06 Consolidated half-year report

Just like in the 2020 financial year, management expects that the pandemic will not have a significant adverse impact on the 2021 financial results. In the first half-year of 2021, the revenues and operational expenses from both the regulated and the non-regulated and/or exempt activities did not deviate significantly from the business plan due to the pandemic. No adjustments were made in the accounting of revenue, purchase and lease contracts. Our present contracts also do not prompt the inclusion of new obligations or provisions in the balance sheet. The refinancing calendar has not changed due to the pandemic and the planned repayment of a non-current loan in the first half-year of 2021 took place as scheduled. The Company’s financial liquidity is good, including access to the money and capital markets. Gasunie has not requested governmental emergency financial support in the Netherlands or Germany.

In particular, management has analysed the impact of the COVID-19 pandemic on the transactions that are accounted for in accordance with the following standards:

• Revenues
• Property, plant and equipment (impairments)
• Financial instruments
• Leases
• Provisions
• Income taxes

Management concludes that the application of the accounting policies mentioned above need not be revised at the balance sheet date of 30 June 2021 compared to the accounting policies as applied in preparing the 2020 annual report.

In the first half of 2021, Gasunie distributed € 262.3 million (first half-year of 2020: € 288.4 million) in dividends to its sole shareholder, the Dutch State. This concerned the appropriation of result for the 2020 financial year in accordance with the resolution of the General Meeting of Shareholders of 29 March 2021.

The nature of Gasunie’s other related parties transactions in the first half-year of 2021 is identical to those disclosed in the 2020 annual report. Related party transactions in the first half-year of 2021 were performed at arm’s length where applicable.

Financial information is segmented in line with the group’s activities. The operating segments reflect the group’s management structure. The following segments are distinguished by Gasunie:

• Gasunie Transport Services
  This segment covers network management in the Netherlands and is responsible for managing gas transport and developing the transport network and related assets, as well as promoting the market mechanism.
   
• Gasunie Deutschland
  This segment covers network management in Germany and is responsible for managing gas transport and developing the transport network and related assets, as well as promoting the market mechanism.
   
• Participations
  This segment focuses on developing projects for the energy transition, ensuring an optimum utilisation of existing participations and facilitating access to the new gas flows for north-western Europe through an LNG connection and long-distance pipelines. This segment also includes jointly operated pipelines that connect the Gasunie transport network with foreign markets, such as the BBL pipeline to the United Kingdom.

The accounting policies for the measurement of assets and liabilities and the determination of the result used for these segments are the same as those applied in preparing these 2021 interim financial statements and the 2020 consolidated annual report.

The assets, revenues and results of a segment comprise both items directly related to the segments and items that can reasonably be attributed to the segments. Because the Company is funded at a corporate level, no segment information is prepared and reported for the Company’s equity and liabilities. Inter-segment transactions are performed at arm’s length. Transactions between segments are eliminated in the information about operating segments.

Revenues and results per segment are as follows:

The increase in revenue for the GTS segment can be attributed mainly to an increase in the 2021 entry tariffs together with increased capacity bookings as a result of higher amounts of imported gas. This did not lead to an increase in the result however, due to substantially higher network and electricity costs. The revenues and the result for the Gasunie Deutschland segment declined. This can be attributed mainly to changes in gas flows in Germany, resulting in lower demand for transport capacity from Gasunie Deutschland in the first half-year of 2021. Although the revenue of the Participations segment was approximately the same, the result declined due to substantially higher network and electricity costs and due to an increase in the costs relating to the energy transition.

Inter-segment services amounted to € 21.0 million in total in the first half-year of 2021 (first half-year of 2020: € 19.2 million). During the first half-year of 2021, the Gasunie Transport Services segment rendered inter-segment services of € 7.0 million (first half-year of 2020: € 5.5 million), the Gasunie Deutschland segment rendered inter-segment services of € 0.2 million (first half-year of 2020: € 0.1 million) and the Participations segment rendered inter-segment services of € 13.7 million (first half-year of 2020: € 13.6 million).

