We believe that it is self-evident that we should report in a transparant manner on how our company is run and supervised.
We believe that it is self-evident that we should report in a transparant manner on how our company is run and supervised.
The Board of Supervisory Directors oversees the policy of the Board of Management and the general business performance at GasTerra. The Board of Supervisory Directors comprises eight members, one of whom is appointed by the Minister of Economic Affairs and Climate Policy. (MEACP). The Board appoints a chairperson from among its midst; this appointment has to be approved by the Minister of Economic Affairs and Climate Policy.
The Board of Supervisory Directors appoints from among its midst a College of Delegate Supervisory Directors, comprising five members, one of whom is appointed by the Minister of Economic Affairs and Climate Policy. The Board may delegate its powers to the College, in so far as this delegation does not infringe the duties and powers of the Board of Supervisory Directors.
The company's Articles of Association lay down that two members of the Board of Supervisory Directors are to step down each year at the General Meeting of Shareholders according to a rotation schedule determined by drawing lots. The members who step down may be re-elected or reappointed immediately. Successive members of the Board of Supervisory Directors take the place of their predecessors on the rotation schedule.
On 1 October 2017 Mr. C.W.M. Dessens LLM stood down as a member of the Board of Supervisory Directors and consequently also resigned the chair of the Board and the College of Delegate Supervisory Directors.
The Board would like to express its particular gratitude for the excellent way in which Mr. Dessens has devoted himself to the company since 2006 in his positions as supervisory director and chair of the Board and the College.
As of 1 October 2017 Mr. Dessens was succeeded in these positions by Mr. B.J. Bruins LLM. But he was appointed as a minister in the new government on 26 October 2017 and had to stand down as a supervisory director of GasTerra. He was discharged on 25 October 2017. This position has been vacant since.
As of 12 February 2018 Mr. B.C. Fortuyn MSc was appointed as chairperson of the Board of Supervisory Directors and the College of Delegate Supervisory Directors.
|Name||Term of office||Capacity||Date of appointment|
|ir. B.C. Fortuyn||-||Delegate Supervisory Director||12 February 2018|
|Mr. R.M. de Jong MA||Re-electable in 2018||Delegate Supervisory Director||1 August 2016|
|Mr. R.G. de Jongh MA||Re-electable in 2021||Member of the Board of Supervisory Directors||1 April 2016|
|Mr. A.F. Gaastra LLM||Re-electable in 2018||Delegate Supervisory Director||15 September 2016|
|Mr. J.W. van Hoogstraten MSc||Re-electable in 2019||Delegate Supervisory Director||1 March 2016|
|Mr. T.W. Langejan LLM||Re-electable in 2020||Member of the Board of Supervisory Directors||15 February 2016|
|Mr. J.M.W.E. van Loon MSc||Re-electable in 2020||Delegate Supervisory Director||1 January 2016|
|Mr. F.A.E. Schittecatte MSc||Re-electable in 2019||Member of the Board of Supervisory Directors||15 February 2014|
|Mr. C.W.M. Dessens LLM Chairperson (until 1 October 2017)||-||Delegate Supervisory Director||1 January 2016|
The Board (including the College of Supervisory Directors) met 12 times in the presence of the Board of Management. The Audit Committee (AC) was also represented at one of the meetings. At the invitation of the Board, the external auditor was present at the meeting in which the Annual Report and Accounts relating to 2016 were dealt with.
|Board of Supervisory Directors||College of Delegate Supervisory Directors||Audit Committee|
|Mr. C.W.M. Dessens, LLM||1/1||7/7||n.a.|
|Mr. J.M.W.E. van Loon MSc||2/2||10/10||n.a.|
|Mr. J.W. van Hoogstraten MSc||2/2||9/10||n.a.|
|Mr. A.F. Gaastra LLM||2/2||6/10||n.a.|
|Mr. R.M. de Jong MA||2/2||10/10||n.a.|
|Mr. R.G. de Jongh MA||2/2||n.a.||n.a.|
|Mr. F.A.E. Schittecatte MSc||2/2||n.a.||n.a.|
|Mr. T.W. Langejan LLM||2/2||n.a.||4/4|
|Mr. T.P.K. Huysinga||n.a.||n.a.||3/3|
|Mr. A.J. van der Linden MA||n.a.||n.a.||4/4|
|Mr. A.J. Boekelman MA||n.a.||n.a.||4/4|
|Mr. S.G. van Santbrink LLM||n.a.||n.a.||0/1|
The first number shows the number of meetings attended, the second number is the number of meetings that took place during the period in which the individual was in post.
