annual report 2014 - vng ag · annual report 2014 vng – verbundnetz gas aktei ngesellschaft vng...

Annual Report 2014 VNG – Verbundnetz Gas Aktiengesellschaft

Annual Report 2014 VNG – Verbundnetz Gas Aktiengesellschaft

VNG AG annual financial statements

2014 2013

EBIT € million 253 176

Earnings after tax € million 224 174

Funds From Operations (FFO)* € million 317 155

Cash flow from operating activities € million 255 110

Financial liabilities** € million 501 672

Equity ratio % 32 27

Balance sheet equity € million 874 695

Shareholders of VNG AG

EWE Aktiengesellschaft, Oldenburg 63.69 %

VNG Verbundnetz Gas Verwaltungs- und Beteiligungsgesellschaft mbH, Erfurt* 25.79 %

GAZPROM Germania GmbH, Berlin 10.52 %

HIGHLIGHTs

As at December 31, 2014

* FFO: Result for the period adjusted by non-cash-effective costs and income as well as profits and losses attributable to the disposal of fixed assets

** Due to financing partners outside the Group

* Trustee for ten utilities and municipal companies (Annaberg-Buchholz, Chemnitz, Dresden, Erfurt, Hoyerswerda, Leipzig, Lutherstadt Witten-berg, Neubrandenburg, Nordhausen, Rostock)

HIGHLIGHTs

VNG Group key performance data

2014 2013

Number of employeesat year-end 1,427 1,440

Gas sendout billion kWh 368 362

Length of pipeline system at year-end km 7,200 7,200

Capacity of underground gas storage facilities at year-end billion m³ 2.7 2.6

VNG Group annual financial statements

2014 2013

EBIT* € million 230 182

Earnings after tax € million 184 89

Funds From Operations (FFO)** € million 238 225

Cash flow from operating activities € million 278 101

Financial liabilities*** € million 575 762

Equity ratio % 25 20

Balance sheet equity € million 722 590

* inclusive tax refund for exploration costs of VNG Norge** FFO: Result for the period adjusted by non-cash-effective costs and

income as well as profits and losses attributable to the disposal of fixed assets

*** Due to financing partners outside the Group

Contents | Annual Report 2014

04 THE VNG GROuP

06 FOREWORD OF THE ExECuTIVE BOARD

08 REPORT OF THE suPERVIsORy BOARD

10 MANAGEMENT REPORT AND GROuP MANAGEMENT REPORT FOR THE 2014 FINANCIAL yEAR

10 A. CONsTANT AND CONsIsTENT FuRTHER DEVELOPMENT

10 B. BACkGROuND

12 C. THE VNG GROuP – AN OVERVIEW

15 D. REVIEW OF OPERATIONs IN THE BusINEss AREAs

20 E. ANNuAL FINANCIAL sTATEMENTs OF VNG AG AND CONsOLIDATED FINANCIAL sTATEMENTs OF THE VNG GROuP

23 F. GROuP-WIDE MANAGEMENT OF OPPORTuNITIEs AND RIsks

25 G. OuTLOOk

28 BALANCE sHEET OF VNG AG

29 CONsOLIDATED BALANCE sHEET OF VNG GROuP

30 INCOME sTATEMENT OF VNG AG

31 CONsOLIDATED INCOME sTATEMENT OF VNG GROuP

32 NOTEs TO THE FINANCIAL sTATEMENTs

48 BREAkDOWN AND DEVELOPMENT OF FIxED AssETs

50 AuDITOR’s REPORT

52 BusINEss AREAs OF THE VNG GROuP

CONTENTs

With its four independently operating business areas Exploration & Production, Gas Trading & service, Gas

Transport and Gas storage, the VNG Group is active in the entire value chain of the German and European

natural gas industry.

With its subsidiaries and participating interests in Germany, Poland, the Czech Republic, slovakia, Austria,

Italy, Norway and Denmark, the VNG Group has regional ties and an international presence.

Via VNG Norge As and VNG Danmark Aps, the VNG Group performs its own exploration and production

activities on the Norwegian continental shelf and in the Danish North sea. This commitment is part of

the growth strategy of the VNG Group and, at the same time, contributes to diversifying the procurement

sources of natural gas while enhancing the independence of the VNG Group.

The natural gas wholesale trader and energy service provider VNG AG and its trading companies supply

German and international customers reliably with natural gas from their own production facilities, long-

term import contracts and the European trading markets. In a challenging energy market, customers can

rely on flexible gas products and services for their market success. This also involves projects and coopera-

tions for the research, development and positioning of modern natural gas technologies in the electricity

and heat market and also in the mobility field. The private and commercial end customer business is

continuously expanded via the goldgas Group.

As an Independent Transmission Operator, ONTRAs Gastransport GmbH, strictly complying with the regu-

latory unbundling requirements, provides Germany’s second largest gas transmission system with a

length of 7,200 km, thereby guaranteeing secure gas supplies in association with European transmission

networks and numerous distribution grids as well as gas storage facilities. Within the VNG Group, the inde-

pendent VNG Gasspeicher GmbH is the third largest national storage operator with a working gas volume

of 2.7 billion m3. It has many decades of experience in the field of setting up and operating underground

gas storage facilities and markets innovative storage products.

The companies ECG Erdgas-Consult GmbH, GDMcom Gesellschaft für Dokumentation und Telekommuni-

kation mbH, ENERGIEuNION GmbH and VNG-Erdgastankstellen GmbH, each being closely connected with

one of the four core business areas, are operating successfully on the energy market.

For the VNG Group, economic success is more than coping with competition and safeguarding sustainable

jobs. The economic commitment of the VNG Group is closely linked with targeted activities and initiatives

in research and development as well as education, culture, sport and in the social sphere.

THE VNG GROuP

4

The VNG Group | Annual Report 2014

The Executive Board of VNG Group:

Prof. Dr klaus-Dieter Barbknecht, Dr karsten Heuchert, Bodo Rodestock and Hans-Joachim Polk (l. to r.)

Dear shareholders and business partners, dear friends of the Company,

The year 2014 was a special year for VNG. The 25th anniversary of the peaceful revolution reminded us

again of bravery and civil courage of people in the autumn of 1989. Without this bravery and courage, the

VNG Group would not exist in its present form.

At that time, Leipzig emitted signals not only forming the basis for a new political order, but also laid the

foundation for the transition from the planned economy to the social market economy. This is the only

reason why we will soon be celebrating a further anniversary: the 25th anniversary of the transformation

from the state-owned Verbundnetz Gas to a modern joint stock corporation also falls in June 2015.

These historic turning points offer a special opportunity for expressing our heartfelt thanks to our

em ployees. Without their commitment, their motivation and resourcefulness, VNG AG and the VNG Group

would not, in the course of the past two decades, have become what they are today. Driven by the passion

for natural gas, they continue to work every day towards ensuring that the clean energy medium natural

gas will in future be able to expand its key role within a sustainable energy system.

This commitment has also made a major contribution to the excellent result for 2014. Within a demanding

business climate, the VNG Group has again succeeded in constantly further developing its operations last

year. The net income of the VNG Group amounted to € 184 million, and VNG AG realised a record profit of

€ 224 million. The result is decisively characterised by the sale of a participation which was not strategi-

cally necessary. The gas sendout of the Group amounted to a total of 368 billion kilowatt hours. As a result

of falling prices, sales declined slightly to approximately € 10 billion.

The VNG Group’s strength also lies in the four independently operating business areas Exploration &

Production (E&P), Gas Trading & service, Gas Transport and Gas storage. Together, they cover the entire

value creation chain related to the energy medium natural gas and have made varying contributions to the

economic development in the 2014 financial year.

In times of rapidly changing markets and conditions, it is more important than ever to have a clear idea of

one’s objectives, to be aware of the path towards these objectives and to consistently pursue this path –

step by step. The strategy which has been tightened in recent years, based on our corporate values of

entrepreneurship, partnership, responsibility and openness, is smoothing our path towards the future.

With this strategy, we will further develop and constantly improve the VNG Group and will realise our vision

of being the preferred partner for natural gas in Europe. The essential criterion in this respect continues to

be the satisfaction of our customers on the basis of reliable supply, particularly also within a background

FOREWORD OF THE ExECuTIVE BOARD

6

Foreword of the Executive Board | Annual Report 2014

of international crises. For this purpose, we have at our disposal a wide range of instruments, comprising

diversified import sources and transport routes, high storage capacities as well as our own production.

Our excellent relations with our partners in Norway and Russia guarantee that our customers’ supply needs

are always satisfied.

Natural gas continues to be a reliable and also environmentally friendly energy medium! In its varied

and highly efficient areas of application, it forms a reliable and socially acceptable foundation for future

energy policy.

25 years ago, a new era commenced for VNG as a joint stock corporation. since that time, the credo of the

VNG Group has been to retain an open mind for changes and to take advantage of the resultant opportu-

nities. The 2014 financial year has demonstrated that VNG is thus successfully maintaining its position on

the market. We consider that the VNG Group is well equipped to meet the challenges of the next few years,

and will continue to take advantage of the opportunities which become available. We will be guided by

the courage with which many VNG employees faced the changing circumstances in the autumn of 1989.

We wish to thank the supervisory Board and our shareholders, and would be pleased if they continue

to provide us with the excellent support which we have experienced in the past. We should also like to

express our special thanks to the works council for the excellent cooperation and particularly to our cus-

tomers for the trust which they have placed in our Company.

We will continue to do our utmost to justify this trust also in future!

The Executive Board

Bodo RodestockBoard Member Commercial/

Human Resources

Dr karsten HeuchertChairman of theExecutive Board

Prof. Dr klaus-Dieter Barbknecht

Board Member Trading

Hans-Joachim PolkBoard Member Infrastructure/

Technical Affairs

7

REPORT OF THE suPERVIsORy BOARD

The supervisory Board has been provided by the Executive Board regu-

larly, comprehensively and promptly in written and verbal form regarding

the development and the situation of the Company as well as regarding

major business transactions. On the basis of these reports and the infor-

mation provided, the supervisory Board has supervised senior manage-

ment and in particular has considered and held extensive consultations

regarding the development of the business areas, the financial situation

of the Company, issues of financial, investment and personnel planning

as well as all measures which, according to the articles of incorporation,

require the approval of the supervisory Board.

In the 2014 financial year, the supervisory Board held a total of six meetings. The individual meetings

focussed on the continued development of the strategy concept developed by the Company and also on

the implementation of this concept. The focus was also on the Company’s participation in various explora-

tion and production activities in the Norwegian sea and the Danish North sea, as well as the situa tion of

the gas trading activities of VNG. The supervisory Board also regularly considered the impact of regulation

on the Group. It also extensively discussed the other participating interests of the Company, including

restructuring under company law. In this connection, the supervisory Board approved the sale of the

shares in Erdgasversorgungsgesellschaft Thüringen-sachsen mbH (EVG).

On the basis of these discussions and also the reports and information provided by the Executive Board,

the supervisory Board has verified the adequacy of senior management.

PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Leipzig, has audited the

annual financial statements and consolidated financial statements prepared by the Executive Board for

the period ending December 31, 2014 as well as the combined management report and Group manage-

ment report for the 2014 financial year, including the accounting records as well as compliance with the

accounting obligations in accordance with Article 6b (3) EnWG, and has awarded them an unqualified

auditor’s opinion. The audit reports have been handed to all members of the supervisory Board. The

supervisory Board has noted and approved the result of these audits.

The supervisory Board has audited the annual financial statements and consolidated financial state-

ments as well as the combined management report and Group management report. Following the defini-

tive result of its audit, no objections are to be raised. The auditor attended the accounts meeting of the

supervisory Board and reported to the supervisory Board on the main results of the auditor’s audit.

The supervisory Board has approved the annual financial statements and consolidated financial state-

8

Report of the supervisory Board | Annual Report 2014

ments prepared by the Executive Board for the period ending December 31, 2014. The annual financial

statements have thus been adopted.

The supervisory Board approves the proposal of the Executive Board regarding the appropriation of the

cumulative profit.

In the extraordinary meeting of the supervisory Board on April 8, 2014, Dr Rainer seele laid down his office

as Chairman of the supervisory Board with immediate effect. Holger Hanson assumed the Chairman’s

office on an interim basis as the first deputy of the Chairman of the supervisory Board.

In the supervisory Board meeting on June 11, 2014, Dr Heiko sanders was elected as Chairman of the

supervisory Board of VNG with immediate effect.

Dr Rainer seele, Dr Ties Thiessen and Prof. Dr Mathias Wolkewitz laid down their supervisory Board man-

dates with effect from November 25, 2014. The supervisory Board wishes to thank the members of the

supervisory Board who have stepped down from their office for their excellent cooperation carried out

within an atmosphere of mutual trust and also their major commitment.

Pursuant to a resolution of the annual general meeting of December 16, 2014, Matthias Brückmann, ulf

Heitmüller and Dr Jochen Weise were appointed as members of the supervisory Board.

In its meeting on November 11, 2014, the supervisory Board decided to extend the appointment of

Dr karsten Heuchert as Chairman of the Executive Board of VNG – Verbundnetz Gas Aktiengesellschaft

until August 31, 2019.

The supervisory Board wishes to express its thanks and appreciation to the Executive Board and all

employees for their work in the 2014 financial year.

The supervisory Board Leipzig, March 3, 2015

Dr Heiko sanders Chairman

9

MANAGEMENT REPORT AND GROuP MANAGEMENT REPORT FOR THE 2014 FINANCIAL yEAR

A. CoNStANt ANd CoNSiSteNt FuRtheR deVeloPmeNt

The challenges facing the energy sector continue to be sig-nificant. In an economic and energy policy climate which continues to be difficult, the VNG Group is convinced that the environmentally friendly energy medium natural gas can play a key role in a sustainable energy industry. The strategy of the VNG Group, which was defined precisely in the 2014 financial year, therefore aims to achieve constant and consistent further development of the four independent business areas related to natural gas: Exploration & Production (E&P), Gas Trading, Gas storage and Gas Transport.

In the 2014 financial year, the VNG Group succeeded in considerably outperforming the positive development in earnings seen in 2013 (with EBIT1) of € 230 million com-pared with € 182 million). At € 253 million, the EBIT of VNG – Verbundnetz Gas Aktiengesellschaft (VNG AG) is higher than the corresponding figure applicable for the Group, and is also higher than the corresponding previous year figure (€ 176 million). The VNG Group has been able to improve its operations, although exceptional one-off effects have had an impact on results. Overall, the VNG Group has achieved earnings after tax of € 184 million (prior year: € 89 million), and VNG AG has reported a fig-ure of € 224 million (prior year: € 174 million). In line with this performance, the cash flows for the VNG Group and VNG AG have also reported positive developments.

