06 Our internal economic value creation

By operating our energy infrastructure we make energy available to society. We generate measurable economic value for the users of our grids, our ‘external value creation’. However, the management, maintenance and expansion of our networks also provide value for stakeholders other than the direct users. Our business operations and investments, and the focus we have on risk management, innovation and cost efficiency lead to internal value creation. It ensures that our employees receive their wages, our suppliers get paid, our bondholders collect interest and the government receives dividends and tax revenues. In this section we look at the long-term internal economic value we generated in 2021. 

Related material topics: 
No. 2 Financial performance and resilience 
No. 5 Developments in laws and regulations 
No. 7 Strong market position 
No. 8 Cybersecurity, data security and privacy 

Related SDGs:
8  

Relevant stakeholders:
Employees
Suppliers
Investors
Shareholder
Regulatory authorities

We not only look to our operations for cost savings, we also seek to reduce costs in our financing. To be able to perform our duties towards our customers and make the investments we deem necessary, we want to have access to the local and international money and capital market. Having an adequate credit rating is essential for this.

Our credit ratings remained at the same high level in 2021. The most important reasons behind these good ratings were our solid financial profile, having the Dutch state as a shareholder, clarity with regard to the Dutch and German regulatory frameworks in the coming years, and the important role played by Gasunie in achieving European and Dutch energy transition objectives. 

In 2021, we used our credit facility with the European Investment Bank (EIB) to finance the new nitrogen plant in Zuidbroek. In May, we borrowed € 90 million for 9 years at an interest rate of 0.258%. In June, we borrowed € 150 million for 8 years at an interest rate of 0.127%. 

The committed credit facility was extended by one year in March 2021 and now has a term until April 2026. The RCF amounts to € 600 million and the facility includes KPIs for sustainability. When these KPIs are met, we are granted a discount on the annual credit provision costs.

In June we repaid a bond loan of € 300 million. In October, we issued a € 300 million bond loan with a tenor of 15 years at an effective interest rate of 0.763%. The revenue from this new bond was used to repay a bond loan of € 433 million maturing in October. 
 

Our maturity profile as at 31 December 2021

Our outstanding long-term loans as at 31 December 2021

Our net debt position (nominal interest-bearing debt less cash) decreased in 2021 by € 89 million to € 3,220 million. Gasunie’s solvency at year-end 2021 was 61%, identical to the figure at year-end 2020.

In 2022, Gasunie must repay a bond loan of € 369 million and an EIB loan of € 125 million; the repayment of a € 125 million EIB loan and of possibly € 100 million in TLTRO (targeted longer-term refinancing operations) borrowings will follow in 2023.

As more of our Vision 2030 projects are, as planned, approved in the coming years, the need for additional financing will increase, though some of this need will be absorbed by grants. In 2022, we expect to raise up to € 500 million to meet our long-term financing needs, through new bank financing or by issuing bonds. Interest charges will decrease in the near future due to our existing higher-interest bonds maturing in 2022 and 2023: the current interest rates for a 10-year bond are 3 to 4 percentage points lower than the maturing bond. 

In 2021, Gasunie purchased a total of € 850 million worth of products and services from suppliers. The most important goods and services we procure are the following:  

• services for construction, management and maintenance of pipeline networks and systems  
• materials for construction, management and maintenance of pipeline networks and systems 
• gas, electricity and nitrogen  
• IT facilities and services  
• facilities services and temporary staff.  

Most of what we procure comes from the European Union.

We classify our product and service groups into the following categories:  

• strategic: a product and/or service where, due to the risk of reputational damage and the costs of finding a new supplier, stringent requirements are imposed on the supplier of the product and/or service;  
• critical: a product and/or service where, due to the risk of reputational damage, specific requirements are imposed on the supplier of the product and/or service, though not as stringent as those for strategic products and services;  
• non-strategic/non-critical: all other products and services are classified as non-strategic and non-critical. 

As a capital-intensive TSO operating in two countries, Gasunie is a major purchaser of goods and services. We add internal economic value through our well-defined procurement strategy. Our role as a buyer will increase in the coming years as we implement our Vision 2030 investment agenda. 

