Our customers and society at large trust us to provide them with a safe, reliable and affordable supply of energy. And again, during the past year, our employees worked hard to be worthy of that trust. We are pleased to report that, in 2015, we achieved security of supply of almost 100%. With regard to safety, we achieved most of our objectives. We set up a new programme to improve safety awareness and behaviour even further. The programme is definitely paying off, but our ambitions go beyond the results achieved so far. With regard to our efforts in the field of the environment, such as reducing our footprint, the desired improvements were achieved in 2015. Finally, our financial results were solid, enabling us to pay € 332 million in dividend to our sole shareholder, the Dutch state.

Partly due to our investments in gas infrastructure (pipelines, installations, terminals and storage facilities), customers have been able to benefit from a well-functioning gas market in the Netherlands and Germany. In the autumn, we put into use a new pipeline from our German network to Denmark, and on the Maasvlakte, in cooperation with Vopak, we started to expand our infrastructure for liquefied natural gas for the transport sector. In addition, we took further steps to set up green gas projects and develop new services regarding contracting capacity in our network and our gas storage. A well-functioning gas market also contributes to an affordable and reliable supply of gas and heating in north-west Europe. In 2015, the gas trading platform TTF continued to strengthen its position as a leading trading platform in Europe.

The changing gas market

The gas market is changing radically. In 2015, the Dutch Minister of Economic Affairs announced a further reduction of gas production in the Groningen field. To ensure sufficient gas remains available for customers and society, an additional supply of gas will be needed, either from other Dutch fields or from abroad. Thanks to the gas roundabout, this gas may come from anywhere in the world. The internal European energy market is functioning increasingly well. A shift is taking place from national to international markets. This is mainly due to the expansion of interconnection capacity and a larger international supply of gas via pipelines and LNG. We aim to maintain, and where possible strengthen, our leading position as a cross-border gas infrastructure player.

Changes in the gas market are also necessitating operational adjustments. For instance, to make gas from outside the Netherlands suitable for small-scale users in the Netherlands it needs to be blended with nitrogen to achieve the right quality. We are therefore preparing an expansion of our nitrogen facilities. By carrying out maintenance and replacement programmes, we also make sure that our infrastructure, not only in terms of pipelines and installations, but also our IT systems, stays in top condition.

The role of gas in the energy transition

In line with the agreements reached at the climate summit in Paris in 2015, the Dutch government has made the reduction of CO₂ emissions the focal point of its energy policy. Accordingly, in its Energy Report published in January 2016, the government has left open all available energy options that may help create an energy system that is cleaner, while also remaining safe, reliable and affordable. It is important that the daily supply of energy is not disrupted, slowed or blocked during the transition to a fully sustainable energy future.

In its Energy Report, the government discusses various areas where gas and gas infrastructure could make a significant contribution to achieving its 2050 objectives. The underlying assumption is that gas, as the least polluting fossil fuel, will continue to play a crucial role for a long time to come. The volume of natural gas will decline in the longer term, with fossil gas gradually being replaced by renewable gases. Natural gas will then be increasingly used for applications for which no cleaner alternatives are at hand, such as in high-temperature processes in industry, or for freight transport by road or sea, where LNG can serve as a replacement for polluting fuels, such as diesel and fuel oil. In addition, gas will serve as a back-up at moments when the availability of energy from renewable sources is insufficient. We support this “Customised Gas” approach. Together with partners, we are developing LNG infrastructure and promoting the use of renewable gases, such as green gas and syn gas.

In consultation with our shareholder and the relevant ministries, we are investigating how, with our existing assets, specific competences and expertise, we can make a positive contribution to the energy supply today and to a low-CO₂ energy supply in the near future that remains reliable and affordable. Given the expected declining role of coal-fired plants in the future, gas (as the cleanest fossil fuel that can be deployed flexibly) can make a significant contribution to CO₂ reduction in the coming 20 years.

Energy dialogue

Energy has become a social issue, with much attention being paid to the living environment. In 2015, we held many discussions with stakeholders, both from within the gas sector and outside it, as well as with policymakers and environmental and advocacy organisations. In a number of cases, this has led to new forms of cooperation. For instance, in 2015, we co-founded the Dutch Renewable Energy Foundation. In 2016, one of our focal points will be to take an active part in the wider energy dialogue, in both our social and our political environment.