In the past financial year, the individual business areas have again made differing contributions to the overall economic development. The sale of a participation which was not strategically necessary ensured that an additional major contribution to earnings was made for the Group in 2014. The Gas Transport business area continues to generate stable and positive contributions to annual and consolidated results. The market climate continues to be challenging, and has again had a significant impact on the results of Gas storage and Gas Trading. In addition, the mild weather in 2014 also had an impact particularly on the development of business in Gas Trading, which meant that the impact of the consolidation and optimi-sation measures which had been implemented has not

yet been felt in full. In the E&P business area, success-ful exploration drillings and the expansion of production activities in 2014 meant that considerable progress and increases in value have been achieved on the way to-wards an independently viable business area within the VNG Group. However, considerable exchange rate and oil price changes have had an impact on results due to refer-ence date factors.

B. BACkGRouNd

1. economic background

slight economic growth. The economic recovery at the beginning of the financial year weakened appreciably as the year progressed. Accordingly, gross domestic product in Germany has increased by only 1.5 per cent. Within the Euro zone, economic growth was even lower than the corresponding figure posted for Germany. The economic institutes are anticipating a similar development for the year 2015.

Downturn in demand for natural gas. Energy consumption in Germany declined by approximately 5 per cent, and demand for natural gas in particular declined by approxi-mately 14 per cent. In particular, the mild weather condi-tions in the first and fourth quarters had a considerable impact on the heat market, which accounts for most of energy demand (approximately 40 per cent) and on which natural gas continues to be the preferred energy medium. The weak economic performance is also reflected in the lower demand for energy. Gas consumption used for generating electricity has also declined, particularly as a result of the priority enjoyed by renewable energies. In the mobility field, and despite an excellent refuelling station infrastructure, there has only been a moderate increase in the number of gas-fuelled vehicles and thus also in the demand for the alternative fuel.

Considerable price movements. In the year under review, there were considerable price movements on the financial and commodity markets; these have also had an impact

1) inclusive tax refund for exploration costs of VNG Norge

10

Management Report | Annual Report 2014

on the business activities of the VNG Group. The downturn in demand and excess supply on the energy market were also reflected in lower gas prices in the course of the year. In the second half of the year, the increasing supply of vol-umes from non-OPEC countries resulted in sharply lower oil prices. Interest rates have declined further, and thus continue to be at an all-time low. In addition, the euro and the Norwegian krone (which are relevant for the Group) have also weakened against the us dollar.

2. energy policy

Natural gas is essential for attaining energy and climate targets. In October 2014, the European Council adopted binding energy and climate targets until the year 2030. According to these targets, greenhouse gas emissions, in conjunction with a reform of Eu emissions trading, is expected to be reduced by 40 per cent compared with 1990. At the same time, the proportion of renewable energies is to be increased to 27 per cent, and energy efficiency is to be improved by at least 27 per cent. The energy medium natural gas, with its positive climate footprint in the heat, electricity and mobility fields, is essential if these objectives are to be attained. It is the most cost-effective solution for reducing carbon emis-sions, and is able to compensate for the high volatility of wind and solar energy. The VNG Group is involved actively in the political process and also in product marketing, e. g. as a coinitiator of the Initiative Zukunft Erdgas e. V.

Natural gas in the heat market. The energy policy debate continues to be very much characterised by the further form of the electricity market. However, with its presen-tation of a “national action plan Energy efficiency” and an “action programme Climate protection” the German government has also outlined measures in the heat mar-ket which are expected to make a contribution towards attaining the national target of greenhouse gas reduc-tion. These include measures for refurbishing buildings and heating systems. The heat market accounts for the highest percentage of energy consumption, and is respon sible for approximately one third of carbon emis-sions. In this respect, natural gas with its efficient and

environmentally compatible application opportunities offers enormous potential for reducing the emissions.

Natural gas in the electricity market. Natural gas can play a key role in central and local power generation. The German government has accordingly announced that it intends to improve the conditions for subsidising instal-lations featuring co-generation units in order to attain the target (set out in the coalition agreement) of ensuring that co-generation units account for 25 per cent of overall power generation by the year 2020. At the same time, in its “action programme Climate protection”, the German government has also emphasized the benefits of co-generation units for efficient power and heat generation. However, the amendment of the Renewable Energy Act (EEG) will now also impose the EEG levy on the efficient co-generation units, and will thus have a negative impact on the expansion of such units. The situation for gas-fired power stations will continue to be challenging; these power stations are able to provide their power within a few minutes and are thus able to ensure the necessary stabilisation of the network in the event of fluctuations in electricity supplied from renewable sources. However, the low electricity prices resulting from the priority accorded to renewable energies mean that economic operation of such installations is virtually impossible. However, the natural gas infrastructure is also an ideal long-term storage facility for electricity generated from renewable energies. The VNG Group is therefore involved in various projects with the aim of supporting the successful further development of this technology.

Natural gas in mobility. Natural gas can also make a cost-efficient contribution towards reducing greenhouse gas emissions in the mobility field. The Eu Parliament has explicitly emphasized this particular role of natural gas as fuel in a directive concerning alternative fuels, and has obliged the member states to step up their efforts to expand the gas infrastructure in the mobility field. The “national action plan Energy efficiency” also assures the extension of the reduced tax rate for natural gas as fuel beyond 2018.

Focus on supply reliability. In connection with the ukraine crisis, the subject of “supply reliability” has assumed spe-

11

cial importance in public discussions at the European and also at the national levels. The gas industry bases supply reliability on four pillars: diversified import sources and transport routes, liquid trading markets, high storage ca-pacities as well as own natural gas production. The VNG Group is active in all four areas, and thus guarantees reli-able supplies of natural gas for its customers.

C. the VNG GRouP – AN oVeRView

1. Strategic orientation

sustainable development of core business. As a result of the political and economic conditions, the VNG Group revised and further tightened its strategy in the 2014 financial year. It continues to be convinced that natural gas plays a central role in ensuring reliable, economic and environmentally friendly energy supplies, and therefore is continuing the sustainable and profitable development of its four core areas of business, namely E&P, Gas Trading, Gas storage and Gas Transport. In this respect, the VNG Group is able to access a high degree of competence and many years of experience related to the product natural gas. The further development of the strategy is consistent with the uniform image of the VNG Group. The key stra tegic factors focus on the objective of further strengthening the position of the VNG Group in Europe as the preferred part-ner for natural gas.

success assured by diversification of business activities. The VNG Group has positioned itself with its four inde-pendent business areas along the value-added chain for natural gas. Investments in the segments assure the per-formance of the Group and will result in further growth. The diversification of the business activities ensures a balanced risk-return profile for the VNG Group, as various value drivers have an impact on the development of the individual segments. A sound business model with good credit standing – measured in terms of gearing and the equi ty ratio – is in turn a major basis for the activities of the VNG Group, particularly for access to the capital markets and trading partners and thus for a high degree of scope for trading and shaping the future of the Group’s business.

self-sustaining E&P business. The involvement in E&P activities is part of the growth strategy of the VNG Group; it supports diversification of sources and strengthens the independence of the Group. The continuing aim is to develop these activities into self-sustaining business with stable long-term contributions to earnings for the VNG Group. The sustainable strengthening of the asset portfolio comprising gas and oil production licences will be carried out gradually, initially by way of participating in licencing rounds, by way of successfully transferring projects from exploration right through to development and production and also by way of investments in depos-its which have already been developed. The VNG Group is concentrating on Norway and neighbouring regions with its subsidiaries VNG Norge As (VNG Norge) and VNG Danmark Aps (VNG Danmark). The exploration success achieved in the recent past is sustainably strengthening the business area, and will improve the risk position of the overall portfolio.

Optimum management and control of the trading port-folio. VNG AG has a major influence on the development of business and the result of the trading business area; it operates as the holding company for the main subsidiar-ies and also, in operations, as a player on the wholesale market. In addition to trading of VNG AG, net trading in-come also reflects the activities of the other trading com-panies and participating interests in Germany and abroad. The gradual expansion of end user business, particularly via the goldgas Group and the close links with wholesale activities, means that synergies are utilised and further income is generated. In a very volatile market the business area takes advantage of its opportunities by means of optimum control and management of its trading portfolio. On the procurement side the VNG Group will continue to focus on a mix of various sources. In terms of sales Ger-many will continue to be the core market of the VNG Group for natural gas in all areas of application, for individual customer solutions and trading-related services. At the same time, the VNG Group will continue to further expand its activities in neighbouring European countries.

Focus on high-capacity storage facilities. In the storage business, the VNG Group, through VNG Gasspeicher GmbH (VGs), has many decades of experience in the field of setting up and operating storage facilities and also in

12


marketing innovative storage products. storage activities continue to face difficult market conditions, with fierce competitive pressure resulting from an excess supply of flexibility from import, production and storage capacities. The VNG Group is retaining its efficient and competitive core portfolio of storage facilities, and expects to see a recovery of the storage market in the medium to long term. As the third-largest storage operator in Germany, VGs will continue to take advantage of opportunities which become available, also in order for instance to utilise the existing infrastructure as storage facilities for renewable energies.

Network as a stable component of the VNG Group. With a pipeline network covering 7,200 kilometres and more than 500 interconnection points, the gas transmission network of ONTRAs Gastransport GmbH (ONTRAs), which is the second-largest network in Germany, will continue to be one of the guarantees for stability and economic suc-cess of the VNG Group and also for the sustainable role of natural gas for energy supplies in Germany. The transport activities will be further optimised within the framework of regulatory possibilities. The shares of the VNG Group in the participating interest Erdgasversorgungsgesellschaft Thüringen-sachsen mbH (EVG), which was not strategi-cally necessary for the business area, were sold in the 2014 financial year.

In the Gas Transport segment, GDMcom Gesellschaft für Dokumentation und Telekommunikation mbH and GEOMAGIC GmbH provide IT and communication services for internal and external customers. With the establish-ment of INFRACON Infrastruktur service GmbH & Co. kG (INFRACON), ONTRAs has also responded to the increased demand for network-related unregulated services in the field of energy infrastructure, and thus utilises the existing competences for realising future income.

2. investment portfolio of the VNG Group

The investment portfolio essentially reflects the strategic focus of the VNG Group, and continued to be consistently optimised in the 2014 financial year. Details of changes are set out in the notes to the financial statements of VNG AG and the VNG Group. The business areas control the Group companies assigned to them.

Gas transport

oNtRAS Gastransport Gmbh, leipzig

GDMcom Gesellschaft für Dokumentation und Telekommunikation mbH, Leipzig

GEOMAGIC GmbH, Leipzig

INFRACON Infrastruktur service GmbH & Co kG, Leipzig

OsG ONTRAs servicegesellschaft mbH, Leipzig

Gas Storage

VNG Gasspeicher Gmbh, leipzig

Gas trading & Service

VNG – Verbundnetz Gas Aktiengesellschaft, leipzig

BALANCE VNG Bioenergie GmbH, Leipzig

ECG Erdgas-Consult GmbH, Leipzig

ENERGIEuNION GmbH, schwerin

G.EN. Gaz Energia sp. z o.o., Tarnowo Podgórne, Republic of Poland

goldgas GmbH, Vienna, Austria

goldgas sL GmbH, Eschborn

goldpower GmbH, Eschborn

HANDEN sp. z o.o., Warsaw, Republic of Poland

Leipziger Biogasgesellschaft mbH, Leipzig

MBG Mitteldeutsche Biogasgesellschaft mbH, Leipzig

sPIGAs s.r.l., La spezia, Italy

VNG Austria GmbH, Gleisdorf, Austria

VNG Energie Czech s.r.o., Prague, Czech Republic

VNG-Erdgascommerz GmbH, Leipzig

VNG-Erdgastankstellen GmbH, Leipzig

VNG Italia s.r.l., Bologna, Italy

VNG Polska sp. z o.o., Tarnowo Podgórne, Republic of Poland

VNG slovakia, spol. s r.o., Bratislava, slovak Republic

exploration & Production

VNG Norge AS, Stavanger, Norway

VNG Danmark Aps, kopenhagen, Denmark

The fully consolidated companies of the VNG Group

13

3. Personnel development in the VNG Group

Important and attractive employer in the region. As of December 31, 2014, the VNG Group employed a total of 1,427 persons in the parent company and in the fully con-solidated companies. More than 1,000 employees work at the Leipzig location alone. The Group thus continues to be an important employer in the region; however, it is also an important international employer, such as in Norway, Poland and Italy.

The objective of the VNG Group is to continue to be an attractive employer in the region with qualified, com-mitted and efficient employees. This is a major basis for the Group’s business success. Only with the necessary know-how, the creativity, the ideas and the commitment of employees will it be possible for the future of the VNG Group to continue to be a success story.

The VNG Group therefore employs a sustainable person-nel policy with the aim of ensuring that the commitment and skills of the employees are permanently maintained, that employees are adequately supported and that the selection of suitably qualified young professionals meets the requirements of the Group. This for instance includes the provision of ongoing initial and further training to spe-cialists and senior executives and also the employment of trainees. The VNG Group also maintains contact with numerous universities and again supported numerous students on practical experience programs in the 2014 financial year. Commercial and technical training pro-grams have resulted in 24 trainees of the VNG Group being awarded professional qualifications. VNG AG has again been recognised as an “Excellent Training Operation” by the Chamber of Industry and Commerce (IHk) in Leipzig.

In addition to encouraging personal and specialist skills, and in particular with consideration being given to de-mographic change, the focus is also on ensuring the ef-ficiency and satisfaction of employees in the long term. VNG AG offers its employees a range of benefits, includ-ing attractive compensation in conjunction with flexible working hours in a modern working environment. How-ever, the subject of corporate culture and the creation of a pleasant and thus attractive working climate are also

4. Social responsibility and commitment

Commitment to the region. The VNG Group has its roots in Central Germany, and particularly at the location in Leipzig. It has underlined its commitment to the region in numerous events in memory of the peaceful revolu-tion of 1989. Employees were actively involved in shaping the changes at that time and, within this atmosphere of starting afresh, also paved the way for the success of the Group. For the VNG Group, social responsibility has always meant much more than success in the energy industry and securing future-proofed jobs. As a Group with regional roots, the Group also ensures a high level of regional value creation in Central and Eastern Germany, which account for more than two thirds of the Group’s order volume of more than € 200 million. Responsibility for the common good. The VNG Group also explicitly assumes responsibility for the common good, and has been involved for many years in the fields of art

very important. These benefits are rounded off by support provided in the fields of health and ensuring an appropri-ate balance between an employee’s professional career and private life.

Headcount in the VNG Group and at VNG AG – year end figures

VNG GroupVNG AG

200

400

600

800

1,000

1,200

1,400

1,600

0

754

1,455

2011

1,427

408

2010 2012

1,343

692

2013

1,378

393

2014

1,440

395

14


and culture, education and science as well as sport and social affairs. For a long time, the Verbundnetze have been at the forefront of social involvement, for the pur-pose of promoting activities for Eastern Germany with regional and local authority partners. The aim of the Ver-bundnetz der Wärme is to achieve public recognition for volunteers and also to encourage children and youngsters to become actively involved in volunteering. The Verbund-netz für kommunale Energie has created a forum in which for instance the challenges of future energy policy at local authority level are discussed.