In the procurement of materials, engineering and contracting for major projects such as WarmtelinQ and Porthos and for the hydrogen backbone, we use our existing framework contracts as much as possible. We achieve lower transaction costs by procuring these goods and services, where possible, from parties we know through the management and maintenance of our natural gas infrastructure. In a project with several partners, it is decided in mutual consultation which party will arrange which purchases. In practice we see that Gasunie generally procures the goods and services relating to transmission, either on its own or on behalf of the project. 

Many of the construction contracts (i.e. the contractors) required for the construction of the new infrastructure exceed the value set in the existing framework contracts and are therefore specifically put out to tender, possibly throughout the EU. When it comes to non-standard materials or services, we put out a call for tenders in accordance with the EU rules regarding public tendering procedures for specific sectors. 
This may concern individual contracts that only have a bearing on the specific project (such as components for WarmtelinQ, which sometimes require technologies other than those used for CO₂, natural gas or hydrogen). In other cases we conclude framework contracts, which can then be used more widely within Gasunie or for other projects. With this approach, we aim to make best possible use of the synergy across the various energy infrastructures.

Before deciding to go ahead with a Vision 2030 project, we aim to have the major contracts (long lead items, materials, contractors) ready so that we can get a picture that is as realistic as possible (financial aspects, lead times) when the time comes to make the FID. 

In 2021 we paid € 850 million in supplier’s bills. We put more than a hundred contracts worth € 250,000 or more out to tender. For our Vision 2030 projects WarmtelinQ and Porthos, we ordered € 136 million in long-lead items.

Gasunie is a capital-intensive company that is active in a sector with major safety risks. We provide not only reliable and sustainable infrastructure, but also affordable infrastructure. Accordingly, we pay close attention to operating cost-effectively. In 2021 we invested € 90 million in replacement of our infrastructure assets.

Gasunie uses risk-based asset management for this. We map our risks with the help of a risk matrix. A risk assessment is carried out on all hazards/vulnerabilities in the system, during which each of the four business values – security, transport security, sustainability, and financial or other damage – are assessed.  
We use this risk assessment to assess replacement investments. This ensures that as many risks as possible are eliminated in a cost-efficient manner, and that no unnecessary works are carried out. Every year, some of the installations are re-analysed and re-assessed for risks. 

In 2021 we revised our risk matrix. The risk associated with a hazard/vulnerability is determined based on the level of severity of the impact (rows A to E) and frequency of occurrence (columns -I to V). With regard to the impact (potential negative value creation), not only do we look at the impact on Gasunie, but also at the impact on society. 

A precondition for creating economic and social value and realising our Vision 2030 is that our digital systems, data and information be adequately secured, an understanding shared by our stakeholders, who this year placed IT security higher on our list of material topics.  
To ensure security of our IT systems, we take appropriate measures based on risk analysis, factoring in changing views, ambitions, threats and technology. We regularly review the effectiveness of measures through internal and external audits and assessments.  
Our focus on information security is not solely an inward one. Given the vital importance of an uninterrupted energy supply for the Netherlands, Germany and the rest of Europe, we are increasingly working together with other parties across the energy supply chain and with governments to be able to prevent possible future energy supply disruptions. 

Our IT security measures and results in 2021 were in accordance with the digital threats. There were no disruptions with an impact on the essential business processes. Potential crisis situations and business disruptions, as a result of vulnerabilities in suppliers’ software for example, have been adequately resolved. In 2021, we took proactive security measures where necessary, to address a vulnerability in the printing software for example. In 2021, the Information Security Management Systems of Gasunie Netherlands and Germany will be recertified to the international ISO 27001 standard.

Roughly 90% of our annual revenue comes from operations in markets where we hold a regulated monopoly. Regulatory authorities see to it that we provide our services at the lowest possible cost to the public. The tariffs that the regulated parts of our GTS and GUD business units charge customers are set by the respective national regulatory authorities every year. They are calculated by dividing the permitted revenues for the year in question by the estimated capacity demand. 

The revenues permitted by the regulatory authorities consist of an allowance for the cost of capital invested, a reimbursement for the annual depreciation costs (calculated on the basis of the depreciation periods determined by the regulatory authority and the value of the assets) and a reimbursement for the operating costs. If the revenues earned differ from the permitted revenues, the difference is settled in subsequent years. The regulatory authorities review their regulatory regime every 3 to 5 years; in the Netherlands the new regulatory period (price control period) starts in 2022, in Germany in 2023.