Discussions with the management took place regarding the company’s strategy and how to translate this into objectives for the future. Maximisation of the value of Dutch gas remains our top priority. The Board noted and approved the updating of the process for the production of the Business Plan. It also discussed how far the objectives for 2017 had been achieved and set the objectives for 2018. GasTerra contributes actively to ensuring that natural gas continues to play an important role in the transition towards a climate-neutral energy supply.
The decisions taken since the beginning of 2014 by the Minister for Economic Affairs and Climate Policy on how much of the potential gas in the Groningen field may be extracted, as a consequence of the developments in the Groningen earthquakes dossier have had a major influence on how the company is able to carry out its strategy.
The maximum production figure set in calendar year 2017 for the Groningen gas field for the 2016/2017 gas year was 24 billion m3. The corresponding figure for the 2017/2018 gas year is 21.6 billion m3. The respective production decisions taken leave room for a higher ceiling if the gas year is colder than average. In addition, if certain technical limitations in the installations of GTS occur, extra production may be necessary at the direction of GTS. In addition to the production limits in force, there are also other conditions relating to the distribution of production among the sections of the Groningen field within the gas year. NAM is required to comply with these requirements, and GasTerra makes an important contribution to developing the planning systems needed for this, and for their day-to-day implementation.
Good progress was made in 2017 towards the goals set out within the GasTerra 2018 reorganisation project. The approach to and results of this project are discussed with the Board of Supervisory Directors at set times.
In 2017 the Board of Supervisory Directors discussed the risks associated with business activities. As part of this process, the management’s assessment of the set-up and operation of the internal risk management and control systems was discussed, as well as the document of representation. Attention was also paid to the management letter from the external auditor, and the social aspects relevant to GasTerra were taken into consideration too. The Board concludes that GasTerra has a robust control system that functions effectively, and that it is subject to continuous improvement.
The post of CEO of GasTerra fell vacant on 1 January 2017.
Between 1 January and 1 April 2017 Mr. R.E. van Rede acted as interim CEO in addition to his role as Chief Commercial Officer. The Board would like to thank him for the excellent way in which he carried out this task and for the additional effort required.
At the proposal of the Board of Supervisory Directors, Ms. A.J. Krist was appointed CEO on 1 April 2017.
On 1 October 2017 Mr. M.W.J. de Wilde resigned as CFO of GasTerra to pursue his career elsewhere. The Board would like to thank him for his dedication to the company. With the agreement of the Board, a reorganisation of management roles took place and Mr. F.F. van Koten was appointed CFO. This reduces the size of the management team from 4 to 3 individuals.
Each year the Board of Supervisory Directors and the management together discuss potential successors present within the organisation who could fulfil management functions. Remuneration policy is approved by issuing a Collective Labour Agreement mandate.
Where necessary, the Board gets involved in updates relating to ancillary positions held by members of the Board of Management, and once a year discusses the complete overview of these ancillary positions. The overview of ancillary activities of members of the Board of Supervisory Directors is also reviewed once a year.
The Board of Supervisory Directors has established an Audit Committee. This committee oversees the workings of the internal risk management and control systems, all financial affairs, relations with the external auditor and the application of information and communication technology. At one of the meetings of the Supervisory Board, the Audit Committee reported on the activities it had undertaken.
The Audit Committee met on four occasions during the reporting year.
On 23 November 2017 Mr. T.P.K. Huysinga left the Audit Committee and was succeeded by Mr. S.G. van Santbrink LLM. At year-end 2017 the composition of the Committee was as follows:
Mr. A.J. Boekelman MA (Chairperson)
Mr. T.W. Langejan LLM
Mr. A.J. van der Linden MA
Mr. S.G. van Santbrink LLM
In 2017 the Board of Supervisory Directors discussed its own performance, and in 2018 will ensure that the recommendations made during this process are implemented.