The VNG Foundation in 2014 once again supported nu-merous projects and initiatives in the fields of science and education, art and culture as well as non-profit commit-ment. Via the VNG Foundation, the VNG Group is also a member of wissensfabrik – unternehmen für deutschland e. V. This association supports educational projects relat-ing to sTEM subjects (science, Technology, Engineering and Mathematics) and aims to bring about a sustained improvement in the underlying conditions for Germany as a business location. The initiative VNG-Campus supports student and research exchanges between well-known universities in Germany, Norway, Poland and the Czech Republic. The Technische universität Bergakademie Freiberg as well as the university and Handelshoch-schule Leipzig play important roles in this respect. The VNG Group also cooperates with the Hochschule für Technik, Wirtschaft und kultur Leipzig (HTWk) in various fields, including the awarding of a Germany scholarship for recognising excellent student achievements.

Intensive dialog regarding raw material cooperations. In 2014, the VNG Group was also intensively involved in the German-Russian Commodities Forum (Deutsch-Rus-sisches Rohstoff-Forum). Within this framework, repre-sentatives from science, industry and politics discussed various aspects at the 7th German-Russian Commodities Conference in Dresden, including possibilities of value creation with the use of raw materials as well as aspects of technical-scientific cooperation.

d. ReView oF oPeRAtioNS iN the BuSiNeSS AReAS

1. Gas trading

a) Business development

Ongoing pressure on prices and margins. The mild weath er conditions in particular had a negative impact on the net trading income of VNG AG and thus also on the VNG Group. The lower sales resulting from weaker de-mand and the resultant excess supply on the European markets resulted in a considerable downturn in market prices. The ongoing fierce competition on the domestic and international wholesale markets continued the pres-sure on prices and margins which has been evident in recent years, and this is the reason why only inadequate compensation has been achieved on the sales markets for structuring and flexibility services.

Diversification in terms of procurement. As was the case in the prior year, the VNG Group purchased in the 2014 financial year a total of approximately 365 billion kWh of natural gas. Most of these volumes were procured via VNG AG. The optimisation of the portfolio again resulted in a higher level of sourcing via the spot and futures markets. In addition, the volumes sourced via long-term delivery agreements particularly from Russian and Norwegian sources constituted a major element of procurement. The gas sourcing of the VNG Group is broken down as follows:

Sources 2014 2013

Russia billion kWh 57.0 64.8

Norway billion kWh 43.9 42.8

spot/futures markets and other billion kWh 263.6 257.1

Further increase in send-out on the wholesale markets. The gas send-out of the VNG Group in the 2014 financial year totalled 368 billion kWh of natural gas (prior year: 362 billion kWh). Whereas the gas send-out to wholesale and trading companies as well as industrial and power station customers has increased, sales to redistribu-tors and end users have declined as a result of the mild

15

weather conditions. In 2014, gas send-out was broken down as follows compared with 2013:

Client groups 2014 2013

Redistributors billion kWh 99.6 114.8

Industry and power stations billion kWh 63.2 49.7

Trading companies billion kWh 200.5 191.6

End users billion kWh 5.1 6.3

The total gas send-out of approximately 368 billion kWh is broken down as follows: Germany 87 billion kWh, other countries 36 billion kWh and the European spot and futures markets 245 billion kWh. Italy, Poland and Luxembourg were again the main sales areas of the VNG Group in other European countries. In the 2014 financial year, the gas send-out of VNG AG was unchanged com-pared with 2013, namely 310 billion kWh, despite the mild weather conditions.

Gas Trading taking advantage of its opportunities in competition. Trading is responding to the fierce price competition with further efforts designed to improve sourcing conditions, reduce infrastructure costs and also adjust cost structures. On the sales side, the continu-ous development of customized products and services is strengthening the competitive position of the busi-ness area. The VNG Group supports its customers with their own portfolio management activities, and provides them with access to the wholesale markets. The further development of trading and portfolio management sys-tems guarantees portfolio management with the optimum use of capital, utilising the European spot and futures markets. The business area is able to access the Group’s many years of know-how on the German and European wholesale markets.

Regional presence. With its ten sales offices, VNG AG has established a presence in all regions of Germany. These regional sales structures ensure that strong local links are established with customers, and also form the basis for customer relations based on the principle of partnership. For instance, skW stickstoffwerke Piesteritz GmbH, the largest producer of urea and ammonia in Germany, again awarded VNG AG the contract for supplying natural gas

for the next few years. This means that both companies are continuing their long-standing successful partner-ship. The VNG Group has also established a presence in other European countries, with its trading subsidi aries in Italy, Poland, the Czech Republic, the Republic of slo-vakia and Austria.

Further growth in the end user segment. The goldgas Group, which was acquired in 2013 and which has now been integrated, is expected to ensure growth in the end user segment. The sustainable expansion of the cli-ent base will be the main factor in this respect. Goldgas already supplies approximately 157,000 private and commercial customers in Austria and Germany with its products, and achieves high satisfaction values. As the result of a survey carried out among German consum-ers, goldgas is one of the holders of the German fairness prize 2014.

Promotion of modern natural gas technologies. In 2014, the VNG Group again promoted efficient, environmentally friendly and efficient natural gas technologies. VNG AG is accordingly a partner in a research project of HTWk Leip-zig, which is developing energy-saving local power supply systems using co-generation units based on natural gas. In 2014, the project was awarded the Preis der deutschen Gaswirtschaft für Innovation & klimaschutz in the category “science”. VNG AG is providing support to HTWk for the practical realisation of the project, and coordinates com-panies which construct and sell the co-generation units. In 2014, VNG-Erdgastankstellen GmbH opened its sec-ond natural gas refuelling station in Leipzig, and operates eight other installations in Germany. One station in Jena is currently under construction.

b) Opportunities and risks

Continuous monitoring of the overall portfolio. For the VNG Group, the opportunities and risks arising from gas trading operations result from the price fluctuations on the raw material markets. The positions of purchasing and sales contracts are pooled, monitored and managed within the companies in an overall portfolio. Taking account of natural hedging effects in the portfolio, the Group also

16


uses derivative financial instruments to limit potentially negative changes to results of the trading portfolio. The activities of the business area are carried out within a risk-limiting trading framework specified by the Group.

Broadly positioned on purchasing and sales side. As a result of changing over the long-term sourcing portfolio to market-related conditions, the contract-specific risks have been considerably reduced. On the sales side of the equation, the VNG Group is developing new products and opening up new distribution channels in traditional wholesale business and also on the end user market. The VNG Group also consistently uses the opportunities which arise in spot and futures trading for optimising its portfolios.

Compliance with trading regulation requirements. The VNG Group complies with the current reporting obligations and the risk mitigation requirements of EMIR (European Market Infrastructure Regulation). VNG AG is also cur-rently preparing to comply with the requirements of REMIT (Regulation on Energy Market Integrity and Transparency) as soon as these are known. The process of translating MiFID II (Market in Financial Instruments Directive) into national law is still ongoing.

Adjusting the business processes and improving IT systems. The expansion of business and the ongoing changes in the background conditions of trading busi-ness are posing major challenges to the stability and reli-ability of the business processes. By way of making early adjustments to the structure and procedure organisation and also by way of introducing powerful IT systems in conjunction with staff training, the VNG Group guarantees a high degree of process reliability. Particular mention has to be made of the further development of the trading systems in this respect.

2. exploration & Production


Considerable progress. At the end of 2014, VNG Norge held shares in 37 production licences on the Norwegian

continental shelf and also shares in two licences in the western Danish North sea via its subsidiary VNG Danmark. In eight of its licences, VNG Norge acts as the operations manager. With above-average exploration success as operations manager, with the expansion of production activities as well as the continuous expansion of the licence portfolio, the year 2014 saw not only considerable growth in value along the way towards an independently viable business area. The successes also strengthen the trust and recognition of partners, local authorities and the state in the competence and efficiency of the Norwegian and Danish Group companies.

Considerable expansion of production capacities. VNG Norge acquired a 7.56 per cent interest in the producing oil field Draugen on the Haltenbank terrace in the Norwe-gian sea with effect from January 1, 2014. This acquisition has considerably increased the hydrocarbon production of VNG Norge. In addition to Draugen, VNG Norge also has interests in the producing fields Njord, Brage and Hyme and also a field which is currently being developed (Ivar Aasen). Repair work on the Njord platform was completed as scheduled in the summer of 2014, and the produc-tion of oil and gas was resumed with prospects of higher production rates.

successful drillings as operations manager. In the course of the year, VNG Norge was involved in various exploration and expansion drillings. For instance, the drillings on the Pil prospect under the operations management of VNG Norge are indicating promising potential resources and production characteristics with the possibility of economic development. The Pil finding is considered to be one of the most significant oil and gas finds of the past two years on the Norwegian continental shelf. The drilling on the neigh-bouring Bue prospect also resulted in a further promising deposit. The exploration drilling on the Gotama prospect did not find any evidence of any resources.

Research and development. VNG Norge carries out re-search and development work for hydrocarbon deposits which is typical for E&P business. Research activities naturally focus on constantly improving the process of prospecting for, developing and producing hydrocarbon deposits. For instance, VNG Norge concentrates on studies

17

of rock formations which are accessible on land and which can be used as an analogy for the exploration projects under the Norwegian continental shelf. In addition, the aim of projects with well-known research institutions is to further develop the expertise in relation to the recognition of fault zones with the aid of geophysical characteristics in 3D models. In addition, VNG Norge also invests in vari-ous technological solutions and, within the framework of joint research projects, is involved in the development of improved realisation concepts for prospecting for and producing natural gas and oil.


Balanced portfolio for spreading risk. The VNG Group has a balanced portfolio of licences in the exploration phase and also increasingly in the production phase. The main risks are to be seen in potential incorrect assessments of geological structures and the resultant abortive drill-ings. As the licences are increasingly further developed, the extent of the business risks declines. The successes of the recent past are significantly strengthening the business area and are improving the risk position of the overall portfolio. The diversified portfolio also opens up a wide range of options enabling the Group to respond to medium-term price fluctuations. The result of the busi-ness area very much depends on the development of the market prices of natural gas and oil. The current price pressure resulting from the surplus supply is expected to decline in the medium term. The current value of the individual licences is regularly monitored. In the underly-ing scenarios, the current development of exchange rates and commodity prices were taken into consideration last year in accordance with the planning assumptions, and value adjustments were made for production licences. Overall, with regard to the composition of its portfolio, the VNG Group concentrates on prospects where the risks are manageable, aims to achieve shareholdings in licences which are commensurate for the level of risk involved, and also works together with experienced partners within the framework of syndicates.

Compliance with stringent standards. The company has taken out standard insurance for the sector in order to

avoid environmental and accident risks. The VNG Group relies on cooperation with experienced operators and companies which, in the same way as VNG Norge itself, also guarantee compliance with the stringent interna-tional safety standards of environmental and health pro-tection in Norway as well as industrial safety in Norway and Denmark.

3. Gas Storage


storage capacities exposed to fierce price pressure. As is the case with Gas Trading, storage activities are also facing a difficult market climate. storage fees are still facing considerable competitive pressure. The major contribution made by natural gas storage facilities to-wards ensuring reliable supplies, network stability and portfolio optimisation is not being sufficiently rewarded by storage customers as a result of the excess supply of flexibility. VGs is therefore concentrating its activities on the economically sound and efficient core portfolio. For the remainder of the portfolio, the VNG Group set aside appropriate risk provisioning in 2013 and 2014.

storage capacities fully booked. At present, VGs has a working gas volume of around 2.7 billion m³ at its exist-ing underground gas storage facilities in Bad Lauchstädt, Bernburg, Etzel, kirchheilingen and Buchholz. The under-ground storage facilities have been or are fully booked in the storage year. Together with GAZPROM Germania GmbH, VGs is also involved in establishing the under-ground storage facility “katharina” via Erdgasspeicher Peissen GmbH (EPG). EPG put its third storage facility into service in October 2014. By the year 2024, it is expected that a total of 12 caverns with a useful storage volume of approximately 600 million m³ will be installed; one quar-ter of this volume has already been realised.

VGs in competition. VGs is facing up to the competition in the German storage market with its know how which it has established over many decades in the field of establishing and operating storage facilities and also with the develop-ment of innovative products and customised solutions.

18


Accordingly, with the new online product “easystore”, storage customers are able to put together the appropri-ate combination of working gas volume as well as entry and exit capacities quickly, easily and independently. In addition, the marketing of storage capacities directly to the virtual trading points is currently becoming increas-ingly important.


Improving efficiency. The further intensification of compe-tition between storage operators is tending to result in a high proportion of only short-term storage bookings. The extent of storage fees which can be generated in future and also the willingness of storage customers to pay for the offered flexibilities are uncertain. The VNG Group is facing up to this development by means of product inno-vations, demand-oriented investment decisions as well as measures designed to improve efficiency. There are also opportunities for the existing infrastructure to be used as a storage facility for renewable energies. In the storage fa-cilities operated jointly with partners, VGs aims to achieve mutually acceptable solutions for financial optimisation of the project in the course of commercial negotiations with its project partners. If the negotiations have not produced a result, VGs considered that it was compelled to initiate arbitration proceedings in order to enforce its claims. VGs is also considering the possibility of shutting down one storage facility.

High safety standards. The constant maintenance and monitoring of the underground gas storage facilities on the basis of technical rules and internal regulations and also the regular assessment of the condition of all un-derground and overground installations guarantee a high technological safety standard which is also consistent with mining law. Annual training plans designed to en-sure the ongoing qualifications of employees and service providers of VGs as well as regular internal and external audits also guarantee stringent quality standards.

4. Gas transport


Certified compliance with unbundling regulations. The development of business in the Gas Transport busi-ness area is very much determined by ONTRAs which is organised in the form of a so-called Independent Trans-mission Operator and which is thus a fully equipped network company. Compliance with the unbundling requirements of the Energiewirtschaftsgesetz (Energy Industry Act) was certified to ONTRAs in 2014 by the Bundes netzagentur (BNetzA).

ONTRAs in incentive regulation. since 2010, ONTRAs has been subject to incentive regulation. With the resolution of september 16, 2014, the BNetzA fixed the revenue cap of ONTRAs for the second regulatory period from 2013 to 2017. As was the case for the first period, an efficiency of 100 per cent has been certified to ONTRAs for this period. This also takes account of the results of an out-of-court settlement of various complaint procedures against the BNetzA in connection with the network fee calculation. This has also resulted in a subsequent increase in the revenue cap for the year 2014.