On 1 February 2021, regulator ACM published the 2022-2026 methodology decision [methodebesluit 2022-2026], setting the boundaries within which GTS can charge its tariffs. ACM has also opted to change the way in which GTS’ capital costs are spread over time, so as to factor in the future reduction in gas consumption as a result of the energy transition. Various market parties have lodged an appeal against a number of elements of the methodology decision, including GTS. To this end, in December 2021 a notice of appeal was submitted to the Dutch Trade and Industry Appeals Tribunal (College van Beroep voor het bedrijfsleven, CBb). GTS’ appeal relates to three elements of the methodology decision: the benchmark, the energy costs and the permitted return.

Within 12 weeks of the filing date, ACM will submit its statement of defence to the Board of Appeal regarding both the appeal from GTS and those of the other market parties. This is followed by an opportunity to respond via a ‘reply and rejoinder’ (i.e. a full second presentation of the appellant’s case) after which a hearing is scheduled. The proceedings are expected to continue throughout 2022 and perhaps longer.

In 2021 Germany implemented a change to the regulatory framework. The regulation of the gas TSOs and DSOs has been harmonised and simplified. Incentives have also been created to accelerate the development of the German network. This new regulatory framework, which will apply an annual cost of capital comparison, will take effect from 2023. 

Before the start of this new regulatory period, the parameters of the relevant regulatory period – and so also the applicable revenue cap for GUD – will be redefined by the German regulator Bundesnetzagentur (BNetzA). In June 2021, GUD submitted its cost application to BNetzA based on the costs incurred in the ‘photo year’ 2020 (the photo year [base year] is three years prior to the first year of the new regulatory period). The consultation process with regard to the cost application started in November 2021, when GUD received the official consultation responses to the initial cost level.  BNetzA will assess the individual efficiency level for GUD that will apply during the upcoming regulatory period.

In October 2021, BNetzA published the equity interest rates for the new regulatory period for electricity and gas networks. The permissible rate of return on equity is 5.07% pre-tax for new assets and 3.51% pre-tax for old assets. Like many other network operators, GUD has filed a lawsuit with the Higher Regional Court in Germany with regard to BNetzA’s determination of equity. In 2022, BNetzA will evaluate a new general efficiency factor that will apply to all TSOs and DSOs in the regulatory period 2023-2027.

In July 2021, ACM wrote in a memorandum that regulation of the Dutch hydrogen infrastructure is not yet necessary, given the near complete lack of production or consumption of green hydrogen. The hydrogen market that does exist mainly concerns grey hydrogen as a waste or by-product of industry that is purchased by other industrial parties on the basis of bilateral agreements. In December, the Ministry of Economic Affairs and Climate Policy, following the example set by the ACM in its guideline published in September, decided that network operators may build and maintain production installations for alternative energy carriers, such as electrolysers, but may not manage or own them.

German energy legislation was amended in July 2021, making it possible to operate a hydrogen network within (opt-in) or outside (opt-out) a regulated framework. The tariffication rules for hydrogen transmission within a regulated network are governed by the hydrogen network tariff regulation (Wasserstoffnetzentgeltverordnung, H2NEV), which entered into force in November 2021. For example, a rate of return on equity of 9% pre-tax is initially applied for new assets (7.73% pre-tax for old assets); however, this is only guaranteed until the end of 2027.

Gasunie wants to apply a more process-driven approach to its operations: process management is a powerful means to achieve organisational goals effectively and efficiently. In 2021, we created more coherence in Gasunie’s business processes and recorded this in our ‘Process House’, this way providing more insight and promoting steering towards objectives and cooperation between departments. The process model also serves as a reference point when drawing up our audit agenda and enterprise architecture (IT) to ensure that our processes, our systems and the control of both are well aligned.  

We also introduced the annual Process Review, in which process owners together with experts evaluate the performance of their processes. Not only does carrying out this review raise the process owner’s awareness of their role in process management, it helps identify potential risks that threaten the process objective and process optimisation opportunities so that these can be followed up. 
Together with our external supply chain partners, we have started drawing up a supply chain process model to help ensure that supply chain processes between our organisations are recorded in a more consistent manner and that we are ‘speaking the same language’.

In 2021, Gasunie further elaborated its Digital Ambition for the year 2025. Implementing this digital strategy will help us realise our Vision 2030 goals. Digitalisation, data and IT play a crucial role in the energy transition and the energy system of the future. The illustration (interactive) shows in which areas we will be going digital.