At set times members of the Board of Supervisory Directors have informed employees on the company’s activities in informal conversations. With a few exceptions, the Board always meets in the company’s building.
Board members attended two consultative meetings between the management and the Works Council in 2017. One of the topics on the agenda of these meetings was ‘GasTerra 2018’.
The recommendations from the Board of Supervisory Directors to the General Meeting of Shareholders, to be held in Groningen on 22 February 2018, are as follows
We have examined the financial statements for 2017, prepared by the Chief Executive Officer in accordance with Article 23 of the Articles of Association. We concur with these Annual Accounts and recommend that:
The Board of Supervisory Directors wishes to express its appreciation for the results attained in 2017 and is grateful for the way in which the Board of Management and employees devoted themselves to the objectives of the enterprise during the financial year, and for the results that were achieved The Board wishes every success to everyone working at GasTerra in their endeavours to achieve the objectives set for 2018.
The Board of Supervisory Directors,
Mr. B.C. Fortuyn MSc, chairperson
Mr. A.F. Gaastra LLM
Mr. J.W. van Hoogstraten MSc
Mr. R.M. de MS
Mr. R.G. de Jongh MA
Mr. T.W. Langejan LLM
Mr. J.M.W.E. van Loon MSc
Mr. F.A.E. Schittecatte MSc
The Board of Management of GasTerra consists of a Managing Director (CEO). As from 1 April 2017 this was Ms. A.J. Krist. In addition to Ms. Krist, the Board of Management also consists of a financial director (CFO), Mr. F.F. van Koten and a commercial director (CCO), Mr. R.E. van Rede. Mr. Van Rede held the position of Managing Director from 1 January to 1 April 2017 as temporary CEO.
Until 1 October 2017 Mr. M.W.J. de Wilde RC held the position of financial director (CFO). Until that time the organisational structure of GasTerra consists of the Commercial, Portfolio and Financial units. Following Mr. De Wilde’s decision to pursue his career elsewhere, the change in the organisational structure of GasTerra from three units to two, which had already been planned in the reorganisation trajectory GasTerra 2018, was implemented. Mr. Van Koten was appointed financial director and the activities of the Portfolio unit were transferred to the Commercial and Financial units.
In addition to the Board of Management there are also three heads of department responsible for Legal Affairs, Regulation and Secretariat, Staff & Organisation and Communications & Public Affairs.
GasTerra B.V. is a private limited company with registered offices in Groningen, the Netherlands. The company was founded on 1 July 2005 when N.V. Nederlandse Gasunie was legally split into a transmission system operator and a trading company. In the process, the infrastructure (the gas pipelines) and all transmission-related activities remained with Gasunie while the newly formed GasTerra continued with all gas trading activities.
GasTerra B.V.'s authorised share capital is €180 million, split into 40,000 shares of €4,500 each. All shares have been subscribed, fully paid up and registered, and can only be transferred by unanimous approval of the General Meeting of Shareholders. The shares are held by the State (10%), EBN B.V. (40 %), Shell Nederland B.V. (25 %) and Esso Nederland B.V. (25%). No depositary receipts are issued.
GasTerra is not a listed company, as a result of which the Corporate Governance Code does not apply to the organisation. However, where possible and relevant, GasTerra is guided by the principles of the code and takes the best practice provisions as a guide. In this chapter, we report on the appropriate principles of the Code.
These are to be implemented in the main when it comes to the principles and provisions included under the task and manner of working of the Board of Management. The tools that the Board of Management uses for this consist specifically of the annual activity plan, the budget, monthly and quarterly reports and the Business Risk Analysis (BRA) tailored to the organisation. The structure and operation of risk management at GasTerra are described in these documents (see also the risk chapter, which contains a description of the most important risks). Risk management has been delegated to the line management. Reports are made to the Board of Management concerning implementation. The Board of Management reports at least once a year to the Audit Committee via the BRA. The external auditor assesses the compliance of this system to the extent relevant in the context of the audit of the accounts.