To us, the changes in the gas market mean that we will further improve the efficiency of our internal processes by accelerating and simplifying processes and structures, and by increasing our innovative power.

In carrying out our activities and in achieving our objectives, we fully rely on the dedication, knowledge and experience of our employees. On behalf of the company, we therefore wish to thank all our colleagues for their contribution in 2015. Together, we will confidently continue to build the energy infrastructure of the future.

Han Fennema, CEO
René Oudejans, CFO

Developments in our environment

In the area of European and Dutch energy supply, we are currently faced with three far-reaching changes that are of great importance to us. 

Firstly, the Netherlands and Europe face the challenge of having to reduce total emissions of greenhouse gases by 80 to 95% by 2050, a target that was confirmed recently at the climate summit in Paris. This means an almost 100% reduction of CO₂ emissions in the energy supply chain. This requires a drastic transformation that is not only technological in nature, but also one that is continuously able to adjust to broader developments in society in social, economic and financial terms. Furthermore, it is important that, during this transformation, the energy supply is not disrupted. The reliability and (social) cost of an energy supply that keeps renewing itself pose risks that require explicit attention. The Energy Report published by the Dutch Ministry of Economic Affairs in January 2016 underlines this. The Energy Report also emphasises that natural gas, as the least polluting fossil energy carrier, occupies a special position in the transition to a CO₂-free energy supply. In the coming decades, natural gas will remain an important part of the energy supply in the Netherlands, even though this role will change in the longer term.

Secondly, the gas market in north-west Europe is changing, because gas production (particularly in the Netherlands) is declining rapidly. This is not only because the gas fields are becoming empty, but also because of decisions with regard to production from the Groningen field in the light of the earthquakes issue. This decline in volume and flexibility is bigger than the expected decline in demand due to increasing demand for sustainable energy. As a result, the Netherlands and north-west Europe will need to import more, supplementary gas. It is expected that more LNG and Russian gas will be supplied, but the details of these supply routes are as yet uncertain. In the current market – with low gas prices, varying expectations about the development of the demand for gas and geopolitical uncertainty – it is difficult for market parties to enter into long-term obligations and to take decisions about the development of energy infrastructure.

Thirdly, the energy market is increasingly developing from a national into an international playing field. This is because services and products are now better aligned, the internal European energy market is working better, the interconnection capacity has been expanded, and there is a higher international supply of gas via pipelines and LNG.

What do these developments mean for us?

Hybrid system perspective
The transition to a CO₂-neutral energy supply has consequences for the role of gas and gas infrastructure. In the short and medium term, replacing coal by gas for electricity production can reduce CO₂ emissions significantly, as well as ensure a higher utilisation of the gas infrastructure. However, in the context of the energy transition, a decline in the use of natural gas in the long term is inevitable. In addition, the share of renewable gases, such as green gas, will increase. In the sustainable energy system of the future, various kinds of gases, electricity and heat will jointly play a role and affect each other. By joining up the strong points of gas, electricity and heat, the weak points that these energy carriers have individually can be offset. That is why we want to make our gas infrastructure suitable for transporting and storing other kinds of gases, such as hydrogen. In this way, we can optimise the deployment of our network. In addition, we can link up the currently largely separate gas, heat and electricity systems. From this hybrid system perspective and the context of ‘affordable, reliable and sustainable’, we are convinced that continued use of the existing gas infrastructure, in combination with other energy carriers (e.g., green gas, hydrogen and electricity), will also be the best choice from a social perspective.

Liquid trading platform
The decline in production in the Netherlands is leading to a change in gas flows and thus a change in capacity bookings. More gas will be contracted from non-Dutch sources. It is not self-evident that these new flows will go via our network, as we clearly face competition from foreign gas infrastructure companies. 

We aim to attract transit flows by offering good connections to import points, collaboration with neighbouring infrastructure companies, a smoothly running and efficient system with no physical bottlenecks, attractive services and tariffs, good market connections, and a liquid trading place. In this way, we can keep our network attractive and our tariffs low, and our customers can benefit from a well-functioning gas market.

