Revision of NMa rules leads to Gasunie loss and impairment

Groningen

Gasunie reports a 548 million euro loss for the first half of 2011, the state-owned company announced today in its Semi-annual Report. The loss is due to the announcement by the regulator NMa that it has developed new rules which it intends to implement retroactively. With what is termed “Method Decisions”, the NMa determines the level of the tariffs which the national transmission operator Gas Transport Services (GTS), a subsidiary of Gasunie, can charge. The previous Method Decisions were annulled in court in June 2010. The new NMa rules are based on a much lower value for the existing Dutch gas transport net. As a result of this, GTS will have to employ lower tariffs, leading to reduced revenues. Because the new rules will apply from 2006, the tariffs will need to be reduced retroactively. Moreover, the allowed return on investment will also be reduced, putting the feasibility of investments under pressure. With the information which is now available, Gasunie has to conclude that this is a matter of great financial risk. In accordance with internationally applicable accounting rules, the Executive Board must put a value on that risk. That valuation currently leads to an impairment loss of 900 million euro. In the event that the NMa sets the rules unchanged and forces Gasunie to take the reduced tariffs retroactively into account, another impairment loss of approximately 800 million euro may follow.

Blow
Paul van Gelder, CEO of Gasunie: 'This is an enormous blow, first of all to our company and our shareholder, the Dutch state, but also to further development of the gas roundabout. GTS is dependent on gas transport revenues from tariffs which are determined by the NMa. The method used for determining the tariffs has been the subject of discussion for years. The regulator has now had to obey the court ruling to determine a new regulatory framework. Unfortunately this means that the rules of play will be drastically altered - not only in hindsight but also retroactively. Then you’ve pretty much got your back up against the wall. We will do our utmost to absorb the effects of this unexpected blow, but it does threaten to be at the expense of expansion of the gas roundabout and thereby of the Netherlands’ strong position in the international energy market.'

Objections
The NMa’s Method Decisions are currently in development. Gasunie and its shareholder, the Ministry of Finance, have submitted formal objections to them. The regulator is expected to finalise the regulatory framework this September. Gasunie can appeal against the final decisions in court.

Semi-Annual Report 2011

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