The assets for each operating segment are as follows:

Unallocated assets comprise deferred tax assets and current assets. The most important investments are further disclosed in note 4 ‘Tangible fixed assets’.

Revenue increased by 0.8% compared to the first half-year of 2020 (first half-year of 2020: increase of 4.3%). A further revenue breakdown is included below.

The Company categorises its revenues according to the way in which economic factors influence the nature, amount, timing and uncertainty of the cash flows. A distinction can be made between two categories in the case of Gasunie. The first revenue stream relates to revenue from regulated transport and related services, as generated by Gasunie Transport Services and Gasunie Deutschland. The Dutch and German regulatory authorities set the permitted income for this revenue stream for the long term.

The second revenue stream relates to non-regulated services and/or those exempt from regulation. The income for these services is determined by the market on the basis of supply and demand and is generally subject to greater volatility in revenue compared to the regulated services. Revenue from the non-regulated services and/or those exempt from regulation is almost completely generated by the Participations segment.

Revenue for each operating activity is as follows:

Revenues can be divided into revenues from gas transport and related services, and other activities. Gas transport and associated services covers both revenues from regulated gas transport and revenues from non-regulated and/or exempt gas transport. Other activities include, among other things, revenues from gas storage services.

The breakdown is as follows:

Revenues by geographical area are determined on the basis of the area where the activities take place (within the Netherlands or outside the Netherlands).

The geographical distribution of revenues is as follows:

Investments in tangible fixed assets in the first half-year of 2021 amounted to € 126.3 million (first half-year of 2020: € 191.0 million). This amount does not include investments in right-of-use assets. The investments mainly relate to the development of Gasunie Transport Services’ nitrogen installation in Zuidbroek, construction of a natural gas pipeline to Volkswagen’s car factories in Wolfsburg and to the development of the second pipe of the EUGAL pipeline in Germany. As at 30 June 2021, Gasunie had entered into conditional investment obligations of € 197.3 million (year-end 2020: € 205.2 million). These obligations mainly relate to the aforementioned construction projects.

At regular intervals, management determines whether there is any event or indication of impairment of fixed assets. As mentioned in note 1 ‘Significant matters and events in 2020’, the COVID-19 pandemic had no consequences for the valuation of fixed assets as at 31 December 2020. The outcomes of this analysis for each significant cash-generating unit are shown below.

Gas transport network in the Netherlands
Valuation of the gas transport network in the Netherlands depends, among other things, on the Company’s income from regulated services. Management tested the valuation of the gas transport network in the Netherlands at year-end 2020, due to the release of the GTS 2022-2026 method decision on 1 February 2021. The outcome of the test was recognised in the 2020 financial statements. After preparing the 2020 annual report, both GTS and market parties filed a pro forma appeal against the method decision at the Dutch Trade and Industry Appeals Tribunal (CBb). Grounds for the appeal will be further determined in the second half of 2021. As at the date of these financial statements, it is unknown when the Trade and Industry Appeals Tribunal will handle the substance of the appeal. 

No events or circumstances were identified in the first half-year of 2021 that may give rise to significant changes in estimates and judgements made as at year-end 2020.

Management’s review did not identify any other events or indications that the gas transport network in the Netherlands may be impaired as at 30 June 2021.

Gas transport network in Germany
Valuation of the gas transport network in Germany depends, among other things, on the Company’s income from regulated services. In 2019, an investigation was launched by the German Ministry for Economic Affairs and Energy with respect to a change in the regime for investment measures, among other things. Since then, it has been investigated whether the present regulatory regime should be amended in this regard in the future with the aim of accelerating the investments necessary for the energy transition. The changes are to result in a faster commissioning of planned and approved investments.

On 25 June 2021, the German Bundesrat gave final approval for the new bill (the ‘AregV Novelle’). An important change starting from the new regulatory period on 1 January 2023 is that the present regime of investment measures (known as IMAs) is abolished. At the same time, the commitment to pay back historically accumulated investment allowances is also abolished. In addition, a change in determining capital cost allowances is introduced for other investments. For the period up to 2028, a transition arrangement is in place.  