European integration
Better (physical) interconnections within Europe and better functioning gas trade markets ensure that even markets that do not immediately border the Netherlands increasingly affect pricing in the Netherlands. We expect that this impact will continue to grow, as European integration continues and markets become increasingly interconnected. In these markets, we can convert our competencies in the field of infrastructure and market development into value for society and our shareholder. That is why we have a European focus, and aim to strengthen our leading position, for which collaboration with European partners is becoming increasingly important.

We carefully monitor these developments in the market. We take them into account in our annual evaluation of our strategy, and adjust the strategy if we believe this is justified.

We are a company with a public task, and our goal is to enable a safe, reliable, affordable and sustainable energy supply. We do this in an efficient and professional way. The role that gas infrastructure plays in this forms the basis for our strategy. Through the connecting role of our infrastructure in the energy supply, we respond to the energy needs of customers and consumers. To keep meeting these needs, we are working in innovative and breakthrough ways in the field of energy, and that of gas and natural gas in particular. In order to realise our strategy, we use a business model that allows us to respond in the best possible way to opportunities in the market, to mitigate risks, and to create value for our stakeholders. We have included the aspects that play a role in our value creation process in our value creation model.

Our customers’ wishes are an important guiding principle in our service provision. We aim to keep developing our leading position in Europe, where possible in collaboration with partners, both nationally and internationally. In our strategy, we take into account the opportunities, risks and challenges of the quickly changing energy market. We regularly carry out environs analyses to ensure good alignment between our strategy, our objectives, our business model and current circumstances.

Strategic pillars

Our strategy is based on the following three pillars:

• Optimum infrastructure: optimising the value our existing assets
• European connections: strengthening our leading position as cross-border gas infrastructure company in Europe
• Energy in transition: enabling the transition to more sustainable energy consumption.

Optimising the value of our existing assets

Our gas infrastructure activities are at the heart of our activities. We focus on carrying out the legal tasks of network operators GTS and Gasunie Deutschland, in order to facilitate a well-functioning gas market. Through our network operators, we ensure the management and development of the gas transport network by means of transport services and related services, quality conversion and guaranteeing security of supply.

Strengthening our leading position as cross-border gas infrastructure company in Europe

In an increasingly consolidating market, we take up the challenge to maintain, and where possible strengthen, our leading position as a cross-border gas infrastructure player. We aim to make sure that our infrastructure is the preferred route for market players for their gas transport, so that our assets are put to optimum use. By taking this approach, we also strengthen our position as the ideal negotiating partner for regulatory authorities. This enables us to exert a positive influence on appropriate legislation. Our positioning as an innovative service provider also contributes to this.

In the past year, we worked intensively on possible collaborations with other gas infrastructure companies to arrive at a further expansion of the gas roundabout; for instance, by increasing opportunities for the supply and throughput of gas, and thus also provisioning opportunities for the Netherlands and continental Europe.

Enabling the transition towards a more sustainable use of energy

The issues in the field of energy and sustainability are more challenging than ever. On the way towards a cleaner energy future that is not only feasible, but also reliable and, above all, affordable, we are keen to take advantage of any opportunities that arise. We believe in a sustainable future in which gas will play an ongoing role. Our focus here is on green gas, heat provision in the built-up environment, and carbon capture, transport and storage (CCTS). If society opts for CCTS, we will help to facilitate that.

In 2015, we revised our Corporate Social Responsibility strategy and adjusted it to current developments both within our company and in the outside world. Our focus areas in the field of CSR are directly derived from our strategy. Good performance in our key focus areas of safety, security of supply and care for our employees remains the basis of our CSR strategy. It determines the level of support we receive for our activities; i.e., our licence to operate. Special focus areas in 2016-2017 are footprint reduction, energy transition, sustainable mobility and socially responsible procurement. Our results in these areas increasingly determine the room we have for further development, our licence to grow. We will elaborate on these activities and the results achieved in Our results.