In formal terms the Board of Management of GasTerra consists of a Managing Director, nominated on the recommendation of the Supervisory Board and approved by the Minister of Economic Affairs and Climate Policy. The Managing Director is appointed for an indefinite period. In addition to the Managing Director, the Board of Management also consists of two further Directors/holders of a general power of attorney: a financial director and a commercial director.
The remuneration of the Managing Director is set by the Board of Supervisory Directors and, in addition to a fixed remuneration, it also has a variable component that is dependent on the financial and general performance of the organisation. The Board of Supervisory Directors decides whether the Managing Director is eligible for a variable remuneration and its amount. In accordance with government policy on state holdings, the variable remuneration may not exceed 20% of the fixed salary. The amount of the Managing Director's remuneration is given in the financial statements. With regard to the Managing Director, the provisions relating to the maximum number of allowable supervisory board memberships in the Management and Supervision Act are observed.
Supervision of the Board of Management of GasTerra is exercised by the Board of Supervisory Directors, which consists of eight members One member is appointed directly by the Minister of Economic Affairs and Climate Policy, the remaining members are appointed by the Annual General Meeting of Shareholders on the recommendation of the individual shareholders. The number of Supervisory Board memberships that one person may hold is limited to ensure the proper performance of the duties. The Supervisory Board has appointed its own secretary, who is supported, where necessary, by the Company Secretary.
The Dutch Civil Code contains provisions regarding even gender distribution of the seats on the Board of Management and the Board of Supervisory Directors. This is taken into account when appointing and proposing new members of the Board of Supervisory Directors. In the year under review, the seat distribution of the Board of Supervisory Directors did not comply with this provision. The Company has a positive attitude to the appointment and employment of women at all levels in the company.
The duty and manner of working of the Supervisory Board are in accordance with the Code set out in its own regulations. It is standard procedure that the Annual Report contains a report of the Supervisory Board. A (brief) profile of the members of the Supervisory Board is included in the Annual Report. The provisions relating to the supervision of the Board of Management by the Supervisory Board are effected at the regular meetings of the Supervisory Board. Furthermore, at least once a year without the Board of Management being present, the Supervisory Board discusses its own performance (and desired competencies) as well as that of its own individual members and individual members of the Board of Management.
The Articles of Association stipulate that decisions which are important to GasTerra must be approved by the Supervisory Board or the College of Delegate Supervisory Directors. The College of Delegate Supervisory Directors is a corporate body. The College is formed by members of the Supervisory Board and consists of five supervisory directors including the supervisory director who has been appointed by the Minister of Economic Affairs and Climate Policy.
The Supervisory Board has established an Audit Committee. The Audit Committee is a non-corporate body composed of four members appointed by the Supervisory Board. The Supervisory Board, or the College of Delegate Supervisory Directors, may refer matters for the consideration of the Audit Committee. Whether requested to do so or not, the Audit Committee advises the Supervisory Board or the College of Delegate Supervisory Directors on matters within its remit and prepares the decisions of the Supervisory Board in relation to those matters. The Audit Committee generally meets four times a year, and did so in 2017.
The duty and method of working of the Audit Committee are set out in regulations that essentially follow best practice provisions mentioned in the Code. Thus, the duties of the Audit Committee include supervision regarding the financing of the company, operating expenses and capital expenditures in relation to the agreed budgets, the provision of financial information, the operation of the internal risk management and control systems, compliance with recommendations and observations of internal and external auditors, the role and functioning of the internal audit department, and maintaining the relationship with the external auditor. Matters covered in particular by this latter topic are the independence of the auditor, remuneration and the potential provision of work that is not audit-related.
The (system of) remuneration of the Board of Supervisory Directors is approved by the Annual General Meeting of Shareholders. The total amount of remuneration of the Board is stated in the financial statements.
With regard to the powers of the shareholders, the Articles of Association stipulate that resolutions of shareholders may only be adopted by a majority of three-quarters of the votes cast. For certain resolutions, in particular the transfer of shares, suspension or dismissal of the Managing Director, amendment of the Articles of Association and dissolution of the company, unanimity is required.
As regards disclosure of information to shareholders and the potential impact on the share price, it should be noted that the 'GasTerra share' is not traded on the financial markets.