Development and expansion of the network. ONTRAs and the other transmission network operators are obliged to prepare a joint network development plan every year so that they will be able to continue to guarantee sup-ply reliability in future. The plan which was published in April 2014 does not specify any investment obligations of ONTRAs. At present, the network development plan 2015 is being drawn up and discussed; this will probably also not require any investments of ONTRAs.

Installation of power-to-gas and biogas network connec-tions. The VNG Group is committed to using the existing network and storage facility infrastructure by renewable energies. For instance, the largest power-to-gas installa-tion in Europe (in Falkenhagen) has been injecting hydro-gen into the network of ONTRAs since June 2013, and a further power-to-gas installation in Prenzlau has also been injecting hydrogen since December 2014. At present, work is also being carried out on a further connection for such

19

an installation to the network of ONTRAs; this is expected to be put into service in the course of 2015. In addition, further facilities for connecting biogas installations to the ONTRAs network have been, and continue to be, installed.

Cooperations with other network operators. ONTRAs is a shareholder of GAsPOOL Balancing services GmbH, which is responsible for the GAsPOOL market territory (H-gas and L-gas). In addition, ONTRAs also holds a stake in other European transmission operators as well as PRIsMA Euro-pean Capacity Platform GmbH, which operates a primary and secondary platform for the allocation of entry and exit capacities in accordance with European capacity marketing rules. In addition, ONTRAs is a member of the Vereinigung der Fernleitungsnetzbetreiber Gas e.V., and is currently the chair of this organisation. The aim of the association is to bundle and coordinate common tasks such as the production of the annual network develop-ment plan, coordination of work within the association of European transmission network operators and also repre-senting the members to the media, public and politicians.


ONTRAs in regulation. The economic development in the Gas Transport business area very much depends on the regulatory conditions and the resultant permissible rev-enue caps. In accordance with the incentive regulation ordinance, the BNetzA is required to present an evalu-ation report with proposals for the future form of incen-tive regulation to the Bundesministerium für Wirtschaft und Energie as of December 31, 2014. The amendment of the ordinance is planned for the spring of 2015, and may involve positive as well as negative financial effects for ONTRAs.

ONTRAs in competition. ONTRAs continues to take ad-vantage of the opportunities offered by the regulated transport market, and also takes advantage of the pos-sibilities of rendering services in the non-regulated en-ergy infrastructure field. For this reason, starting in 2015, ONTRAs will pool its entire service activities in its newly established subsidiary INFRACON. The company has also identified opportunities in the development and further

development of national and international cooperations with other network operators.

Technical safety is guaranteed. ONTRAs continuously carries out necessary improvement and modernisation work on its technical installations in order to guarantee maximum reliability within the network and thus to guar-antee supplies to customers. Technical safety and the availability of the transmission network and the corre-sponding installations were also guaranteed at all times throughout 2014.

e. ANNuAl FiNANCiAl StAtemeNtS oF VNG AG ANd CoNSolidAted FiNANCiAl StAtemeNtS oF the VNG GRouP

The satisfaction and trust of employees, customers and all other business partners are the major basis for the financial success of the VNG Group. They are therefore extremely important for the further development of the Group’s core business areas related to natural gas. The image of the VNG Group integrates the common values of partnership, openness, entrepreneurship and responsi-bility; these are intended to guarantee trust and stability and are the benchmarks against which the Group meas-ures itself. In addition to these non-financial indicators, the VNG Group and the Group’s business areas are man-aged on the basis of key financials (EBIT; incl. tax refund; earnings after tax) as well as further financials such as gearing and the cash flow indicator FFO. The purpose of this parameter-based management is to secure a solid credit rating for the VNG Group. The 2014 financial year has overall seen a positive development in the parameters of the VNG Group and VNG AG. These positive results were accompanied by a positive cash flow development and, in conjunction with a simultaneous reduction in financial liabilities, have resulted in an increase in the equity ratio and a reduction in gearing.

20


VNG Group VNG AG

2014 2013 2014 2013

EBIT incl. tax refund € million 230 182 253 176

Earnings after tax € million 184 89 224 174

Funds From Operations (FFO)* € million 238 225 317 155

Cash flow from operating activities € million 278 101 255 110

Financial liabilities** € million 575 762 501 672

Equity ratio % 25 20 32 27

* FFO: Result for the period adjusted by non-cash-effective costs and income as well as profits and losses attributable to the disposal of fixed assets** Due to financing partners outside the Group

1. earnings situation

With EBIT2) of € 230 million, the VNG Group in 2014 con-siderably outperformed the corresponding prior year fig-ure (€ 182 million). Adjusted by exceptional factors, the Group has overall reported an improvement in operations.

As has been the case in previous years, Gas Transport activities again made a clearly positive contribution to the overall result of the Group. The sale of the shares in EVG also generated a high one-off income, which is re-flected in the separate financial statements of VNG AG in the corresponding increase in the profit transfer of VNG-Erdgascommerz GmbH (VNG-EC) and also in the financial statements of the VNG Group. However, the fact that the overall market climate continues to be challenging is still having a negative impact on the results of Gas Trading and Gas storage. Nevertheless, there has been an improve-ment in operational net trading income. However, the fact that the exceptional factors relating to the agreement with suppliers (felt in the two prior years) are no longer ap-plicable has meant that there has been a considerable downturn in earnings in gas trading. In gas storage, risk provisioning recognised in relation to storage assets as a result of the still difficult market situation again had a negative impact on earnings. In addition, business-spe-cific costs in connection with the upstream activity have had a negative impact on the EBIT of the Group. However, approximately 78 per cent of these costs are refunded by the Norwegian state (income from tax refund). In addition,

successful exploration drillings and the expansion of pro-duction activities have had a positive impact on operating result. Considerable exchange rate and oil price changes have had a negative impact on results due to reference date factors, and have also resulted in adjustments to the value of production licences. Regarding the extent of the various positive as well as negative earnings effects, please refer to the notes to the financial statements of VNG AG and of the VNG Group.

Despite an increase in gas sendout, sales have declined by approximately € 1 billion to around € 10 billion. This is due to the development in market prices, which resulted in lower sales prices.

The income from participating interests mainly reflects the at-equity valuation of associated companies, and is slightly higher than the corresponding previous year figure.

Net interest income has declined compared with the prior year. This is due to higher interest costs in connection with the creation of provisions as well as the lack of interest income from tax refunds which had improved the result in 2013.

In addition to tax income from tax refunds, which are rec-ognised in EBIT, lower tax costs have also had an impact on results.

2) inclusive tax refund for exploration costs of VNG Norge

The individual parameters are as follows:

21

Taking account of the net interest income and the tax re-sult, the VNG Group has reported net income of approxi-mately € 184 million (prior year: € 89 million).

VNG AG has reported EBIT of approximately € 253 million; this is higher than the prior year EBIT of approximately € 176 million and also higher than the corresponding Group figure, as costs of E&P activities in particular do not have an impact on results. The earnings after tax of VNG AG amounted to approximately € 224 million (prior year: € 174 million), and were also considerably higher than the corresponding figure reported for the VNG Group.

Due to the sale of shares in EVG, the results of the VNG Group and VNG AG were considerably better than the fig-ure which had been forecast in 2013.

2. Financial situation

The development in results has also had an impact on the FFO of the VNG Group, which is higher than the prior year forecast. In addition, changes in working capital related to reference date factors have contributed to an increase in the cash flow from operating activities. The outflows of cash from investing activities mainly relate to invest-ments in E&P assets and also in transport activities. On the other hand, inflows have been reported from the sale of shares in EVG. In connection with financing activities, the VNG Group had repaid mainly financial obligations of approximately € 187 million due to external financing partners. In 2014, a dividend of € 45 million for 2013 was paid to the shareholders.

VNG Group VNG AG

2014 2013 2014 2013

Cash and cash equivalents at the beginning of year € million 28.0 24.0 3.9 3.1

Cash flow from operating activities € million 278.1 101.0 254.7 109.7

Thereof funds from operations (FFO) € million 238.0 225.2 316.5 154.8

Thereof other payments from operating activities € million 40.1 –124.2 –61.8 –45.1

Cash flow from investing activities € million –31.0 –129.0 –266.9 –100.8

Cash flow from financing activities € million –232.3 32.7 17.3 –8.1

Changes result from exchange rates and consolidated group € million –2.1 –0.7 0.0 0.0

Cash and cash equivalents at the end of year € million 40.7 28.0 9.0 3.9

The FFO of VNG AG has improved considerably compared with 2013 and the prior year forecast as a result of higher results of the subsidiaries. Compared with the VNG Group, changes in working capital have had a negative impact on cash flow from operating activities. The cash outflows of VNG AG for investing activities were higher than the cor-responding prior year figure, mainly as a result of equity and loan payments to subsidiaries. Compared with the VNG Group, inflows from the sale of the shares in EVG have not had an impact on the cash flow from investing activities of VNG AG, as the shares were held by VNG-EC. In connection with financing activities, VNG AG repaid financial liabilities of approximately € 171 million from external financing partners. On the other hand, the cash pool liabilities due to subsidiaries have increased by ap-proximately € 234 million, mainly as a result of higher cash-effective results of VNG-EC and VGs. Taking account of the dividend payment of € 45 million, the inflow of cash from financing activities amounted to approximately € 17 million.

The companies in the VNG Group were solvent at all times. As of the reporting date, committed credit lines of approxi-mately € 1.1 billion had not been drawn down.

22


VNG Group VNG AG

Assets 2014 2013 2014 2013

Intangible assets and property, plant and equipment % 31 23 1 1

Financial assets % 9 10 46 39

Inventories % 13 18 12 19

Receivables and other assets % 39 43 41 41

Other assets % 8 6 0 0

% 100 100 100 100

equity and liabilities 2014 2013 2014 2013

Equity % 25 20 32 27

Liabilities % 75 80 68 73

% 100 100 100 100

3. Net assets

The balance sheet structure of VNG AG and the VNG Group changed as follows compared with the prior year:

Compared with the previous year, the balance sheet total of the VNG Group has declined by approximately € 83 mil-lion (2.8 per cent). The percentage of fixed assets is higher than the corresponding prior year level, mainly as a result of higher investments in E&P. These relate mainly to the acquisition of the Draugen production field and also the successful exploration drillings. Within current assets, inventories have declined as a result of lower storage vol-umes and the receivables. On the other hand, the deferred tax assets have increased compared with 2013.

As a result of the positive development in results and the reduced financial liabilities, the equity ratio of the VNG Group has improved to the current figure of 25 per cent compared with the prior year reference date, and is thus higher than the prior year forecast.

Compared with the VNG Group, the balance sheet total of VNG AG increased by approximately € 169 million (6.5 per cent) compared with 2013. The percentage of financial assets (a key element of fixed assets) has increased par-ticularly as a result of payments in the form of equity and loans to subsidiaries such as ONTRAs and VNG Norge within the framework of internal financing. On the other hand, current assets have declined. Whereas inventories

have declined, receivables have increased slightly. The equity ratio has improved (also compared with the prior year reference date and the prior year forecast) to the cur-rent level of 32 per cent.

F. GRouP-wide mANAGemeNt oF oPPoRtuNitieS ANd RiSkS

Risk diversification by means of strategic positioning. With four independent divisions, the VNG Group has estab-lished a position in relation to the product natural gas. The purpose of this strategic positioning is to promote risk diversification, and also enables the Group to take advantage of the opportunities within a dynamic mar-ket environment. The Group responds promptly to any changes in the financial and legal conditions of its core business, and the potential opportunities and risks are identified and evaluated (with regard to the opportunities and risks of the individual business areas, please refer to the comments in section D).

Group-wide risk management. For ensuring that there is a permanent balance between opportunities and risks,

23

the VNG Group has an extensive risk management sys-tem in which all business areas and corresponding group companies are integrated. The principles of group risk management are implemented in the individual compa-nies and business areas on the basis of company-specific risk management regulations and transparent reporting. systematic recording and evaluation of opportunities and risks. In addition to the operational measures and moni-toring of risks, the comprehensive inventory is carried out twice every year; this inventory systematically records, evaluates and aggregates all opportunities and risks. There is also an ad-hoc reporting system on the basis of defined benchmarks guaranteeing that changes in the op-portunity/risk portfolio are recognised at an early stage.

Functional management of key participating interests. The earnings forecasts which are regularly updated by the participating interests are included in the reporting system. The value of the participating interests is regularly monitored. In the case of major participating interests, the Group has introduced instruments and procedures of functional management which enable the VNG Group to focus on its objectives and also which enable opportuni-ties and risks to be identified at an earlier stage. The VNG Group observes all relevant markets of its participating interests, and is also able to respond promptly to risks if necessary as a result of its presence on the executive bodies of the companies. Impairments are recognised if there are any future risks to results with an impact on the value recognised for the participating interests.

Group-wide compliance management. The VNG Group has a Group-wide compliance management system. The aim of this system is to ensure that the conduct of all employees complies with all legal requirements so as not to pose a risk to the confidence of customers, business partners, shareholders and the public in the VNG Group. In addition to organisational precautions and guidelines, there is also an extensive reporting system as well as goal-oriented training for employees.

Certified integrated management system. VNG AG also has a certified integrated management system with the elements of quality, environmental and informa-

tion security. The reliability of the work procedures and the adequate implementation of all standards are regu-larly monitored.

systematic financial risk management. The financial risk structure of the VNG Group is virtually unchanged com-pared with last year. The VNG Group is exposed particu-larly to risks arising from changes in raw ma terial prices, exchange rates and interest rates as well as credit risks. The fundamentally conservative approach of the com-pany is reflected in its systematic financial risk man-agement system. The functions of trading, clearing and financial risk controlling are strictly segregated within the Group’s organisation.

Hedging of price, currency and interest rate risks. The sole purpose of the derivative standard financial instruments used within the framework of financial risk management is to hedge existing risks of underlyings. Commodity futures are used for minimising price risks arising from gas pur-chasing and sales contracts. All currency exposures of the VNG Group are, where possible, concentrated and com-pletely hedged at VNG AG. Contracts with Group compa-nies outside the eurozone are concluded in the domestic currency of such companies. The main instruments used for hedging purposes are currency futures and natural portfolio hedge effects. VNG AG operates an active policy of interest rate risk management, with regular evaluation of all interest rate risks. Derivative financial instruments are also used for this purpose.

Financing assured. The Group’s solvency is guaranteed at all times as a result of adequate liquidity reserves in the form of committed credit lines and also as a result of optimised allocation of the Group‘s internal liquidity. The core elements of financing are a stable syndicate loan and borrower‘s note loans with various financing part-ners. The rolling liquidity planning covering several years regularly establishes the future peak financing require-ment which, as of the reference date, was always covered by adequate sources of finance even in risk scenarios.

Increase in number of business partners characterises credit risk management. The main credit risks are attrib-utable to the continued increase in the number of gas

24


supply and trading agreements with national and inter-national business partners. Credit risks also arise from financial instruments agreed for the purpose of hedging currency, raw material price and interest rate risk posi-tions. The rating assessment of our business partners (financial institutions, trading partners, customers and suppliers) is evaluated and continuously monitored within the framework of established credit risk man-agement on the basis of available information and us-ing standard market procedures. The standard hedging instruments (e. g. guarantees) and credit insurance for factoring are used selectively for managing credit risks.

