A challenging year with solid results
We are very pleased to present to you our results for 2012. Last year was a dynamic year for us at Gasunie. We completed a number of large-scale projects, while keeping the security of supply at a high level – and we did it without compromising on safety. Even when we found ourselves quite literally ‘under pressure’ from politics and regulators, Gasunie employees continued to give their best, working hard to ensure that people in the Netherlands and Germany would not be without energy. The public interest is and remains leading. So all in all, we believe we can say that, despite the tough challenges we faced, we can be proud of the results we achieved in 2012.
Gasunie’s position in a changing Europe
The energy mix in Europe is changing rapidly. In 2012, we saw, on the one hand, more renewable energy being used in the Netherlands and Germany, while on the other hand we saw strong growth in the use of coal for generating electricity. The International Energy Agency (IEA) predicted in 2011 that a ‘golden age’ for gas would dawn, but the reality is that this is still not the case for north-west Europe. While in the United States coal-fired power stations are being replaced rapidly by gas-fired stations, which emit considerably less CO2, in Europe we see precisely the opposite trend taking place. The new American gas ‘revolution’ is leading to a glut of coal, at cheap prices. Much of this cheap coal is being shipped to Europe. As a result, the energy mix in the Netherlands, for instance, has become one of extremes: renewable energy sources on the one hand and polluting coal on the other. As a result, natural gas is threatening to be increasingly pushed out of the energy mix, despite the fact that gas is the ideal partner of renewable energy sources, such as solar power and wind. In the short term, therefore, the position of gas – and thereby the position of all related activities – is uncertain. Meanwhile, following developments in the United States, the subject of shale gas is high on the political agenda in the Netherlands. The Ministry of Economic Affairs has ordered a study to be carried out into the pros and cons of shale gas. The results of this study are expected by mid-2013.
Gasunie believes that natural gas can play an important part in the transition to the sustainable provision of energy, and strives to exploit to the full the potential of gas for industry, households and mobility. Natural gas offers the best chance of enabling us to achieve – as quickly as possible – our collective climate goals, in ways that are responsible, and above all affordable.
Only the combination of renewable energy and gas will, in the long term, be feasible from an environmental and cost point of view.
Gasunie’s position in the changing landscape of the Netherlands and Germany
In 2012, the German government’s decision to turn its back on nuclear energy and to invest heavily in subsidised sustainable energy, such as solar panels, led to an abrupt change in the European energy landscape. This Energiewende (Energy Transition) effectively put an end to the idea that there was a single European energy policy. At Gasunie, we believe the European Commission is right to put the further integration of Europe’s energy market high on its list of priorities. Our ownership of pipeline networks both in the Netherlands and in Germany means we can play an important part in this integration process. This has meant that we have already been able to contribute to much better security of supply in north-west Europe – for instance, during the extremely cold weather we had in February 2012. By making maximum use of our export capacity, we were also able to help prevent a massive black-out in southern Germany.
As far as regulation is concerned, we are pleased to say that, in 2012, the situation for us, both in the Netherlands and Germany, seemed to stabilise. In November, the Dutch Industrial Appeals Tribunal (CBb) rejected the appeals against the Dutch regulator’s method decisions, which means we now at least have a clearer idea of how the Dutch regulatory framework will operate. In the past, the permitted tariffs were set too high, and the ruling means we now need to pay back a total of €400 million in 2012 and 2013. In Germany, the German regulator BundesNetzAgentur (BNetzA) broadly maintained the existing regulation. A transparent regulatory framework that allows for healthy yields is vital if we are going to have a stable investment climate – which is very important for companies like Gasunie. Investing in gas infrastructure is not something you do for the short term. It requires further integration of the gas market, not to mention a level playing field regarding the regulatory methods used across Europe.