Management tested whether the intermediate change of some principles in the present regulatory framework constitutes an indication that the gas transport network may be impaired. Management’s review demonstrates that, among other things due to the transition arrangement, the effect of abolishment of the investment measures and the introduction of a capital cost comparison model are largely offset by forgiving the repayment of historically accumulated investment allowances. Management therefore concludes that the introduction of the AregV Novelle is not an indication for an impairment of the gas transport network in Germany as at 30 June 2021.

Management’s review did not identify any other events or indications that the gas transport network in Germany may be impaired as at 30 June 2021.

BBL Company
Management’s assessment has not revealed any event or indication of an impairment of BBL Company’s tangible fixed assets as at 30 June 2021.

EnergyStock
Management’s assessment has not revealed any event or indication of an impairment of EnergyStock’s tangible fixed assets as at 30 June 2021.

Other tangible and financial fixed assets
Management’s assessment has not revealed any event or indication of an impairment of other tangible and financial fixed assets as at 30 June 2021.

The movements in joint ventures in the first half-year of 2021 are as follows:

In the first half-year of 2021, Gasunie mainly invested in Gate terminal’s LNG storage facilities and in joint ventures that focus on establishing infrastructure for the ongoing development and integration of alternative energy sources.

The changes in equity concern the revaluation of the participation in Gate terminal as a result of the fair value change of Gate terminal’s cash flow hedge. Gasunie recorded this change in equity in comprehensive income.

The joint operation Ambigo V.O.F. was dissolved as of January 2021. The entity already ceased its operational activities earlier. Following the termination of Ambigo V.O.F., Gasunie Ambigo B.V. was dissolved in June 2021 as well. Both dissolvements had no important financial impact on the Company.

In June 2021, GASPOOL Balancing Services (GASPOOL) GmbH merged with NetConnect Germany GmbH & Co. KG (NCG) to form Trading Hub Europe GmbH (THE). Gasunie previously held an interest in GASPOOL and obtained a share in THE due to the merger. The merger is the result of a legislative change in Germany with the aim of establishing one integrated German market area. The merger will get rid of the separate northern and southern market areas and establish a new commonly controlled market area with a single entry and exit zone.

The merger has no significant financial impact on Gasunie. The financial interest in THE amounts to € 0.5 million. This equals the amount previously held in GASPOOL. Based on the cooperation agreement, all eleven shareholders each have an identical financial interest (of 9.09%). Based on the cooperation agreement, Gasunie has significant influence over the relevant activities of THE. The financial interest is therefore considered an associate company and measured in accordance with the equity method.

As at 30 June 2021, the nominal amount of € 3,042.4 million (year-end 2020: € 3,102.4 million) in non-current loans comprised € 2,252.4 million (year-end 2020: € 2,552.4 million) in bond loans and € 790.0 million (year-end 2020: € 550.0 million) in private loans. The transaction costs and discount still to be amortised amounted to € 8.4 million as at 30 June 2021 (year-end 2020: € 9.1 million).

The movements in interest-bearing loans are as follows:

In the first half-year of 2021, the Company repaid € 300.0 million (first half-year of 2020: € 10.7 million) in non-current loans.

In May 2021, an amount of € 90.0 million was drawn from a facility granted by the European Investment Bank (EIB) regarding the construction of GTS’ nitrogen installation. The effective interest rate is fixed at 0.258%. Repayment of the loan will take place in a single instalment in May 2030 at the latest. Subsequently, the remaining part of the facility amounting to € 150.0 million was drawn in June 2021. The effective interest rate for this part of the loan is fixed at 0.127%. Repayment will take place in a single instalment in June 2029 at the latest. Early repayment is allowed for both parts of the loan.  

N.V. Nederlandse Gasunie provided no securities to its credit providers for the interest-bearing loans and other facilities. Existing loan agreements are unchanged compared to 2020.

