B.V. As of the balance sheet date, 1 million A shares and 1 B share have been issued and paid up in full. The movements in issued share capital are as follows: In millions of euros Balance as at 1 January 1.0 Issued and fully paid up shares 1.0 Balance as at 31 December

21 5. Share premium The movements in the share premium reserve are as follows: In millions of euros Balance as at 1 January Splitoff of regional gas transport network, repayment of equity provided by shareholder Deposits in the financial year Repayments Conversion of other reserves into share premium 96.9 (40.0) Balance as at 31 December 1, Revaluation reserve The movements in the revaluation reserve are as follows: In millions of euros Balance as at 1 January Splitoff of regional gas transport network, repayment of equity provided by shareholder in the form of a revaluation reserve Realised share of the unrealised revaluation (9.8) (30.8) Balance as at 31 December The revaluation reserve relates to the revaluation of the tangible fixed assets as of 1 January The part of this revaluation reserve that is based on the revaluation of the assets of Gasunie Grid Services B.V. was transferred by Gasunie Transport Services B.V. to Gasunie Grid Services B.V. on 1 January 2016, as part of the splitoff of the regional gas transport network in the Netherlands. 20

22 7. Other reserves The movements in the other reserves are as follows: In millions of euros Balance as at 1 January 30.8 Realised share of the unrealised revaluation Conversion into share premium (9.4) Appropriation of result for previous financial year (21.4) Less: interim dividend distributed Balance as at 31 December Result for the year The movements in the result for the year are as follows: In millions of euros Balance as at 1 January (21.4) Appropriation of result for previous financial year Result for the year 0.1 Balance as at 31 December Dividend paid and proposed The Management proposes that no dividend be distributed for No dividend was distributed in

23 9. Provisions Provision for abandonment costs and redevelopment The movements in the provision are as follows: In millions of euros Balance as at 1 January 55.2 Splitoff of regional gas transport network Additions including accrued interest Used Released 0.9 (7.8) (3.0) (14.3) Balance as at 31 December The shortterm part of the provision for abandonment costs and redevelopment totalled 14.2 million at the end of 2017 (2016: 9.1 million). This provision was recognised in 2010 due to management decisions to decommission, remove or redevelop specific assets within the foreseeable future, for instance because of new legislation, such as the Decree on the External Safety of Pipelines, which came into force on 1 January This decree sets requirements (including new requirements) on the transportation of hazardous substances through pipelines. As a result, the company needs to take measures in order to limit the effects on people s health and the environment. The provision relates to the redevelopment of siterelated and grouprelated bottlenecks, obligations to disengage decommissioned branches from the grid and the decision to redevelop or replace certain pipeline sections. Pipelines that had already been disengaged were added to the redevelopment programme in 2011, and in 2012 pipelines were added that had been taken over from third parties in the past. The province of Groningen has been confronted with an increasing number of earthquakes caused by gas extraction. Moreover, the strength of these earthquakes is also increasing. The Ministry of Economic Affairs has informed Gasunie Transport Services B.V. that, for the time being, the maximum force of earthquakes is assumed to be 5.0 on the Richter scale. When the gas transport system was constructed, however, no account was taken of earthquakes of that magnitude. For this reason, Gasunie Transport Services B.V. commissioned studies into possible measures it can take to ensure that its infrastructure can withstand these forces. On the basis of these studies, it was concluded that a large majority of the pipelines can withstand earthquakes of the maximum magnitude expected over the coming years. However, for approximately 4% (about 80 kilometres) of the regional network of Gasunie Grid Services B.V. in the earthquake zone, this cannot be guaranteed. 22

24 This concerns pipelines constructed before 1964, which were taken over by N.V. Nederlandse Gasunie when it was founded. It has been decided to make preventive adjustments to this part of the pipeline network as part of the project Magnitude. The last part of the redevelopment programme, including project Magnitude, is expected to be carried out in The size of the provision for abandonment costs and redevelopment was initially determined on the basis of general key figures, such as unit costs plus a generic project management surcharge. The size of the provision was reassessed in 2017 on the basis of experience figures derived from completed projects. A provision for longterm general abandonment costs is not recognised because it is currently considered unlikely that the removal of transport pipelines and appurtenances will be needed. The income from alternative use (in the longer term) less the costs of conservation is anticipated to offset the costs of removal, including societal costs. 10. Current liabilities In millions of euros 31 Dec Dec Other debts 0.2 Total current liabilities 0.2 Other debts at yearend 2016 concerned prepaid contributions to investments received from third parties. 11. Financial risks General Gasunie Grid Services B.V. is subject to credit risk and liquidity risk. In consultation with N.V. Nederlandse Gasunie, Gasunie Grid Services B.V. applies financial risk management with the aim of reducing this risk through operational and financial measures. Financial instruments are only used to hedge risks and not for trading or any other purpose. Credit risk Credit risk relates to the loss that would arise if counterparties were to default entirely as at the balance sheet date and fail to meet their contractual obligations. Gasunie Grid Services B.V. s only counterparties are related parties. For transactions with related parties, see note 20. Liquidity risk The liquidity risk is the risk that the company has insufficient cash to meet its shortterm liabilities. To be able to meet its shortterm liabilities, Gasunie Grid Services B.V. has a current account overdraft facility, made available by N.V. Nederlandse Gasunie. 23