With regard to financial reporting, several times a year (at regular meetings), the Supervisory Board, the College of Delegate Supervisory Directors and the Audit Committee supervise compliance with the internal procedures relating to the preparation of the quarterly reports and the preparation and publication of the annual report and the financial statements.
The Annual General Meeting of Shareholders appoints the external auditor. It is standard procedure for the Audit Commission to interrogate the external auditor with regard to his declaration on the accuracy of the financial statements. Furthermore, the Board of Management and the Supervisory Board report to the Annual General Meeting of Shareholders on the independence of the external auditor and a recommendation is issued for the appointment of an external auditor. For this purpose, the Board of Management and the Supervisory Board assess the functioning of the external auditor periodically, at least once every four years. From the 2015 financial year, EY (Ernst & Young) has been GasTerra’s auditor.
The external auditor has an understanding of the Internal Audits working plan, which is discussed in the Audit Committee. Findings concerning the internal audit function are included where necessary in the external auditor’s management letter, which is discussed at a meeting of the Supervisory Board. The external auditor reports anything it wishes to bring to the attention of the Board of Management and the Supervisory Board in relation to its audit of the financial statements and the related audits. This gives effect to the provisions pertaining to the principle in the Code on the relationship and communication of the external auditor with the company's organs.
CSR is an integral part of the strategy at GasTerra and is therefore embedded into our day-to-day operations. GasTerra has integrated the materiality matrix and associated objectives and activities into the Business Plan which is approved by the Board of Supervisory Directors, the governance body with the highest degree of responsibility. Monitoring of progress is included in the regular reporting cycle. The quarterly reports are discussed by the College of Delegate Supervisory Directors and the Audit Committee.
A robust risk policy is vital to GasTerra in order to allow it to achieve its aims. Risk management at strategic, tactical and operational level is part of the Management Control System. GasTerra’s Management Control System is based on the COSO ERM framework that is used throughout the world.
The Board of Management and the management team jointly determine the strategic and tactical risks, and are responsible for their management. Reports on this issue are also submitted to the Board of Supervisory Directors and the Audit Committee. In addition, each process owner is responsible for the management of operations risks associated with his business processes.
Risk management is an integral part of business activities. All employees are from time to time involved in parts of the Management Control System. They are always expected to comply with the policy rules, procedures, work instructions and guidelines in force.
GasTerra has set up a risk and control register, containing a central summary of all risks and management measures for each business process on the basis of operational risk analyses. In 2017 the risks and measures were tightened up for a certain number of business processes in order to improve the relationship between risk profile, procedures and key controls.
GasTerra’s risk tolerance is low, and so in most situations it has a risk-avoiding approach. Risks are mitigated by specific measures. For all risks, an assessment is carried out to determine whether the residual risk is acceptable. GasTerra’s focus lies on the effectiveness and efficiency of existing measures so that balanced measures appropriate to the level of the risk are taken.
The major risks and uncertainties are identified by means of regular risk analyses. Strategic and tactical risks are determined twice a year. The frequency of risks at operational level is determined on the basis of the risk profile of the business process concerned. In any event, each process is subjected to a risk analysis once every three years. The management measures that cover high risks, known as key controls, are tested periodically via self-assessments carried out by the process owner. The results are reported and the implementation of recommendations made on the basis of the results is monitored. In addition to the self-assessments, an internal auditor periodically tests the design and operation of the management measures, also on the basis of the risk profile of the business process concerned. Finally, GasTerra has a procedure for reporting incidents in order to promote improvements and to allow people to learn from each other.
During the course of normal business operations, the company uses financial instruments that expose the company to market risk, including exchange rate risk and interest risk, and to credit risk and liquidity risk. This is described in the ‘financial instruments’ section of the financial statements.
GasTerra’s business risk analysis analyses the main business risks that could interfere with the achievement of targets in terms of anticipation, volume, price and costs. For each risk GasTerra determines the likelihood of the risk occurring and the impact on GasTerra if it does occur. The company decides what are the most important risks on the basis of that information. The summary below shows the most important risks identified in 2017 and the measures taken.
|Supply from the Groningen field|
|Supply from small fields|
|Image of natural gas|
The various risks, classified according to the volume, anticipation and costs targets, are described below along with the measures taken by GasTerra. No business risk was identified under the price target. GasTerra offers conditions in line with the market, following the market price.