Foreseeable risk position. Apart from the general risks associated with business, there are no indications at present of any risks which might have a sustainable and significantly negative impact on the net assets, financial position and results of operations of VNG AG and the VNG Group.

G. outlook

Natural gas has a future. Natural gas has been and will continue to be a major fundamental pillar of future en-ergy supply and will have a major role to play especially in shaping the electricity and heat market in Germany – even in conjunction with the optimistic assumptions regarding the expansion of renewable energies. This is the reason why the future energy policy also represents an opportunity for the flexible, reliable, inexpensive and clean energy medium natural gas. This however assumes that natural gas continues to be competitive and adapts to meet the specific challenges of the market situation. Reliable conditions necessary. The energy industry re-quires reliable conditions which are neutral in terms of energy medium and which are open with regard to tech-nology. All actions must be measured in relation to their contribution to reducing carbon emissions in conjunction with their capital input. In the market economy, the ef-ficient technology which is also the most socially com-patible will come out on top. This is a major criterion for the acceptance of future energy policy by the population.

This also means that equal priority will be devoted to the energy policy objectives of reliability of supply, efficiency and environmental compatibility.

sustainable further development of core business. In view of the opportunities available on the energy mar-ket, the VNG Group will continue the sustainable and profitable further development of its four independent and strategically necessary business areas. The diversi-fication of its business activities will assure the Group’s future viability and will also ensure the economic suc-cess of the VNG Group in a market climate in which no substantial improvement is expected to be seen in the medium term. Gas Transport activities are again expected to report stable results in future. The challenging market situation in Gas Trading and Gas storage will continue. The process of establishing profitable E&P activities will tie up further funds in the course of the next few years. However, in view of the fact that production activity has already been successfully expanded and also in view of the recent exploration success, internal financing is ex-pected to make higher contributions in future – subject to the further development of commodity prices and ex-change rates.

Aim to achieve stable profitability. As a result of the ex-ceptional factors last year, particularly in conjunction with the disposal of the shares in EVG, it is expected that the results in 2015 for the VNG Group and for VNG AG will be considerably lower than the corresponding figures reported for 2014. The development of operating activi-ties and thus also of the FFO is currently expected to be similar to that seen in 2014. The cash flow from operat-ing activities on the other hand will very much reflect changes in working capital holdings. Volatile effects of portfolio employment in trading due to price, temperature and reference date factors may result in fluctuations in this respect.

Investments at a high level. In the 2015 financial year, the VNG Group is again planning a high level of investment activity in all business areas in order to assure the op-erating result basis and also in order to generate further growth. The development in cash flows from operating activities as well as imminent outflows for investing activ-

25

ities will have a corresponding impact on the extent of financial liabilities. The aim is to achieve an equity ratio (a key credit standing indicator) roughly in line with the corresponding figure for last year. There have been no major events after the reporting date.

Positive continuation of 25 years of history. The VNG Group is able to face new and major challenges. This is

also demonstrated by the 25 years of history on which VNG can look back in 2015 as a joint stock corporation. The Group will continue these efforts with its committed and highly motivated employees, and will ensure a posi-tive continuation of this history. The mission statement provides a stable framework on the path towards the in-tended objective of being a preferred partner for natural gas in Europe.

26


27

BALANCE sHEET OF VNG AGAs AT DECEMBER 31, 2014

Assets

Notes dec. 31, 2014 t€

dec. 31, 2013 t€

A. Fixed assets

I. Intangible assets 12,735 11,210

II. Property, plant and equipment 3,254 4,242

III. Financial assets 1,262,698 1,012,207

1,278,687 1,027,659

B. Current assets

I. Inventories 1 326,619 484,570

II. Receivables and other assets 2 1,143,008 1,070,230

III. Cash and cash equivalents 8,997 3,934

1,478,624 1,558,734

C. Prepaid expenses 8,377 9,861

2,765,688 2,596,254

equity and liabilities

Notes dec. 31, 2014 t€

dec. 31, 2013 t€

A. equity

I. subscribed capital 3 328,000 328,000

II. Retained earnings 4 321,849 193,151

III. Balance sheet profit 223,844 173,698

873,693 694,849

B. Provisions 5 99,365 107,740

C. liabilities 6 1,773,816 1,788,224

d. deferred income 18,814 5,441

2,765,688 2,596,254

28

Balance sheet | Annual Report 2014

Assets

dec. 31, 2014 t€

dec. 31, 2013 t€

A. Fixed assets

I. Intangible assets 109,555 45,930

II. Property, plant and equipment 760,364 641,538

III. Financial assets 258,745 279,068

1,128,664 966,536

B. Current assets

I. Inventories 378,109 541,689

II. Receivables and other assets 1,105,652 1,259,506

III. Cash and cash equivalents 40,738 27,987

1,524,499 1,829,182

C. Special loss item from provisions formed pursuant to Article 17 (4) dmBilG [dm Balance Sheet Act] 2,594 2,594

d. Prepaid expenses 10,403 12,440

e. deferred tax assets 180,676 119,614

F. Surplus resulting from asset offsetting and capitalised 627 423

2,847,463 2,930,789

equity and liabilities

dec. 31, 2014 t€

dec. 31, 2013 t€

A. equity

I. subscribed capital 328,000 328,000

II. Retained earnings 205,437 166,292

III. Profit participation capital 695 648

IV. Equity difference from currency conversion 3,975 5,751

V. Consolidated balance sheet profit 183,605 89,059

VI. Adjustment item for share of other shareholders 0 307

721,712 590,057

B. Special items 3,624 4,687

C. Provisions 469,975 406,858

d. liabilities 1,550,948 1,909,772

e. deferred income 20,638 6,081

F. deferred tax liabilities 80,566 13,334

2,847,463 2,930,789

CONsOLIDATED BALANCE sHEET OF VNG GROuPAs AT DECEMBER 31, 2014

29

INCOME sTATEMENT OF VNG AGFOR THE PERIOD FROM JANuARy 1 TO DECEMBER 31, 2014

Notes Jan. 1 to dec. 31, 2014 t€

Jan. 1 to dec. 31, 2013 t€

1. sales 7 7,675,636 8,761,271

2. Other operating income 8 56,908 196,516

7,732,544 8,957,787

3. Cost of materials 9 7,762,820 8,858,502

4. Personnel expenses 10 40,620 38,133

5. Depreciation and amortisation expense 5,935 4,663

6. Other operating expenses 11 52,489 59,275

7. Financial result 12 372,194 173,339

8. Profit on ordinary activities 242,874 170,553

9. Extraordinary expenses 0 2,933

10. extraordinary result 0 –2,933

11. Taxes on income (expense; previous year: income) 13 19,002 6,101

12. Other taxes 28 23

13. Net income for the year = balance sheet profit 223,844 173,698

30

Income statement | Annual Report 2014

CONsOLIDATED INCOME sTATEMENT OF VNG GROuP FOR THE PERIOD FROM JANuARy 1 TO DECEMBER 31, 2014

Jan. 1 to dec. 31, 2014 t€

Jan. 1 to dec. 31, 2013 t€

1. sales 9,977,949 10,987,055

2. Changes in work in progress 55 –103

3. Work performed by the Company and capitalised 2,782 3,646

4. Other operating income 307,783 250,942

10,288,569 11,241,540

5. Cost of materials 9,721,314 10,775,692

6. Personnel expenses 122,762 114,892

7. Depreciation and amortisation expense 143,439 139,622

8. Other operating expenses 144,064 132,422

9. Financial result –6,202 –1,554

10. Profit on ordinary activities 150,788 77,358

11. Extraordinary result 0 –2,933

12. Income from taxes on income 34,427 16,432

13. Other taxes 1,465 1,523

14. Consolidated net income for the year 183,750 89,334

15. Profit or loss attributable to other shareholders –145 –275

16. Consolidated balance sheet profit 183,605 89,059

31

VNG – VERBuNDNETZ GAs AkTIENGEsELLsCHAFT, LEIPZIGNOTEs TO THE FINANCIAL sTATEMENTs

GeNeRAl NoteS

The annual financial statements of VNG – Verbundnetz Gas Aktiengesellschaft, Leipzig (VNG), have been drawn up in accordance with the provisions of the German Commercial Code [Handelsgesetzbuch – HGB], the German stock Corporation Act [Aktiengesetz – AktG] and the German Energy Industry Act [Energiewirtschaftsgesetz – EnWG]. VNG is a large corporation within the definition given in Article 267 HGB.

These financial statements for the period ending December 31, 2014 have been drawn up as “fast close” financial statements. In particular, the reduction in the time available for preparing the financial statements has led to the use of estimating procedures for the determination of gas purchases and sales in December 2014. The estimates con-cerned were made on the basis of all information available at the time when the financial statements were drawn up.

For clearer and more effective presentation, individual items of the balance sheet and the income statement are grouped together. These items are explained in the notes to the financial statements. The notes to the balance sheet and income statement items required by law and the notes which may either be presented in the balance sheet itself or in the notes to the financial statements are presented in these notes.

The income statement has been prepared using the nature of expense method in accordance with Article 275 (2) HGB.

ACCouNtiNG ANd VAluAtioN PRiNCiPleS

Fixed assets

Intangible assets acquired for a consideration are carried at historical cost less straight-line amortisation. Property, plant and equipment are carried at procurement or production cost taking into consideration appropriate overheads in accordance with Article 255 (2) HGB. Buildings and other structures are valued at procurement or production cost with straight-line depreciation. Technical plant and machinery, and other equipment, fixtures, furniture and office equipment were generally depreciated following the declining-balance method up to and including the 2009 financial year. upon the first-time application of the German Financial Reporting Modernisation Act [Gesetz zur Modernisierung des Bilanzrechts – BilMoG] as at January 1, 2010, VNG exercised the option allowed by Article 67 (4) sentence 1 of the Act Introducing the German Commercial Code [Einführungsgesetz zum Handelsgesetzbuch – EGHGB], to continue the previous valuations and to apply declining-balance depreciation. If straight-line depreciation had been applied in 2014, only minor differences would have resulted. since 2010, newly-acquired assets have been depreciated using the straight-line method.

A collective item is formed for low-value assets of property, plant and equipment with a value above € 150 but not exceeding € 1,000. This collective item is written down over a period of five years on a straight-line basis.

Financial assets are shown at the lower of cost or fair value. Appreciation is recorded where the reason for deprecia-tion no longer applies.

32

Notes | Annual Report 2014

Current assets

Raw materials, consumables and supplies were valued at average cost. The last-in first-out (Lifo) method using the monthly inventory layer principle and taking into consideration the strict lower-of-cost-or-market principle in accord-ance with Article 253 (4) HGB was applied for gas inventories stated as merchandise.

Receivables and other assets are shown at principal. Reasonable allowance was made for irrecoverable individual accounts. A percentage of outstanding accounts was deducted to cover the general credit risks.

Provisions

Provisions are recognised for uncertain liabilities at the amount which will probably be required on the basis of reason-able commercial assessment. Provisions cover all foreseeable risks.

Provisions with a term of more than one year are discounted over their remaining term using a discount rate in accord-ance with the average market interest rates of the past seven financial years. For discounting, the average discount rates published by Deutsche Bundesbank under a statutory instrument are used in accordance with Article 253 (2) sentence 4 HGB.

Provisions for pensions and similar obligations were determined on the basis of actuarial reports using the projected unit credit method. Provisions for pensions were valued on the basis of the “Richttafeln 2005 G” (actuarial tables) of Prof. Dr klaus Heubeck taking into consideration future salary increases of 4 per cent p.a. (or 0 per cent for employees under semi-retirement arrangements) and pension increases of 1.75 per cent p.a. Pension obligations were discounted in accordance with Article 253 (2) sentence 2 HGB at the average market interest rate for an assumed remaining term of 15 years (4.54 per cent p.a.; previous year’s reporting date 4.90 per cent p.a.).

Provisions for semi-retirement obligations are formed on the basis of the block model. semi-retirement provisions are valued on actuarial principles on the basis of an interest rate of 4.54 per cent p.a. (previous year’s reporting date 4.90 per cent p.a.) and the “Richttafeln 2005 G” (actuarial tables) of Prof. Dr klaus Heubeck. semi-retirement provi-sions are formed for semi-retirement agreements entered into as of the balance sheet date. such provisions include top-up payments and obligations accrued up to the balance sheet date. Annual wage and salary increases of 3 per cent have been assumed for determining the semi-retirement provisions.

In the income statement, additions to provisions, to the extent that provisions of this type were recognised for the first time, were recognised on the basis of the net presentation principle.

The effects on profit or loss arising from the change in the discount rate have for the first time been disclosed in the financial result.

liabilities

Liabilities are stated at the amounts required to settle the obligations.

33

Currency conversion

Foreign currency transactions are valued at the spot middle exchange rate prevailing at the time of first entry.

Long-term receivables denominated in foreign currencies are, where required, written down on the basis of the lower spot middle exchange rate as at the balance sheet date (following the principle that unrealised exchange losses are to be recognised, whereas unrealised exchange gains are not to be recognised). short-term foreign currency receivables (with a remaining term of one year or less) as well as cash and cash equivalents and other current assets denominated in foreign currencies are converted at the spot middle exchange rate as at the balance sheet date.

Payables denominated in foreign currencies are carried at the spot middle exchange rate as at the date when the payable arose. Long-term payables denominated in foreign currencies are, where required, carried on the basis of the higher spot middle exchange rate as at the balance sheet date (following the principle that unrealised exchange losses are to be recognised, whereas unrealised exchange gains are not to be recognised). short-term foreign-currency payables (with a remaining term of one year or less) are converted at the spot middle exchange rate as at the balance sheet date.

Contingent liabilities denominated in foreign currencies are converted at the spot middle exchange rate.

deferred taxes

Deferred taxes are formed for differences between the balance sheet valuations in the commercial and tax balance sheets to the extent that such differences will probably be eliminated in future financial years with an impact on tax. In addition, deferred tax assets are formed on accumulated losses carried forward for corporation tax and trade tax purposes if it is expected that such losses will be set off against income within the next five years. In the event of an excess of deferred tax assets as of the balance sheet date, the capitalisation option allowed by Article 274 (1) sen-tence 2 HGB has not been exercised. Excess tax assets are therefore not recognised in the balance sheet.

In formal terms, VNG, as the parent company, is the sole tax payer. All the actual and deferred taxes of group companies are therefore to be recognised in full in the annual financial statements of VNG as VNG alone bears the consequences of taxation. The deferred taxes of the group companies are therefore explained in the notes to the financial statements of VNG.

