Additional notes to the consolidated financial statements (2024)

General

The main financial risks to which the company is exposed are market risk (consisting of interest rate risk, currency risk, and price risk), credit risk and liquidity risk. The company uses financial risk management to limit these risks through operational and financial measures. Specific hedging instruments can be used for this purpose, depending on the nature and size of the risks.

The company may use derivative financial instruments to manage interest rate, currency, and price risks arising from ordinary operational activities. Derivative financial instruments are only used to hedge risks and not for trading or any other purpose.

Interest rate risk

The interest rate risk to which the company is exposed relates to the risk that future outgoing interest cash flows will increase due to changes to the market interest rate for interest-bearing loans with floating interest rates and for deposits taken and commercial paper issued with terms of less than one year. The interest rate risk of these instruments, to the extent they are held by the company itself or its wholly-owned group companies, was not hedged at year-end 2021 (year-end 2020: the same). The company is also exposed to an interest rate risk in the period between the decision to issue or refinance non-current loans with a fixed rate and the uptake of these loans.

On average, between 5% and 10% of the company’s non-current debts (including the current repayment obligation on non-current loans) are current financing arrangements with a variable rate of interest. Aside from that, an amount of €100.0 million in non-current loans with a variable rate of interest was outstanding at year-end 2021 (ultimo 2020: €zero). A 1% point change in the interest rate will alter the interest expenses by approximately €2.5 to €4.0 million. Given the limited size and term of these loans, the interest rate risk on these loans has not been hedged.

Currency risk

Currency risks arise if contracts or transactions are entered into in a currency that is not the functional currency. The currency risk the company is exposed to consists of the risk that future cash flows, including those from payables and receivables, will fluctuate over time due to changes in exchange rates.

The currency risk is limited in the context of normal operations because most transactions take place in euros. Only a limited number of transactions take place in currencies other than the euro. The company aims to limit or neutralise the currency risk for a number of these transactions by making use of specific risk hedging instruments, such as forward foreign exchange contracts. Currency risks are hedged if there is sufficient certainty about the amount and timing of the foreign currency cash flows. Hedging the currency risk on transactions in Swiss francs and pounds sterling is an example of this.

At year-end 2021, a total of €2.9 million (translated) in transactions denominated in Swiss francs was hedged (year-end 2020: €5.7 million) by means of forward exchange contracts. This hedging refers entirely to the periodic refund of withholding tax deducted from dividend payments from the Nord Stream participating interest (which has its registered office in Switzerland) to Gasunie. The outstanding tax refunds were hedged for 100%. At year-end 2021, the hedging instruments had a term of under one year (year-end 2020: the same).

Furthermore, the currency risk on a number of future liabilities denominated in pound sterling have been hedged by keeping this foreign currency in a pound sterling bank account. At year-end 2021, the pound sterling balance in this account represented a euro value of €5.2 million (year-end 2020: €5.5 million).

At year-end 2021, there were no other significant foreign currency positions (year-end 2020: the same).

Price risk

The company uses gas and electricity for its day-to-day operations, including for gas transport, balancing actions in the gas transport network, and internal and external production of nitrogen for quality conversion, for which the company has entered into gas and power supply contracts with energy providers. The contracts the company has entered into are supply contracts that are common in the market today, with variable energy prices based on current spot market prices at the moment of contracting/supply. These contracts are not subject to a minimum purchase obligation. The energy supply contracts generally have a relatively short term (3-5years). The company is exposed to a price risk if the variable charges for gas and electricity increase and regulations do not allow Gasunie to offset these price increases in its future tariffs. For the 2021 financial year, the price risk can partially be offset in future tariffs in the Netherlands and Germany. For further details on the price risk, see note1 ‘Significant matters and events in 2021’.Aside from that, the company is exposed to an energy price risk in the performance of certain investment projects.

In order to mitigate the price risk in the company’s day-to-day operations, and thus pursue stability in the regulatory tariffs, the company uses a risk hedging policy and associated energy procurement strategy. The basic principle of this policy is that the company does not trade in energy supply contracts and does not take speculative positions. The company has committed to purchasing the contracted volumes itself and using them for its day-to-day operations.