1. Supply from the Groningen field
The volume offered by NAM from the Groningen field limits the volume to be sold by GasTerra. Restrictions imposed on NAM, in terms of production volume and measures leading to smooth production or the use of the clusters, automatically restrict the volume available, resources available to balance the portfolio, and selling flexibility.
Since 2014 gas production in the Groningen field has been limited by ministerial decisions related to safety in the extraction area. The first decision in 2014 limited production to 42.5 billion cubic metres, and this has been followed by lower limits and further restrictions on extraction at various production locations in the Groningen field.
24 billion cubic metres of natural gas was produced and sold from the Groningen field for the 2016/2017 gas year. The maximum production level for the 2017/2018 gas year has been set at 21.6 billion cubic metres of natural gas from the Groningen field, with scope for more extraction if the year is colder than average. This is unchanged following the statement made by the Council of State on 15 November 2017, but the impact of the earthquake in Zeerijp in the short term is unclear. The Minister of Economic Affairs and Climate Policy will have to make a new decision on this in 2018.
Decisions that might be taken by the minister are anticipated in the context of sale of volume and flexibility, to avoid entering into obligations that cannot be met. GasTerra does this by using its own resources or going to the gas market.
We expect the likelihood of the risk occurring remains as high as in 2016. Nevertheless, GasTerra has shown that it can respond appropriately to the decisions taken.
2. Supply from small fields
Gas extraction from small fields is also under pressure. Relatively low gas prices, difficult permit trajectories and a decline in social and political support for natural gas stand in the way of the realisation and profitability of new projects in particular. Existing gas production is faced with relatively high unit costs as volumes decline, but operator cost management has improved and the gas price is higher than in 2016. This might eventually mean that supply from small fields declines less rapidly than is allowed for in the current forecast.
GasTerra buys gas from small Dutch fields as well as from the Groningen field. GasTerra encourages the production of this gas by guaranteeing that small field producers are always able to sell their gas to GasTerra at normal market conditions. By doing this, GasTerra is implementing the government's small field policy.
However, the developments referred to above stand in the way of opening up new fields for production. The absence of new gas extraction cannot reduce the unit costs of existing production. Very limited exploration activity means that this situation is likely to remain for a considerable time. This will lead to falling supply, which will also affect GasTerra's portfolio.
GasTerra offers small field producers normal market conditions in accordance with the Gas Act and its own company policy. GasTerra also informs parties concerned as to the expected effects of current market conditions on supply from small fields.
This risk is somewhat down on the 2016 level thanks to higher prices. GasTerra expects to have sufficient resources within its portfolio and on the market to allow it to meet its obligations.
3. Image of natural gas
The position of gas in the energy mix of the future and consequently the image of this energy source are under pressure. Society is looking for ways of achieving the ambitious targets for reducing CO2 emissions. The position of gas in this respect has been damaged as a result of the earthquakes in Groningen, concern over dependence on Russian gas, discussions on CO2 emissions from fossil fuels and methane. The positive aspects of (natural) gas risk being pushed to the background of these debates.
Gas has played a vital role in energy supply for decades. But this is no longer automatically the case. Society wants to reduce the volumes of greenhouse gas emissions in order to help limit the extent of climate change. Governments have formulated ambitious targets for this, and plans have been or are being drawn up to achieve them. The presence of fossil fuels is often seen as a drawback in this regard, slowing down the process towards a fully sustainable energy supply. The concept of a responsible move towards sustainability, where the main focus in the transition period is on cutting emissions, risks being pushed into the background as a result of this attitude.
The earthquakes in Groningen have also made many people feel more strongly that gas is at best a necessary evil, and tensions between Russia and the EU have heightened the existing doubts over security of supply of gas in Europe. The debates on shale gas extraction and methane emissions caused by natural gas have also brought the image of gas under increasing pressure.
This development undermines the position of natural gas and is therefore a major concern for the gas sector.