Deferred taxes were calculated at an effective tax rate of 31.0 per cent 15.8 per cent for corporation tax including solidarity surcharge and 15.2 per cent for trade tax), which will probably apply at the time when the tax differences are eliminated. The trade tax rate is based on the average trade tax base rate of 435.74 per cent.

NoteS to the BAlANCe Sheet

Fixed assets

Fixed assets shown in the balance sheet and changes in the fixed assets are detailed in the statement of changes in fixed assets (appendix to the notes).

34


Current assets

(1) Inventoriesdec. 31, 2014 dec. 31, 2013

t€ t€

Raw materials, consumables and supplies 254 284

Merchandise (in particular natural gas inventories in storage facilities) 326,365 484,286

326,619 484,570

The application of the Lifo method resulted in a difference in the sense of Article 284 (2) No. 4 HGB of T€ 24,044 as at December 31, 2014 (2013: T€ 28,971). Depreciation in accordance with Article 253 (4) HGB was recognised in the amount of T€ 37,235 (2013: T€ 3,785).

(2) Receivables and other assets

dec. 31, 2014 t€

dec. 31, 2013 t€

Trade receivables 780,145 734,259

Accounts receivable from affiliated companies 324,458 235,190

Accounts receivable from companies with which the Company is connected by a participating interest 15,942 42,133

Other assets 22,463 58,648

1,143,008 1,070,230

Accounts receivable from affiliated companies include accounts receivable in connection with profit transfer totalling T€ 272,829 (December 31, 2013: T€ 167,683), trade receivables totalling T€ 44,982 (December 31, 2013: T€ 65,785), receivables under loans granted totalling T€ 4,944 and turnover tax totalling T€ 1,703 (December 31, 2013: T€ 983). In the previous year, accounts receivable from liquidity management of T€ 739 were also recorded.

Trade receivables from companies with which the Company is connected by a participating interest amounted to T€ 15,942 (December 31, 2013: T€ 42,133).

As was the case last year, all receivables and other assets had a remaining term of up to one year.

deferred taxes

As of the balance sheet date, the offsetting of deferred tax assets and liabilities (assessment of the overall difference) resulted in an excess of deferred tax assets. The Company did not exercise the capitalisation option provided for by Article 274 (1) sentence 2 HGB. Deferred taxes are therefore not recognised in the balance sheet. The deferred tax assets and liabilities determined resulted from the temporary differences described below at the level of the Company as a parent company and at the level of the affiliated companies included in the Group for tax purposes.

Deferred tax assets were mainly the result of the different recognition of property, plant and equipment and inven-tories for tax purposes and the non-recognition of provisions for tax purposes. The deferred tax assets are opposed by deferred tax liabilities, which are mainly attributable to the non-recognition for tax purposes of the special loss item

35

from provisions formed pursuant to Article 17 (4) DMBilG [D-Markbilanzgesetz – DM Balance sheet Act] (for a controlled company) and also resulting from different figures shown for the carrying amounts of financial assets.

equity

(3) Subscribed capital

The share capital of the Company is € 328 million and consists of 128,000,000 no-par-value shares.

(4) Retained earnings

dec. 31, 2014t€

dec. 31, 2013t€

statutory reserve pursuant to Article 150 (2) AktG 32,800 32,800

Other retained earnings formed pursuant to Article 272 (3) HGB 289,049 160,351

321,849 193,151

Pursuant to a resolution of the ordinary general meeting of April 8, 2014, a figure of T€ 128,698 was paid into the other retained earnings out of the 2013 cumulative profit in accordance with Article 272 (3) HGB.

liabilities

(5) Provisionsdec. 31, 2014

t€dec. 31, 2013

t€

Provisions for pensions and similar obligations 21,462 19,811

Provisions for taxes 23,669 32,108

Other provisions 54,234 55,821

99,365 107,740

In accordance with Article 28 (1) sentence 2 EGHGB, provisions for indirect pension obligations to be met by an assist-ance fund are not shown on the balance sheet. The difference between the present values of the pension obligations of the assistance fund and the cash and cash equivalents held by the assistance fund as at December 31, 2014 was T€ 2,530.

Provisions for taxes concern corporation tax in the amount of T€ 18,374 and trade tax in the amount of T€ 5,295.

The other provisions mainly refer to obligations in connection with outstanding invoices, risks associated with gas business, human resources and other uncertain obligations.

36


(6) Liabilities

dec. 31, 2014

t€

Remaining term up to 1 year (prior year)

t€

Remaining term more than 5 years

(prior year)t€

dec. 31, 2013

t€

Liabilities to banks 424,046 55,295(19,610)

31,000(31,000)

595,144

Advance payments 23,350 23,350(9,386)

0(0)

9,386

Trade payables 675,474 675,474(797,056)

0(0)

797,056

Liabilities to affiliated companies 528,950 528,950(280,158)

0(0)

280,158

Liabilities to companies with which the Company is connected by a participating interest

9,420 9,420(9,085)

0(0)

9,085

Other liabilities 112,576 31,673(16,462)

76,230(76,186)

97,395

(thereof taxes) 28,596 28,596(13,499)

0(0)

13,499

(thereof social security contributions) 8 8(8)

0(0)

8

1,773,816 1,324,162(1,131,757)

107,230(107,186)

1,788,224

Liabilities to affiliated companies concern investment transactions made by these companies as part of cash man-agement in the amount of T€ 474,197 (December 31, 2013: T€ 240,881), tax liabilities in the amount of T€ 31,141 (December 31, 2013: T€ 23,604), trade payables in the amount of T€ 22,755 (December 31, 2013: T€ 15,330) as well as the transfer of losses in the amount of T€ 857 (December 31, 2013: T€ 343).

Liabilities to companies with which the Company is connected by a participating interest concern trade transactions (T€ 1,220; December 31, 2013: T€ 885) and outstanding capital contributions not called up (T€ 8,200; December 31, 2013: T€ 8,200).

As was the case last year, borrower’s note loans of T€ 76,000 were disclosed under the other liabilities. There are also liabilities of T€ 28,596 due to the Finanzamt (revenue authorities); of this figure, T€ 9,663 legally arise only after the closing date.

37

Contingencies

Contingent liabilities to be reported pursuant to Article 251 HGB amount to T€ 67,952. These include guarantees of T€ 34,307 given by VNG for trading partners of affiliated companies. Furthermore, VNG has issued a “hard” letter of comfort for one affiliated company (T€ 3,000). The Company also undertook to provide guarantees of T€ 30,645 for three affiliated companies. In addition, in line with standard practice for the sector, VNG has given unlimited abstract guarantees to Norwegian and Danish state institutions as well as infrastructure operators with regard to natural gas exploration and production activities. According to our current state of knowledge, no claims are expected to arise from the contingencies.

In connection with the process of transferring the network and storage activities to ONTRAs Gastransport GmbH (ONTRAs), Leipzig, and VNG Gasspeicher GmbH (VGs), Leipzig, there is joint and several liability in accordance with Article 133 umwG [umwandlungsgesetz – German Reorganization Act] for liabilities which had been entered into by VNG before the entry of the spin-offs into the commercial register as at March 1, 2012.

other financial obligations

The other financial obligations pursuant to Article 285 No. 3a HGB amount to € 326 million, including obligations of € 276 million towards affiliated companies. These chiefly concern commitments for investments, loan commitments, financial obligations arising from leasing and rental agreements and payment obligations for the use of transport and storage capacities in the 2015 financial year. VNG has undertaken long-term purchase commitments with gas suppli-ers to cover gas demand.

38


NoteS to the iNCome StAtemeNt

(7) Sales

92 per cent of sales were realised in Germany, and 8 per cent were realised in other European countries. sales were chiefly accounted for by income from the gas business. sales realised on European wholesale markets are assigned to sales in Germany. They include income in the amount of T€ 15,028 attributable to other accounting periods; these are mainly attributable to gas deliveries.

(8) Other operating income

Other operating income includes income attributable to other accounting periods of T€ 24,251 (2013: T€ 113,663), resulting mainly from credit notes for previous years. Income of T€ 3,162 results from the appreciation of financial assets.

(9) Cost of materials

2014t€

2013t€

Cost of raw materials, consumables and supplies and of purchased merchandise 7,760,339 8,854,703

Cost of purchased services 2,481 3,799

7,762,820 8,858,502

The cost of materials includes energy tax expenses (T€ 7,151; 2013: T€ 9,551).

(10) Personnel expenses

2014t€

2013t€

Wages and salaries 34,716 33,024

social security costs, pensions and assistance expenses 5,904 5,109

40,620 38,133

Personell expenses include expenses incurred for pensions totalling T€ 1,447 (2013: T€ 718).

(11) Other operating expenses

Other operating expenses include expenses (T€ 9; 2013: T€ 71) resulting from currency conversion.

39

(12) Financial result

2014t€

2013t€

Income from participating interests(thereof income of T€ 2,353 from affiliated companies; 2013 T€ 2,835) 10,144 14,190

Income from profit transfer agreements (thereof income of T€ 382,828 from affiliated companies; 2013 T€ 180,600) 382,828 180,600

Income from loans carried as fixed assets(thereof income of T€ 16,270 from affiliated companies; 2013 T€ 15,834) 16,270 15,836

Interest receivable and similar income(thereof interest of T€ 1,076 from affiliated companies; 2013 T€ 1,284) 1,885 5,794

Amortisation of financial assets(thereof amortisation of T€ 10,119 on interests in affiliated companies; 2013 T€ 16,029) 10,119 16,029

Expenses from absorption of losses(thereof losses of T€ 857 absorbed from affiliated companies; 2013 T€ 343) 903 393

Interest payable and similar charges(thereof interest of T€ 251 to affiliated companies; 2013 T€ 180) 27,911 26,659

372,194 173,339

Interest payables include an amount of T€ 2,556 (2013: T€ 1,797) with respect to the compounding of interest on provisions; at T€ 768 they refer to the effects on profit or loss from the change in the discount rate, which have for the first time been disclosed in the financial result.

(13) Taxes on income

Taxes on income include tax expenses of T€ 4,634 attributable to other accounting periods. In the 2014 financial year, the realisation of tax loss carry forwards resulted in a reduction in the current taxes on income.

derivative financial instruments and valuation units

Within the scope of its business activities, VNG is exposed to currency, interest rate and price risks. These are hedged chiefly using derivative financial instruments. All the derivatives are OTC transactions with contract parties of sound financial standing in the banking sector. They include currency futures, interest rate swaps and commodity swaps. The use of derivatives is subject to uniform standards and stringent internal monitoring and is limited to hedging the business operations of VNG and related investments and financing transactions. The objective of using deriva-tive financial instruments is to reduce fluctuations in profit and inflows and outflows of cash caused by changes in exchange rates, interest rates and market prices. The use of derivative financial instruments for speculative purposes is not permitted.

Derivative financial instruments are normally used for hedging underlying transactions in the case of receivables or payables denominated in foreign currencies and planned transactions in foreign currencies, for hedging interest rate risks in connection with variable-interest loans and for hedging the risk of price changes under gas purchase and sales contracts. Where the statutory requirements are met, hedge accounting in accordance with Article 254 HGB is applied. The effective portions of hedges are presented in the balance sheet in accordance with the net hedge presentation

40


method. The effectiveness of hedge relations is reviewed by appropriate methods (especially the critical term match method and the dollar offset method) both prospectively and retrospectively as of each balance sheet date. The basis for the effectiveness of a hedge is the agreement between the parameters of the underlying and hedging transac-tion which are relevant to valuation. Loss peaks are recognised as expenses, while gain peaks are not recognised.

As at the balance sheet date, VNG held derivative financial instruments with reference to currencies, interest rates and commodity prices.

dec. 31, 2014Face value

t€

dec. 31, 2014Positive fair value

t€

dec. 31, 2014Negative fair value

t€

Currency derivativesCurrency futures 267,311 1,412 1,923

interest rate derivativesInterest rate swaps 624,500 2,788 2,924

Commodity derivativesCommodity swaps 525,983 29,685 125,536

1,417,794 33,885 130,383

The fair value of derivative financial instruments depends on the development of the underlying market factors. In-dividual fair values were determined on the basis of market data as at the balance sheet date using accepted market methods. Currency futures are carried at the futures exchange rate as at the balance sheet date. The fair values of commodity swaps are determined by discounting future cash flows. Futures exchange rates are determined from cur-rent exchange rates using the premiums and discounts for futures. Interest rate swaps are valued using recognised analysis methods on the basis of the interest rate structure curve as at the balance sheet date and accrued interest.

Valuation units for hedging against foreign currency risks

A loan receivable in the amount of NOk 438 million as at the balance sheet date was hedged against the risk of changes in the NOk exchange rate by a micro-hedge. For the loan, currency future contracts with a face value of T€ 48,247 were concluded with a term corresponding to the earliest repayment date of the loan (underlying) in 2015. The currency futures have a negative fair value of T€ 132 as at the balance sheet date. A loan receivable in the amount of Dkk 142 million as at the balance sheet date was also hedged against the risk of changes in the Dkk exchange rate by a micro-hedge. The currency future contracts concluded for this purpose had a face value of T€ 19,048; the positive fair value was T€ 18. Furthermore, a loan receivable in the amount of usD 106 million as at the balance sheet date was hedged against the risk of changes in the usD exchange rate by a micro-hedge. The currency future contracts concluded for this purpose had a face value of T€ 86,351; the negative fair value was T€ 945.

Loans receivable totalling PLN 94 million as at the balance sheet date were also hedged against the risk of changes in the PLN exchange rate by a micro-hedge. The currency future contracts concluded for this purpose had a face value of T€ 21,943; positive fair values of T€ 25 are offset by negative fair value of T€ 40.

41

The contrary changes in the values of the loan receivable and the currency future contracts off-set each other as the underlying transaction and the hedging transaction are exposed to the same foreign currency risk. The underlying and hedging transactions are denominated in the same currency as the loans receivable in NOk, Dkk, usD and PLN as of the due date are off-set by payables in NOk, Dkk, usD and PLN respectively at a fixed NOk/Euro, Dkk/Euro, usD/Euro or PLN/Euro exchange rate. To hedge currency risks connected with pending transactions in gas trading business, currency future contracts with a face value of T€ 81,594 were concluded with external partners. The terms of these contracts were in accordance with the expected due dates of the underlying transaction. As at the balance sheet date, the currency futures had a positive fair value of T€ 1,295 and a negative fair value of T€ 806. To hedge intragroup foreign exchange transactions with a subsidiary for CZk 99.8 million, currency future contracts for the same amount with a face value of T€ 3,625 were concluded with external partners; the positive fair value was T€ 26.

Furthermore, currency future contracts were concluded for hedging bank balances in PLN with a face value of T€ 6,503; the positive fair value was T€ 48.