25 Fair value and carrying amount of financial instruments The carrying amount of the other debts approximates their fair value because of the short period to the due date of these instruments. The fair value is therefore assumed to be equal to the carrying amount. 12. Commitments not included in the balance sheet Investment commitments At yearend 2017, Gasunie Grid Services B.V. had 24.0 million (2016: 33.7 million) of commitments outside the balance sheet for investment projects. Fiscal unity The company is part of a fiscal unity for the purposes of Dutch corporate income tax and VAT. Consequently, the company is jointly and severally liable for the corporate income and VAT liabilities of the fiscal unit as a whole. 24

26 Notes to the profit and loss account 13. Total operating revenues In millions of euros Net revenue Other operating revenues Total operating revenues The decrease in net revenue is related to the reduced permitted income as determined by the regulator ACM within the Method Decision for the regulatory period Other operating expenses In millions of euros Costs of subcontracted work and other external costs Cost of network management Other operating expenses (155.4) (7.3) (6.1) (152.8) (6.9) (9.7) Total other operating expenses (168.8) (169.4) The operating expenses stated above mainly concern the costs of services as agreed between the company and N.V. Nederlandse Gasunie and Gasunie Transport Services B.V. In 2017, there are no additions in other operating expenses (2016: 12.5 million) related to the provision for abandonment costs and redevelopment. 15. Finance income and expenses In millions of euros Accrued interest provision for abandonment costs and redevelopment (0.9) (0.9) Total finance income and expenses (0.9) (0.9) 25

27 16. Taxes The tax expense on the result in the profit and loss account comprises the following components: In millions of euros Corporate income tax payable for the financial year Corporate income tax payable for previous years Movement in deferred taxation 6.0 (6.0) (7.7) Total tax expense The reconciliation between the effective tax rate and the applicable tax rate for the financial statements is as follows: In percentages Profit and loss account Applicable tax rate, the Netherlands Other differences Effective rate Deferred taxation Applicable rate (for subsequent financial years) Effective rate (for subsequent financial years) External auditor s fees For the fees relating to the work carried out by the audit firm responsible for auditing these financial statements, we refer to the annual financial statements of the shareholder N.V. Nederlandse Gasunie, which includes details of these fees. 18. Remuneration of the Management Pursuant to Article 2:383, paragraph 1 of the Dutch Civil Code, the remuneration of the Management is not specified because this can be traced back to a single natural person. 19. Number of employees Employees working for Gasunie Grid Services B.V. are employed by N.V. Nederlandse Gasunie and have been seconded for an indefinite period to Gasunie Grid Services B.V. The company itself did not employ any staff in

28 20. Related parties Gasunie Grid Services B.V. buys services from N.V. Nederlandse Gasunie and Gasunie Transport Services B.V. In addition, the company provides services to Gasunie Transport Services B.V. Gasunie Grid Services B.V. buys services from N.V. Nederlandse Gasunie. Gasunie Grid Services B.V. and N.V. Nederlandse Gasunie have laid down the agreements with respect to this collaboration in such a way that security of supply, security of transport and the safety of gas transport are guaranteed. The agreements between Gasunie Grid Services B.V. and N.V. Nederlandse Gasunie have a term of one year and can be extended. In 2017, the volume of the services provided amounted to 230 million (2016: 264 million), of which 95 million (2016: 144 million) related to investments in the gas transport network, and 135 million (2016: 121 million) were operating costs. The operating costs relate to the deployment of employees, materials, services and other costs, such as transportrelated energy costs. These services are delivered at cost. Gasunie Grid Services B.V. buys services from Gasunie Transport Services B.V., a 100% subsidiary of N.V. Nederlandse Gasunie. These relate to jointly used assets, such as IT, offices and buildings. The usage fee charged by GTS to GGS is based on the compensation GTS would have integrated into its regulated rates had it been the sole user of the assets. The volume of services provided in 2017 amounted to 31 million (2016: 31 million). Gasunie Grid Services B.V. provides services to Gasunie Transport Services B.V., a 100% subsidiary of N.V. Nederlandse Gasunie. These services relate to the network management activities carried out by GGS for the regional transport network. The transport capacity of this network is marketed by GTS at rates determined by the Dutch regulatory authority ACM. GGS charges a fee to GTS for these services, based on the transport revenues that GGS B.V. would have invoiced in 2017, had it been an independent network operator that also invoiced for transport services. The volume of services provided in 2017 amounted to 209 million (2016: 257 million). 27

29 21. Profit appropriation proposal The Management proposes that the 2017 result of 0.1 million be added to other reserves. In 2016, the loss of 21.4 million was charged to other reserves. 22. Events after the balance sheet date With effect from 2 January 2018, the company merged with Gasunie Transport Services B.V., as defined in Part 7 of Book 2 of the Dutch Civil Code. Gasunie Grid Services B.V. s entire equity therefore passed to Gasunie Transport Services B.V. by universal title, and Gasunie Grid Services B.V. legally ceased to exist. For further information regarding this merger, please refer to the section "Continuity" in the general notes to the financial statements. The Management, Bart Jan Hoevers Groningen, 27 March

30 Other information Provisions of the Articles of Association governing profit appropriation Article 34, paragraphs 2 and 3, of the company s Articles of Association read as follows: The profit is at the free disposal of the General Meeting of Shareholders. In the event of a tied vote regarding the distribution or reservation of profit, the profit to which the proposal relates shall be reserved. A decision to distribute the profit is subject to the approval of the management, in accordance with Article 2:216, paragraph 2, of the Dutch Civil Code. The management shall only refuse such approval if it knows or can be reasonably expected to foresee that, after distribution, the company will not be able to continue to pay its due and payable debts. The company may make distributions to shareholders and other persons entitled to receive part of the distributable profit only insofar as its equity exceeds the total issued share capital plus the reserves that must be maintained by law. 29

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