European energy infrastructure influenced by global developments
The Netherlands is growing in its role as the European gas roundabout. You can see this clearly in the success of the virtual trading point, Title Transfer Facility (TTF), which has quickly become the leading gas hub on the mainland of Europe. The gas infrastructure market in the Netherlands has matured, and by using ‘intelligent capacity management’, we are able to serve all our customers with our existing network in a cost-efficient way. The future of the Netherlands as a ‘gas country’, and the development of a single integrated European gas market are becoming increasingly intertwined. European Transmission System Operators (TSOs) are increasingly looking for greater mutual cooperation, while regulation in Europe is being harmonised. Large, powerful parties clearly have an advantage here. The European gas market is developing fast, and is already able to offer high-quality infrastructures and services. By using the existing infrastructure fully and efficiently (and, where necessary, extending it), value can be created. With its extensive integrated network, Gasunie can contribute to this process and in doing so stimulate the liquidity of the European gas market.
Another key development is the transition to a more sustainable energy mix. As we noted already, we at Gasunie believe gas is indispensable in the long term. It is the cleanest fossil fuel there is, and it plays a key role as a stable back-up for the supply of solar and wind energy. In addition, the supply of ‘green gas’ will increase rapidly in the coming years, while liquefied natural gas (LNG) will become increasingly important – particularly as a fuel for freight transport, on roads and waterways. Gasunie thinks in terms of the energy system as a whole: we see a steady convergence of the supply chains of gas and electricity, and they will eventually reinforce each other.
In short, to achieve a reliable, clean and affordable energy mix, we need to think in terms of the energy system as a whole.
Gasunie has introduced a new organisational structure, with three business units, each accountable for its own results. This structure will make us more focused, dynamic and decisive and will be more transparent for our shareholder and the regulators. It will also help to safeguard the Dutch network and guarantee financial integrity. This new structure gives us a solid platform from which we can implement our long-term strategy. The Executive Board has also been restructured, consisting now of a CEO, a CFO and a COO.
A glance at the future
In 2012, we translated our strategy into ten ‘key policy themes’. These are designed to serve as a guideline for Gasunie employees when putting the strategy into practice. We also launched a number of measures to ensure that the strategy will be successfully implemented. For example, our merger and acquisition processes have been improved. In large acquisition projects, Gasunie actively seeks cooperation with partners. In 2013, we will continue the change programmes we have started and pursue our ongoing ambition to achieve operational excellence. This will enable us to operate competitively, transparently and efficiently in the European market. In this wider, European context, many opportunities lie open for us. We will make sure we are ready to take full advantage of them. Where possible and appropriate within our strategy, we strive to expand further in Europe in the near future. To be able to remain an influential player in the European market, we will need to intensify our cooperation with other infrastructure companies. We believe that partial privatisation and the possibility of being able to take an interest in each other’s companies, including at ownership level, could give a big stimulus to such cooperation. We are engaged in constructive talks with our shareholder on this point.
We strive to do our best for our customers and stakeholders. But beyond that, in the Netherlands, we represent a public interest. It is precisely because of this that we want to take a leading role in Europe. We need to make sure that there will be enough gas for the Netherlands, not only now, but for generations ahead – to ensure security of supply, an efficiently functioning market, and sustainable use of the Dutch gas infrastructure. That is the basis of our European strategy.
The combination of regulated transport activities on the one hand and non-regulated gas infrastructure services on the other makes Gasunie an internationally operating company that can face the future with confidence.
Quality and professionalism
Gasunie stands for quality and professionalism – even under difficult and wintery circumstances, our people have provided the highest level of security of supply. In 2013, we will celebrate the fact that, for fifty years, Gasunie has been a guarantee of reliable gas transport. The importance to society of having a smoothly functioning infrastructure is obvious. And the payment of a dividend of € 215 million to the Dutch exchequer merely underlines the significance of our public function.
This year, for the first time, we are publishing our Annual Report online. Our aim is to make the information in the Report more easily available and accessible to our various stakeholders. Online publication is also in line with our CSR ambition to reduce the use of paper and to improve work processes by using modern devices such as tablets and apps.
On behalf of my colleagues on the Executive Board, I would like to thank all Gasunie employees for their dedication and hard work and for the excellent performance they delivered in 2012. These enable Gasunie to enter 2013 with good prospects.
Paul van Gelder
CEO N.V. Nederlandse Gasunie