Valuation units for hedging against interest rate risks

Interest rate swaps have been concluded to hedge the risk of interest rate changes in connection with fixed-interest and variable-interest financial liabilities in the amount of T€ 74,500 and T€ 75,500 respectively. The term of the loans concerned expires in 2018 and 2020 respectively. In accordance with the amount of the loans, the interest rate swaps have a face value of T€ 150,000. The interest rate swaps form a micro-hedge with the loans. The effectiveness of the hedge is reviewed prospectively and retrospectively. As cash inflows and outflows offset each other, the interest rate swaps are not recognised in the balance sheet. Positive fair values of T€ 2,788 are opposed by negative fair values of T€ 949 as at the balance sheet date. In addition, the fixed-interest financial liabilities combined to form a valuation unit in the amount of T€ 74,500 and the fixed-interest receiver swaps were hedged against rising interest rates by means of fixed-interest payer swaps. These derivatives were not included in the valuation unit and have a negative fair value of T€ 622 as at the balance sheet date.

To hedge the risk of interest rate changes in connection with loans which VNG firmly plans to take up in the future, interest rate swaps with a face value of T€ 400,000 were concluded. As at the balance sheet date, these interest rate swaps had a negative fair value of T€ 1,353.

Valuation units for hedging against commodity price risks

Commodity futures in the form of commodity swaps with a face value of T€ 497,937 were concluded as micro-hedges to minimise price risks in connection with gas purchase and sales contracts. The agreed purchasing prices for quanti-ties to be purchased in 2015 are fixed by means of commodity swaps with a face value of T€ 406,359. Positive fair values of T€ 2,170 are offset by negative fair values of T€ 120,657. In addition, existing fixed price in gas delivery agreements have been hedged by means of commodity swaps with a face value of T€ 91,578. These commodity swaps have terms until 2015. Positive fair values of T€ 25,840 are opposed by negative fair values of T€ 4,879 as at the bal-

42


ance sheet date. Furthermore, oil price swaps with a face value of T€ 28,046 were used to hedge against price risks at portfolio level. These derivatives were not included in a valuation unit and have a positive fair value of T€ 1,675 as at the balance sheet date.

otheR diSCloSuReS

information in accordance with Article 6b (2) enwG

In connection with the process of spinning off network and storage activities, loans were extended to ONTRAs and VGs resulting in annual interest income of T€ 10,840. In addition, there is a cash pooling arrangement within the Group using normal market interest rates. Furthermore, in accordance with Article 6b (2) EnWG, major transactions relate to technical and commercial services with VGs, totalling T€ 3,259.

Staff

The average number of staff employed at VNG in the 2014 financial year was 404, consisting of 395 white-collar work-ers, six blue-collar workers and three assistants/student trainees. In addition, the Company employed an average of twelve persons in the passive phase of semi-retirement and 15 vocational trainees.

list of shareholdings

With the acquisition of 25.1 per cent of the shares, VNG’s participating interest in VNG Austria GmbH, Gleisdorf/Austria, rose to 100.0 per cent. In addition, ONTRAs Gastransport GmbH, Leipzig, established two subsidiaries in the 2014 finan-cial year, INFRACON Infrastruktur service GmbH & Co. kG, Leipzig, and OsG ONTRAs servicegesellschaft mbH, Leipzig.

goldgas GmbH, Eschborn, was merged with and into goldgas sL GmbH, Eschborn, and GG goldgas Vertriebsgesellschaft mbH, Vienna/Austria, was merged with and into goldgas GmbH, Vienna/Austria.

In the 2014 financial year, VNG France s.A.s., Paris/France (100.0 per cent), was dissolved in accordance with French law, and the liquidation of FlameEnergy Trading GmbH i.L., Vienna/Austria, was completed. In addition, VNG-Erdgascommerz GmbH, Leipzig, has sold its shares in CCM Communication-Center Mitteldeutschland, Leipzig (100.0 per cent), and in Erdgas versorgungsgesellschaft Thüringen-sachsen mbH (EVG), Erfurt (50.0 per cent). VNG slovakia spol. s.r.o., Bratis-lava/slovakia, has sold its shares in Prievidzské tepelné hospodárstvo, a.s., Prievidza/slovakia (49.0 per cent), and BALANCE VNG Bioenergie GmbH, Leipzig, has sold its shares in BGA Bioenergie GmbH, Hof (saale), (75.1 per cent). VNG holds, directly or indirectly, at least 20 per cent of the shares in the companies listed below (disclosure in accord-ance with Article 285 No. 11 HGB). The values stated for equity capital and net income or loss for the year are taken from the annual financial statements of the companies concerned, drawn up in accordance with the applicable national legislation. The values have been rounded.

43

Share Name and registered office of the company equity capital

€

Net income or loss for the year

€Direct

%Indirect

%

100.00 VNG Austria GmbH, Gleisdorf (Austria) 1,302,129 1,169,688 3)

100.00 VNG Energie Czech s.r.o., Prague (Czech Republic) 1,935,757 170,781 3) 9)

100.00 VNG Italia s.r.l., Bologna (Italy) 49,565,212 –8,579 3)

100.00 VNG Norge As, stavanger (Norway) 58,805,572 –35,164,176 3) 9)

100.00 VNG Polska sp. z o.o., Tarnowo Podgórne (Poland) 62,426,592 1,737,313 3) 9)

100.00 VNG slovakia, spol. s r.o., Bratislava (slovakia) 8,845,363 261,357 3)

100.00 G.EN. Gaz Energia sp. z o.o., Tarnowo Podgórne (Poland) 46,823,188 2,315,146 3) 9)

100.00 goldgas GmbH, Vienna (Austria) 330,814 –989,482 3)

100.00 goldgas uk Ltd., London (England) 28,086 0 3) 8) 9)

100.00 HANDEN sp. z o.o., Warsaw (Poland) 1,925,976 27,875 3) 9)

100.00 sPIGAs s.r.l., La spezia (Italy) 18,004,405 442,274 10)

100.00 VNG Danmark Aps, Copenhagen (Denmark) 18,772,539 –2,911,533 3) 9)

Foreign affiliated companies


€


€Direct

%Indirect

%

100.00 BALANCE VNG Bioenergie GmbH, Leipzig 8,893,700 0 1)

100.00 goldgas sL GmbH, Eschborn 19,145,952 4,075,192

100.00 ONTRAs Gastransport GmbH, Leipzig 120,000,000 0 1)

100.00 VNG-Erdgascommerz GmbH, Leipzig 167,058,531 0 1)

100.00 VNG Gasspeicher GmbH, Leipzig 21,311,301 0 1)

100.00 VNG Vertriebs-GmbH Thüringen/Bayern, Erfurt 34,995 0 1)

100.00 ECG Erdgas-Consult GmbH, Leipzig 779,013 0 2)

100.00 EnergieFinanz GmbH, schwerin 813,966 44,962 3)

100.00 ENERGIEuNION GmbH, schwerin 6,928,820 705,406

100.00GDMcom Gesellschaft für Dokumentation und Telekommunikation mbH, Leipzig 304,107 0 4)

100.00 GEOMAGIC GmbH, Leipzig 1,499,311 278,311

100.00 goldpower GmbH, Eschborn 214,252 –135,647

100.00 INFRACON Infrastruktur service GmbH & Co. kG, Leipzig 96,491 –3,509 5) 6)

100.00 Leipziger Biogasgesellschaft mbH, Leipzig 955,959 85,356

100.00 MBG Mitteldeutsche Biogasgesellschaft mbH, Leipzig 3,203,008 22,482

100.00 OsG ONTRAs servicegesellschaft mbH, Leipzig 24,604 –396 5)

100.00 VNG-Erdgastankstellen GmbH, Leipzig 2,800,000 0 2)

German affiliated companies

44


German participating interests


€


€Direct

%Indirect

%

50.00 Heizkraftwerk Halle-Trotha GmbH, Halle (saale) 1,149,223 386,208 3)

20.00

GasLINE Telekommunikationsnetzgesellschaft deutscher Gasversorgungsunternehmen mbH & Co. kommanditgesellschaft, straelen 41,000,000 39,464,476 3) 7)

20.00

GasLINE Telekommunikationsnetz-Geschäftsführungs-gesellschaft deutscher Gasversorgungsunternehmen mbH, straelen 61,184 2,693 3)

50.00 Erdgasspeicher Peissen GmbH, Halle (saale) 32,411,975 –1,862,713 3)

50.00 InterTransGas GmbH i. L., Leipzig 472,169 –201,435 3)

50.00 lictor GmbH, Leipzig 127,132 27,305 3)

50.00 Robotron|ECG solutions GmbH, Dresden 348,583 117,594 3)

49.00PROMETHEus - Gesellschaft für Erdgasanwendungs anlagen mbH, Leipzig 102,259 6,391 3) 8)

40.00untergrundspeicher- und Geotechnologie-systeme Gesell-schaft mit beschränkter Haftung, Mittenwalde 6,911,478 51,467 3) 8)

33.34 caplog-x GmbH, Leipzig 593,104 393,104 3)

32.00 store-x storage Capacity Exchange GmbH, Leipzig 817,201 260,592 3)

25.10 EMB Energie Mark Brandenburg GmbH, Potsdam 116,062,000 21,307,000 3)

24.60 MITGAs Mitteldeutsche Gasversorgung GmbH, Halle 133,061,000 39,275,000 3)

23.38 stadt- und Überlandwerke GmbH Luckau-Lübbenau, Luckau 23,170,444 2,140,312 3)

Foreign participating interests

1) There is a profit and loss transfer agreement with VNG.2) There is a profit and loss transfer agreement with

VNG-Erdgascommerz GmbH.3) Figures from the annual financial statements as at Dec. 31, 2013.4) There is a profit and loss transfer agreement with

ONTRAs Gastransport GmbH.5) Figures from the short financial year ending Dec. 31, 2014.


€


€Direct

%Indirect

%

50.00 BLuEFIN s.r.l., Bologna (Italy) 24,761,446 –116,109 11)

49.00 Nitrianska teplárenská spoločnosť, a.s., Nitra (slovakia) 12,616,496 1,144,043 3)

33.72 NysAGAZ sp. z o.o., Wrocław (Poland) 2,082,002 31,033 3) 9)

6) shares are held at 99.5% by ONTRAs and 0.5% by OsG. 7) Limited partnership capital 100% outstanding and not called-up. 8) subscribed capital partly outstanding and not called-up, figure refers to

paid-up capital. 9) Converted at middle rate on Dec. 31, 2013. 10) Figures from the annual financial statements as at March 31, 2014. 11) Figures from the annual financial statements as at June 30, 2014.

45

memBeRS oF the SuPeRViSoRy BoARd

dr heiko Sanders Chairman (since June 11, 2014)

Member of the Executive Board of EWE Aktiengesellschaft

dr Rainer Seele(until November 25, 2014)

Chairman (until April 8, 2014)

Chairman of the Executive Board of Wintershall Holding GmbH

holger hanson 1st Vice-Chairman (interim Chairman from April 8 to June 11, 2014)

Chairman of the Board of Management of Neubrandenburger stadtwerke GmbH

Peter leisebein 2nd Vice-ChairmanChairman of the General Works Council of VNG – Verbundnetz Gas Aktiengesellschaft

Günther Boekhoff Honorary Mayor of the City of Leer

matthias Brückmann(since December 16, 2014)

Vice-Chairman of the Executive Board of EWE Aktiengesellschaft

Joachim ebert Telecommunications systems Engineer at GDMcom Gesellschaft für Dokumentation und Telekommunikation mbH

hans-Joachim Gornig Former Managing Director of GAZPROM Germania GmbH

Johannes hegewald Foreman in the compressor station of the Bad Lauchstädt underground storage facility at VNG Gasspeicher GmbH

ulf heitmüller(since December 16, 2014)

Head of Trading unit at EnBW Energie Baden-Würtemberg AG

dr torsten köhne Member of the Executive Board of EWE Aktiengesellschaft and Chairman of the Executive Board of swb AG

Vyacheslav V. krupenkov General Manager of GAZPROM Germania GmbH

Christina ledong Deputy Chair of the General Works Council of VNG – Verbundnetz Gas Aktiengesellschaft

detlef Nonnen Commercial Director of eins energie in sachsen GmbH & Co. kG

Josef Rahmen Former Chairman of the Board of Management of LVV Leipziger Versorgungs- und Verkehrsgesellschaft mbH

Andreas Reichelt Pipeline system Technology Officer at ONTRAs Gastransport GmbH

dr Reinhard Richter Managing Director of DREWAG stadtwerke Dresden GmbH

dr Benno Seebach Head of strategic Network Planning at ONTRAs Gastransport GmbH

Petra Steuer scheduling employee at ONTRAs Gastransport GmbH

Björn thümler Member of the Regional Parliament of Lower saxony

dr ties tiessen(until November 25, 2014)

Member of the Executive Board of Wintershall Holding GmbH

memBeRS oF the exeCutiVe BoARd

dr karsten heuchert Chairman of the executive BoardProf. dr klaus-dieter Barbknecht Board member tradinghans-Joachim Polk Board member infrastructure/technical AffairsBodo Rodestock Board member Commercial/human Resources

46


emoluments of board members

The total emoluments of the Executive Board of VNG – Verbundnetz Gas Aktiengesellschaft, Leipzig, for the 2014 financial year amounted to € 2,506,033.33 (2013: € 2,051,273.53). The total emoluments of retired Executive Board members and their surviving dependants in the 2014 financial year amounted to € 661,759.25 (2013: € 1,554,364.61). Provisions for ongoing pensions to former Executive Board members and their surviving dependants amount to € 10,827,059.00 (2013: € 10,258,405.00). A provision of € 202,084.40 (2013: € 138,000.00) was formed in the 2014 financial year for the emoluments of the supervisory Board.

Participations pursuant to Article 20 AktG

As at the balance sheet date, EWE Aktiengesellschaft, Oldenburg, and VNG Verbundnetz Gas Verwaltungs- und Beteiligungsgesellschaft mbH, Erfurt, each held a share of more than 25 per cent in VNG – Verbundnetz Gas Aktien-gesellschaft, Leipzig.

Consolidated financial statements

In the past financial year, EWE Aktiengesellschaft, Oldenburg (EWE), directly acquired the majority of the shares and vot-ing rights in VNG and prepares consolidated financial statements in accordance with International Financial Reporting standards (IFRs), as to be applied in the Eu, for the largest and smallest group of companies. The consolidated financial statements of EWE, which include VNG as an associated company, are electronically submitted to the operator of the Federal Gazette and can be obtained via the company register (www.unternehmensregister.de).

VNG – Verbundnetz Gas Aktiengesellschaft, Leipzig, has prepared consolidated financial statements for the year ending December 31, 2014 which are electronically submitted to the operator of the Federal Gazette and which can be obtained via the company register (www.unternehmensregister.de). In accordance with Article 285 No. 17 HGB, the total fees paid to the auditor are not disclosed as the information is given in consolidated financial statements in which the Company is included.