The energy supply contracts come with the contractual option to partly fix prices for a certain future supply period. Under the current contracts, this can be done a maximum of three years in advance. In these ‘forward purchases’, the company takes into account the anticipated periodic energy requirements to meet the own-use exemption. The required level of price risk hedging differs from one group company to the next, determined partly by the predictability of the volume and timing of the energy usage. GTS aims to hedge at least 65% of the anticipated energy usage, whereby the degree of hedging is partly based on current and forward prices. For Gasunie Deutschland, prices are fixed only to a very limited degree or not at all under its current procurement contracts and within the current regulatory framework. For other important group companies, such as EnergyStock and BBL, the degree to which prices are fixed varies because their energy usage and timing is harder to predict in practice. Energy usage that has not been contracted under forward supply contracts is purchased on the sport market as and when the need for energy arises.

At year-end 2021, the nominal value of the forward supply contracts for the company’s energy usage totalled approximately €76.1 million (year-end 2020: €30.3 million). The forward supply of energy under these contracts consists entirely of electricity and gas to be supplied in the 2022 financial year. Under IFRS9.2.4, liabilities from forward supply contracts are not recognised in the balance sheet.

Credit risk

Credit risk relates to the loss that would arise if counterparties were to entirely or partially default and fail to meet their contractual obligations. At the balance sheet date, the company was not exposed to any material credit risk with regard to any individual customer or counterparty (year-end 2020: the same).

In making use of derivative and other financial instruments the company applies strict limits on counterparties to limit the credit risk. This limits the level of risk the company is exposed to from its counterparties. The company has drawn up criteria for selecting counterparties in financial transactions. These criteria limit the risk associated with possible credit concentrations and market risks.

To limit the credit risk on trade and other receivables, if appropriate, the company asks for guarantees from its customers and other parties with whom transactions take place.

The company has received the following guarantees from third parties:

Securities received are primarily guarantees issued as part of gas transport arrangements, as well as guarantees provided by contractors and suppliers involved in major investment projects. The security deposits are held in cash and are interest-bearing. A market interest charge is calculated for the security deposits. The letters of awareness mainly relate to legally unlimited guarantees received from the parent company of the customers to which they relate. An internal creditworthiness analysis and the maximum allowed exposure of the customers in question subsequently determined by the company form the basis for quantifying the value of these guarantees.

The individual terms of the guarantees received are generally short (one to three years), with the terms of a few guarantees exceeding five years. The guarantees are not freely assignable.

Liquidity risk

The liquidity risk is the risk that the company has insufficient cash to meet its immediately payable current liabilities. The company quantifies its liquidity risk by using a long-range forecast of capital expenses and investments and a liquidity forecast with a horizon of at least one year for operational expenses. With respect to the hedging instruments held as at the balance sheet date, there are no obligations to provide collateral if the fair value of these instruments is negative.

The company’s financing policy is partly to reduce its liquidity risk at as low a cost as possible. The options for reducing this risk depend on the solvency of the company. Gasunie is a solvent company and can therefore attract credit facilities relatively easily. According to Standard & Poor’s, Gasunie’s long-term creditworthiness is AA- with a stable outlook, while the short-term rating is A-1+. According to Moody’s Investors Service, the long-term credit rating is A1 with a stable outlook, and the short-term rating is P-1.

At year-end 2021, the company had 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), a Euro Commercial Paper (ECP) programme of €750 million (year-end 2020: €750 million) and a European Medium Term Note (EMTN) programme of €7.5 billion (year-end 2020: €7.5 billion) to hedge its liquidity risk. The committed credit facility was extended by one year in March 2021. The agreement now runs through to April 2026, with an option to extend it to April 2027. No funds were drawn on the committed credit facility over the past year. As part of its normal operational activities, the company 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, €2.9 billion was issued in loans as at year-end 2021 (year-end 2020: €2.6 billion). The EMTN programme is regularly updated and runs through to September 2022.

Summary of future cash flows
The maturity profile of future cash flows relating to non-current and current financial liabilities outstanding as at the balance sheet date is as follows:

The maturity profile of future cash flows relating to non-current and current financial liabilities outstanding in 2020 is as follows:

Fair value

The way in which fair value is determined is described under ’Determining fair value’ in the accounting policies for the measurement of assets and liabilities and the determination of the results.

Interest-bearing loans
The interest-bearing loans are bond loans with a listing on the Amsterdam stock exchange, and private loans.

The fair value of listed bonds is the same as the year-end exit price. The determination of the fair value took place according to level1 (year-end 2020: level1). The fair value of the private loans has been determined by calculating the present value of the expected future cash flows at a discount rate equal to the applicable risk-free market interest for the remaining term, plus credit and liquidity surcharges. Account has been taken of the company’s risk profile. The determination of the fair value took place according to level2 (year-end 2020: level2).

The carrying amount and the fair value of the interest-bearing loans as at year-end 2021 were:

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

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