Future repayment obligations are as follows:

The Company has an uncommitted current account facility of € 45 million (year-end 2020: € 45 million), a committed credit facility of € 600 million (year-end 2020: € 600 million) and a Euro Commercial Paper (ECP) programme of € 750 million (year-end 2020: € 750 million). In March 2021, the committed credit facility was extended by one year and now has a term up to April 2026. No amounts were drawn on the committed credit facility in the past half-year. However, as part of its normal operating activities, Gasunie has regularly raised short-term loans on the money market in the form of deposit loans and debt securities under the ECP.

Under the EMTN programme, € 2.3 billion was issued in loans as at 30 June 2021 (year-end 2020: € 2.6 billion). The EMTN programme is being updated as at 30 June 2021.

The long-term and short-term credit ratings by S&P and Moody’s have not changed in the first half-year of 2021. Moody’s reconfirmed the current ratings (A1, P-1) in May 2021. S&P’s latest update dates from June 2020.

Current financing liabilities are as follows:

For further details on non-current loans, please refer to note 6 ‘Interest-bearing loans’.

Gasunie drew an amount of € 240.0 million in short-term interest-bearing loans as at 30 June 2021 (year-end 2020: € 225.0 million). This concerns deposit loans and ECPs with a term of less than one year.

These interim financial statements contain the following financial instruments:

• Other participating interests
• Interest-bearing loans
• Other primary financial instruments

Gasunie applies the following hierarchy of valuation techniques to determine and measure the fair value of financial instruments:

Other participating interests are as follows:

The fair value of the other participating interests as at 30 June 2021 totals € 524.9 million (year-end 2020: € 509.3 million). The increase in fair value of other participating interests amounting to € 15.6 million (first half-year of 2020: decrease of € 8.9 million) is taken directly to the fair value reserve. Nord Stream did not distribute dividend in the first half-year of 2021 (first half-year of 2020: € 20.3 million). In consultation with the shareholders, Nord Stream’s dividend distribution will take place in the second half of 2021.

The determination of the fair value of other participating interests is based on the present value of the expected cash flows. This is considered a level 3 fair value measurement (year-end 2020: level 3). When determining the fair value of the aforementioned other participating interests, Gasunie applies a discount rate based on the risk-free yield, plus credit and liquidity surcharges. This discount rate varies between 3% and 6% after tax, depending on the risk profile of the other participating interest to be measured.

The valuation of the interest in Nord Stream is based on the present value of the expected future cash flows. A calculation model is used and this model is updated annually by Nord Stream based on the most recent business plan. This model is submitted for review and approval to the shareholders of Nord Stream, including Gasunie. The model is subsequently tested by Gasunie’s management on the basis of Nord Stream’s periodic financial reports. The expected cash flows are based on contractual agreements, among other things. All things being equal, if the discount rate changes by 0.5 percentage points, this will result in a change in the fair value amount of approximately € 18.0 million (year-end 2020: € 20.0 million).

The cumulative book value of the interests in Prisma and EDSN amounts to less than € 0.1 million (year-end 2020: less than € 0.1 million). Given this low value, it is assumed that the book value approximates the fair value, and the fair value calculation and a sensitivity analysis for these interests have not been included in these interim financial statements.

Interest-bearing loans relate to bond loans listed on Euronext in Amsterdam and to private loans.

The fair value of listed bond loans is the same as the exit price on the reporting date. This is a level 1 fair value measurement (year-end 2020: level 1). The fair value of the private loans is measured by calculating the present value of the expected future cash flows at a discount rate equal to the applicable risk-free market yield for the remaining term, plus credit and liquidity surcharges. The Company’s risk profile is also taken into account in this calculation. This is a level 3 fair value measurement (year-end 2020: level 3).

The carrying amount and the fair value of interest-bearing loans as at 30 June 2021 is as follows:

Other primary financial instruments comprise trade and other receivables, cash and cash equivalents, current financing liabilities (excluding current repayment obligations on long-term loans) and trade and other payables.

Given the short term of these instruments, their fair value approximates the carrying amount.

Cash and cash equivalents are included in the current assets and, as at 30 June 2021, amount to € 26.4 million (year-end 2020: € 17.9 million).

No significant events occurred between the balance sheet date and the date of these interim financial statements that could give rise to an adjustment or a disclosure in these interim financial statements.