Footprint reduction

We aim to reduce the emission of greenhouse gases by restricting and preventing methane emissions, making maximum use of available energy, and ensuring effective combustion. Through our footprint reduction programme, we contribute to the government objectives with regard to CO₂ reduction and sustainable energy. We aim to be a leader in this regard within the international gas infrastructure sector. Together with a number of European network operators, we aim to have realised a CO₂-neutral gas supply by 2050, a goal that has been laid down in the Green Gas Initiative. On this journey, in our own business operations, we aim to have reduced our direct CO₂ emissions by 20% in 2020 (compared to 1990), which is 93 kilotonnes CO₂ equivalent*. By 2030, we aim to have reduced our CO₂ emissions by 40% compared to emissions recorded in 1990**.

Energy transition

We are convinced that there are many ways in which gas and gas infrastructure can contribute to a sustainable energy supply. They contribute to keeping the development of renewable energy (such as wind and solar energy) reliable and affordable. By deploying gas as a flexible partner for generating electricity, optimum use is made of the existing infrastructure. Moreover, gas is an energy carrier that is also developing into a renewable type of energy through the production of green gas and hydrogen. The first steps in the transition towards a sustainable energy supply are challenging for a number of reasons, such as financing and the state of technological developments. Where possible, we strive to take these steps in collaboration with other parties, both inside and outside our chain. In this way, we aim to maximise the chances of success. Regarding the energy transition, we focus on the following areas: renewable gas, hybrid solutions for heat provision, and small-scale LNG. We provide more details on these specific areas elsewhere in this annual report.

Socially Responsible Procurement (SRP)

In our procurement activities we focus on ‘greenifying’ our activities, for instance by purchasing green energy. In addition, we enter into agreements with our suppliers about the prohibition to against using child labour. We have laid this down in a Code of Conduct for our suppliers. In 2016, we aim to give more shape and structure to sustainable procurement in the form of an SRP policy that is appropriate for a company like ours.

Sustainable mobility

We encourage our employees to limit the number of kilometres they travel for their work as much as possible. Working from home is part of this policy, but this is, of course, not possible for all activities. Part of the vehicle fleet that we use for maintenance activities runs on green gas. In addition, we make Dutch Railway business cards and bicycles available to our employees for work-related travel. We also have a number of cars running on green gas available for work-related travel. Several of our offices have facilities for video conferencing, which also reduces the number of kilometres travelled. Given these various options already available, we aim to draw up a structured sustainable mobility policy in 2016-2017, while also researching other suitable options.

  * This exclusively concerns Scope 1 of the Greenhouse Gas (GHG) protocol (see Environment)
** Calculated over all scopes  (1, 2 and 3) of the GHG protocol

In the overview below we show the link between the value we aim to create and our strategic pillars, coupled to the material topics used for this annual report, result areas and KPIs.

Click for a larger view of the table.

In this analysis, we consider our company’s opportunities and strengths, as well as its threats and weaknesses, including in comparison with similar European companies. An important principle we adhere to in this regard is that, in markets in which we have limited experience, we work closely together with partners. This applies to markets in a geographical sense, as well as to many projects that contribute to the transition to a CO₂-neutral energy supply.

Strengths

• Gas infrastructure: strong in operational, commercial and network planning activities and in the management of new-build projects
• Good brand awareness and reputation
• Long history and extensive experience with, and knowledge of, the Dutch and German gas business
• Strong in business-to-business service provision
• Highly automated processes
• Cross-border activities with a wide range of mid-stream assets
• Solid financial position

Weaknesses

• Main activities focused on gas business
• Dependent on relatively few partners
• Access to a limited number of assets in growth markets
• Limited experience with innovative projects in new environments
• Composition of workforce (high average age)

Opportunities

• Benefit from and encourage new sustainable energy markets by developing sustainable business
• Make the most of our role of energy infrastructure company in the sustainable transition by working together with regional network companies and other national energy infrastructure companies
• Strengthen our position as cross-border gas infrastructure company in Europe by working together with leading gas transport companies
• Contribute to the (European) security of supply by linking up with extra LNG supply in north-west Europe and extra supply of Russian gas for Europe

Threats

• Role of gas not undisputed
• Quickly changing business environment with an expected decline in gas transport
• Geopolitical developments
• Developments in legislation and regulations
• Loss of knowledge of older, experienced employees about to retire