Leipzig, January 20, 2015

VNG – Verbundnetz Gas Aktiengesellschaft

The Executive Board

matthias warnig Managing Director of Nord stream AG

dr Jochen weise(since December 16, 2014)

senior Advisor of Allianz Capital Partners GmbH

Prof. dr mathias wolkewitz(until November 25, 2014)

Head of Legal, Tax and Insurance of Wintershall Holding GmbH

RodestockDr Heuchert Prof. Dr Barbknecht Polk

47

Procurement/production costs depreciation/amortisation Carrying amounts

Jan. 1, 2014t€

Additionst€

disposalst€

transferst€

dec. 31, 2014t€

Jan. 1, 2014t€

Additionst€

disposalst€

Appreciationt€

dec. 31, 2014t€

dec. 31, 2014t€

dec. 31, 2013t€

i. intangible assets1. Purchased concessions,

industrial property and similar rights and assets, and licences in such rights and assets 39,549 5,362 4,493 3,288 43,706 32,338 4,417 4,281 0 32,474 11,232 7,211

2. Advance payments made 3,999 1,148 300 –3,344 1,503 0 0 0 0 0 1,503 3,999

43,548 6,510 4,793 –56 45,209 32,338 4,417 4,281 0 32,474 12,735 11,210

ii. Property, plant and equipment

2,175 24 0 0 2,199 687 65 0 0 752 1,447 1,488

1. Land, land rights and buildings including buildings on third-party land

2. Technical plant and machinery 433 0 0 10 443 320 18 0 0 338 105 113

3. Other equipment, fixtures, fur-niture and office equipment 10,041 423 1,707 327 9,084 7,689 1,435 1,654 0 7,470 1,614 2,352

4. Advance payments made and assets under construction 289 88 8 –281 88 0 0 0 0 0 88 289

12,938 535 1,715 56 11,814 8,696 1,518 1,654 0 8,560 3,254 4,242

iii. Financial assets

1. shares in affiliated companies 620,059 117,515 2,748 79,491 814,317 80,821 10,119 1,022 3,162 86,756 727,561 539,238

2. Loans to affiliated companies 463,523 192,039 48,863 –79,491 527,208 287 0 0 0 287 526,921 463,236

3. Participating interests 25,755 0 1,509 0 24,246 16,041 0 0 0 16,041 8,205 9,714

4. Other loans 19 0 8 0 11 0 0 0 0 0 11 19

1,109,356 309,554 53,128 0 1,365,782 97,149 10,119 1,022 3,162 103,084 1,262,698 1,012,207

1,165,842 316,599 59,636 0 1,422,805 138,183 16,054 6,957 3,162 144,118 1,278,687 1,027,659

VNG – VERBuNDNETZ GAs AkTIENGEsELLsCHAFT, LEIPZIGBREAkDOWN AND DEVELOPMENT OF FIxED AssETs

48

Breakdown and Development of Fixed Assets | Annual Report 2014

Procurement/production costs depreciation/amortisation Carrying amounts

Jan. 1, 2014t€

Additionst€

disposalst€

transferst€

dec. 31, 2014t€

Jan. 1, 2014t€

Additionst€

disposalst€

Appreciationt€

dec. 31, 2014t€

dec. 31, 2014t€

dec. 31, 2013t€

i. intangible assets1. Purchased concessions,

industrial property and similar rights and assets, and licences in such rights and assets 39,549 5,362 4,493 3,288 43,706 32,338 4,417 4,281 0 32,474 11,232 7,211

2. Advance payments made 3,999 1,148 300 –3,344 1,503 0 0 0 0 0 1,503 3,999

43,548 6,510 4,793 –56 45,209 32,338 4,417 4,281 0 32,474 12,735 11,210

ii. Property, plant and equipment

2,175 24 0 0 2,199 687 65 0 0 752 1,447 1,488

1. Land, land rights and buildings including buildings on third-party land

2. Technical plant and machinery 433 0 0 10 443 320 18 0 0 338 105 113

3. Other equipment, fixtures, fur-niture and office equipment 10,041 423 1,707 327 9,084 7,689 1,435 1,654 0 7,470 1,614 2,352

4. Advance payments made and assets under construction 289 88 8 –281 88 0 0 0 0 0 88 289

12,938 535 1,715 56 11,814 8,696 1,518 1,654 0 8,560 3,254 4,242

iii. Financial assets

1. shares in affiliated companies 620,059 117,515 2,748 79,491 814,317 80,821 10,119 1,022 3,162 86,756 727,561 539,238

2. Loans to affiliated companies 463,523 192,039 48,863 –79,491 527,208 287 0 0 0 287 526,921 463,236

3. Participating interests 25,755 0 1,509 0 24,246 16,041 0 0 0 16,041 8,205 9,714

4. Other loans 19 0 8 0 11 0 0 0 0 0 11 19

1,109,356 309,554 53,128 0 1,365,782 97,149 10,119 1,022 3,162 103,084 1,262,698 1,012,207

1,165,842 316,599 59,636 0 1,422,805 138,183 16,054 6,957 3,162 144,118 1,278,687 1,027,659

49

AuDITOR’s REPORT

We have audited the annual financial statements, comprising the balance sheet, the income statement and the notes to the financial statements, together with the bookkeeping system and the management report, which is combined with the Group management report, of VNG – Verbundnetz Gas Aktiengesellschaft, Leipzig, for the business year from January 1 to December 31, 2014. In accordance with § (Article) 6b (5) EnWG [“Energiewirtschaftsgesetz”: “German Energy Industry Act”], the audit also covered compliance with the accounting obligations pursuant to Article 6b (3) EnWG, according to which separate accounts have to be maintained and activity reports have to be prepared for the activities in accordance with Article 6b (3) EnWG. The maintenance of the books and records and the preparation of the annual financial statements and the combined management report in accordance with German commercial law and supplementary provisions of the articles of incorporation as well as compliance with the obligations under Article 6b (3) EnWG are the responsibility of the Company’s Board of Managing Directors. Our responsibility is to express an opinion on the annual financial statements, together with the bookkeeping system, and the combined management report as well as compliance with the accounting obligations in accordance with Article 6b (3) EnWG based on our audit.

We conducted our audit of the annual financial statements in accordance with § (Article) 317 HGB [“Handelsgesetz-buch”: “German Commercial Code”] and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the annual financial statements in accordance with [German] principles of proper accounting and in the combined management report are detected with reasonable assurance, and also require that an assessment can be made with reasonable assurance to determine whether the accounting obligations pursuant to Article 6b (3) EnWG have been met in all material respects. knowledge of the business activities and the economic and legal environment of the Company and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the books and records, the annual financial statements and the combined management report and also for compliance with the accounting obligations in accordance with Article 6b (3) EnWG are examined primarily on a test basis within the framework of the audit. The audit includes assessing the accounting principles used and significant estimates made by the Company’s Board of Managing Directors as well as evaluating the overall presentation of the annual financial statements and the combined management report of the Company, as well as an assessment as to whether the figures which are shown and the way in which the accounts have been allocated in accordance with Article 6b (3) EnWG are proper and understandable, and also whether the principle of consistency has been observed. We believe that our audit provides a reasonable basis for our opinion.

50

Auditor’s Report | Annual Report 2014

Our audit of the annual financial statements, together with the bookkeeping system, and of the combined manage-ment report has not led to any reservations.

In our opinion, based on the findings of our audit, the annual financial statements comply with the legal requirements and supplementary provisions of the articles of incorporation and give a true and fair view of the net assets, financial position and results of operations of the Company in accordance with [German] principles of proper accounting. The combined management report is consistent with the annual financial statements and as a whole provides a suitable view of the Company’s position and suitably presents the opportunities and risks of future development.

The audit of compliance with the accounting obligations in accordance with Article 6b (3) EnWG, according to which separate accounts have to be maintained and activity reports have to be prepared for the activities in accordance with Article 6b (3) EnWG, has not led to any reservations.

Leipzig, January 20, 2015

PricewaterhouseCoopersAktiengesellschaftwirtschaftsprüfungsgesellschaft

(sgd. Rainer Altvater)Wirtschaftsprüfer (German Public Auditor)

( sgd. ppa. Werner Horn)Wirtschaftsprüfer(German Public Auditor)

51

Business areas of the VNG Group | Annual Report 2014

the BuSiNeSS AReASOF THE VNG GROuP

ExPLORATION & PRODuCTIONGAs TRADING & sERVICEGAs TRANsPORTGAs sTORAGE

The VNG Group with its four business areas covers all aspects of natural gas, allowing the Group to diversify risks and harness various growth opportunities in a dynamic market environment.

53

exPloRAtioN & PRoduCtioN

With the exploration and production of natural gas, VNG Norge As and VNG Danmark Aps expand the resource base for our business activities in the long term, thus strengthening security of supply for our customers and actively contributing to the future viability of the VNG Group.

54


Bjørnøya

Hammerfest

TromsøAndenes

Harstad

Bodø

Sandnessjøen

Namsos

Trondheim

Florø

Bergen

StavangerOSLO

Kristiansand

COPENHAGEN

Odense

Århus

Esbjerg

Åbenrå Rønne

Ålborg

Skagen

NO

DK

NJORD

BRAGE

HYME

DRAUGEN


Participation in the production field

Production licences of VNG Norge As

Production licences of VNG Danmark Aps

Head office of VNG Norge As

Head office of VNG Danmark Aps

liCeNCeSIN NORWAy (37)AND DENMARk (2)

Field deVeloPmeNt

39

PARtiCiPAtioNS IN PRODuCTION FIELDs

4

1

liCeNCeS AS oPeRAtoR

8

55

GAS tRAdiNG & SeRViCe

With natural gas from highly diversified international sources and innovative products and services for gas applications, VNG AG and our foreign trading companies provide their customers throughout Europe with a high degree of security, flexibility and efficiency.

56


Leipzig

(16)

(1)

(1)

(3)

(2)

(1)

(1)

(2)

NO

GB

DK

LU

FR

BE

NL

CZ

SK

CH

IT

DE

AT

PL

Procurement RU

Procurement N

O

Procurement RU

Procurement RU

* Berlin | Düsseldorf | Erfurt | Frankfurt a. M. | Hamburg | kassel | Leipzig | Munich | Neu brandenburg | stuttgart

euRoPe-wideGAs sALEs

WHOLESALE ON EuROPEAN sPOT AND FuTuREs MARkETs

368 billion kWhGAS SeNdout

Exploration & Production

supply LNG terminal

spot and futures market

Fully consolidated companies (number)

Head offi ce of VNG AG sales offi ces in Germany

SAleS oFFiCeSIN GERMANy*

10


57

GAS tRANSPoRt

As an Independent Transmission Operator with more than 7,200 kilometres of high-pressure pipelines, ONTRAs Gastransport GmbH and its cooperation partners make sure that the right quantity of natural gas is supplied to the right place at the right time – day and night.

DEUDAN

PRAGUE

NO

RPIPE

EURO

PIPEEU

RO

PIPE II

NETRA

RHG

WEDAL

MIDAL

TENP

MEGAL

MEGAL

MEGAL

NORD STR

EAM

JAMAL

NET4GAS

JAGAL

OPA

L

STEGAL

NEL

Kamminke

Sayda/DeutschneudorfHora Svaté Kateřiny

Lasów

Steinitz

BERLIN

Gubin

Dornum

Waidhaus

Lanžhot

Dortmund

Leipzig

Bobbau

Chemnitz

Greifswald

Neubrandenburg

Frankfurt/O.

Munich

CH

LU

FR

PL

CZ

AT

DK

DE

BE

NL

*

58


DEUDAN

PRAGUE

NO

RPIPE

EURO

PIPEEU

RO

PIPE II

NETRA

RHG

WEDAL

MIDAL

TENP

MEGAL

MEGAL

MEGAL

NORD STR

EAM

JAMAL

NET4GAS

JAGAL

OPA

L

STEGAL

NEL

Kamminke

Sayda/DeutschneudorfHora Svaté Kateřiny

Lasów

Steinitz

BERLIN

Gubin

Dornum

Waidhaus

Lanžhot

Dortmund

Leipzig

Bobbau

Chemnitz

Greifswald

Neubrandenburg

Frankfurt/O.

Munich

CH

LU

FR

PL

CZ

AT

DK

DE

BE

NL

*

hiGh-PReSSuRe PiPeliNeS7,200 km

511 NetwoRk iNteRCoNNeCtioNPoiNtS

dowNStReAm NetwoRk oPeRAtoRS

150

* Trading partners who have a balancing group at their disposal in the GAsPOOL market area can conduct trading transactions on the GAsPOOL Hub. The GAsPOOL Hub is not allocated to any physical entry or exit point and enables the purchase and sale of gas quantities without booking any capacity.


GAsPOOL market area Flow direction

Network interconnection points of ONTRAs Gastransport GmbH with the European natural gas transport systems

Transmission pipelines of ONTRAs Gastransport GmbH

Trans-regional transmission pipelines

Head office of ONTRAs Gastransport GmbH

59

GAS StoRAGe

With a working gas volume of 2.7 billion m3, excellent infrastructure connections and a wide variety of storage products, the independent company VNG Gasspeicher GmbH enables its customers to respond quickly to the dynamism of the energy market.

60


NEL

NETRA

RHG

WEDAL

MIDAL

TENP

MEGAL

MEGAL

JAMAL

JAG

AL

OPA

L

MEGAL

STEGAL

Leipzig

PL

CZ

ATCH

LU

FR

DK

DE

BE

NL

BUCHHOLZ

ETZEL

BERNBURG

KIRCHHEILINGEN

BAD LAUCHSTÄDT

source: GsE

woRkiNG GAS Volume

uNdeRGRouNdStoRAGe FACilitieS

5

mARket AReA CoNNeCtioNS*

* as well as 1 access to the Dutch network

2


Storage locations Bad lauchstädt Bernburg kirchheilingen Buchholz etzel

working gas volume in million m3 1,200 1,039 190 140 164

storage locations of VNG Gasspeicher GmbHHead office of VNG Gasspeicher GmbH

Former gas fieldsalt cavern Aquifer

2.7 billion m³

61

IMPRINT

PuBLIsHED By VNG – Verbundnetz Gas Aktiengesellschaft | Braunstrasse 7 | 04347 Leipzig | Germany

CORPORATE COMMuNICATIONBernhard kaltefleiter

CONTACTPhone +49 341 443-0 | Fax +49 341 [email protected] | www.vng.de

EDITORIAL DEADLINE January 20, 2015

DEsIGN, LAyOuT AND PRODuCTION Militzer & kollegen GmbH

REPRODuCTION AND PRINTING sepio GmbH, Leipzig

PHOTOGRAPHsDirk Brzoska (p. 1) | Michael Handelmann (p. 5) | Helge Hansen (p. 1) Eric kemnitz (p. 1) | VNG AG (p. 8)

annual report 2014 - vng ag · annual report 2014 vng – verbundnetz gas aktei ngesellschaft vng...

Documents