GasTerra has set itself the task of increasing understanding of the energy issue and the importance of gas. Under the umbrella of the Dutch gas association KVGN, GasTerra has been working with other companies that are active in the gas sector in order to produce a new, clear, positive vision of the function of gas in the energy transition. Gas can certainly continue to play an essential albeit changed role, acting more often in smart cooperation with other forms of energy. In other words: the use of gas will increasingly be customised (‘Gas to Order’). In this context the gas sector is supporting the government in its efforts to focus primarily on reducing CO2 emissions in the transition towards a climate-neutral energy supply in 2050. The national campaign ‘Less CO2, count us in’ was launched against this background. This is because climate change is caused by emissions of greenhouse gases. We therefore focus primarily on emission reduction. The means by which this is achieved are secondary. The best way of achieving this is to set priorities for the use of energy sources and energy carriers. Saving energy is the main priority here. The second priority is that, where possible and rational, renewable energy, including renewable (green) gas should be used. Next come the fossil fuels, with natural gas as the first choice because of the three forms of fossil fuel - natural gas, oil and coal - it produces the fewest CO2 emissions.
National elections were held in 2017. The coalition agreement indicates that emission reduction is a central issue. In order to bring this about, a National Climate and Energy Agreement will be developed in 2018, focused on achieving an emission reduction target for 2030. GasTerra will argue in favour of a suitable role for gas in the energy mix via a number of platforms, in particular KVGN and Energie Nederland.
GasTerra itself is proactive in contributing to the development and deployment of renewable gases.
The emission reduction targets will be set in Europe in 2018, and in the opinion of European policymakers the role of natural gas is not self-evident.
There is increasing attention being paid to the role that renewable gases can play in the transition to a climate-neutral energy supply. The risk is therefore slightly lower.
Contraction and the changing external environment means that GasTerra’s organisation may no longer be fit for purpose, and therefore a mismatch between current staff skills and those that are desirable may arise. This may lead to failure to achieve targets and use opportunities.
Developments in the market and our portfolio have placed the organisation in a contraction situation. A reorganisation will reduce the number of fte over three year, from 200 to 160 by the end of 2018. So far GasTerra has successfully managed this transition, but sees a challenge in ensuring that the organisation’s skills in the future remain suitable for the (future) challenges and resulting activities of the organisation.
A new Strategic Staff Plan and related HR policy will be devised in 2018 to match the future organisation.
The aforementioned risk was introduced for the first time in 2017 with a related classification in the risk matrix.
GasTerra is at a higher credit risk because of the worse financial position of a number of large clients.
The credit risk is the loss that might arise if clients are in default and do not comply with their contractual obligations.
GasTerra has drawn up guidelines which must be met by clients, with most of whom there is a long-standing relationship. These guidelines limit the risk associated with possible credit concentrations and market risks. The guidelines form part of GasTerra contracts. The credit-worthiness of each party is permanently monitored. If clients or counterparties fail to meet these guidelines, further securities such as bank guarantees are requested, and/or no new contracts are entered into with these parties.
The risk is somewhat lower than it was in 2016. The credit-worthiness of a number of large clients has stabilised, and where necessary additional agreements have been made with a number of clients. In 2017, no clients were unable to meet their payment obligations because of their financial position. GasTerra has sufficient resources to mitigate this risk.
6. Transmission costs
European Member States are working on the implementation of the Network Code Tariffs (NC TAR). The Netherlands plans to present tariffs under this Network Code for the first time in May 2019. This means that GasTerra is uncertain as to the level of transmission costs, especially as a result of the implementation of the Network Code Tariffs.
GasTerra books transmission capacity for multiannual supply contracts and other types of contracts so that it can meet its supply obligations. In the Netherlands, GasTerra buys transmission capacity from GTS, the operator of the national transmission network. It also books transmission capacity with various operators of transmission networks outside the Netherlands (TSOs). Uncertainty regarding transmission costs for honouring future obligations is not desirable for GasTerra.
Through its public affairs activities, GasTerra attempts to keep informed about and make a constructive contribution to the implementation of the Network Code Tariffs (NC TAR) in the Netherlands.
This risk was introduced for the first time in 2017 with a related classification in the risk matrix.