Underestimation of regulatory risk is cause of impairments on BEB investmentGroningen | press release
Gasunie reaction to report on BEB gas transport network acquisition in 2007
- Gasunie endorses the recommendations of the investigation report into the acquisition of the BEB network and has already put most of these into practice
- Strategic importance of the takeover of the German network is not in dispute
- Three members of the Supervisory Board resign their seats following proper consultations; they will stay on until successors have been appointed
The external investigation report, commissioned by the Finance Minister as a result of the impairments on the German BEB gas transport network acquired by Gasunie in 2007, was published today. Gasunie has cooperated fully with this investigation. Radical changes to the regulation in Germany have meant that Gasunie has had to make total impairments of 1.5 billion euros net, in various stages, on the original purchase price. Although the regulatory risk was recognised at the time as being the most significant risk factor, the report states that the risk was underestimated by the Executive Board of the time, and insufficiently allowed for in the valuation scenarios employed.
Gasunie regrets the extensive impairments which, after the purchase, have proved to be necessary due to unexpected regulatory developments. In this context it should be noted that the takeover contributes to favourable pricing for natural gas for Dutch consumers. This advantage is not reflected in Gasunie’s profit & loss account. Moreover, via the BEB network (and the participations in the Nord Stream and NEL pipelines), the Netherlands is directly connected to Russian gas, which is important as domestic production declines over the long term. This not only contributes towards the future security of supply of gas in the Netherlands, but also ensures that the Dutch gas infrastructure can remain better utilised and for longer, including for transit flows to other countries. Over the long term, this can produce more income for Gasunie and for the Dutch State.
The purchase of the German network was, and still is, seen by Gasunie as a crucial step towards realising the Netherlands’ ambition to expand into becoming the gas roundabout for northwest Europe. Extending the network means that the Dutch gas infrastructure is optimally utilised and also reinforces its international standing. In his letter to Parliament accompanying the investigation report, the minister stresses that the Dutch government also considers the strategic rationale behind the purchase of the German network to be beyond dispute.
The report makes some important recommendations, which are fully endorsed by Gasunie. The company has put most of these into practice already based on its own previous evaluations. On the recommendation of the Supervisory Board, a new Executive Board was appointed from 2010 onwards, which made fundamental changes to the organisational structure and improved merger and takeover procedures. In large-scale acquisition projects, Gasunie now also actively seeks cooperation with partners.
The Supervisory Board followed the acquisition of the BEB network closely and critically at the time and had, on the basis of the information available and discussions held, no reason to withhold its approval of the takeover. The strategic advantages outweighed the risks as they were assessed at the time.
In order to facilitate an open discussion about the outcomes of the investigation, three members of the Supervisory Board, following proper consultation with the shareholder and the Executive Board, have stated that they are prepared to resign their seats. Mr Van Luijk, Mr Noy and Mr Lont were members of the Supervisory Board at the time of the takeover in 2007. With this step they are acknowledging their functional responsibility. Following talks with the shareholder, they will stay on until their successors are appointed. Every effort will be made to complete this process by no later than spring 2013.
Paul van Gelder, who took office as CEO and chairman of the board of Gasunie in 2010: “It’s good that this report is now available. We have already introduced many of the recommendations in our organisation. Gasunie is a healthy company with strong results for the financial year 2012. The Supervisory Board has made significant contributions to many projects which have strengthened Gasunie’s position in the international gas market. I am grateful to them for this. We regret that the members of the Supervisory Board have announced their departure and, at the same time, we respect them for taking this step.”
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