Annual Report VNG Verbundnetz Gas Aktiengesellschaft

Transcription

1 Annual Report 2013 VNG Verbundnetz Gas Aktiengesellschaft

2 Highlights VNG AG annual financial statements Sales million 8,761 7,811 Cost of materials million 8,858 7,844 Personnel expenses million Depreciation and amortisation expense million 5 4 Net income million Total investments million Intangible assets and Property, plant and equipment million Financial assets million 1, Balance sheet equity million Provisions million Liabilities million 1,788 1,978 Balance sheet total million 2,596 2,733 Shareholders of VNG AG EWE Aktiengesellschaft, Oldenburg % VNG Verbundnetz Gas Verwaltungs- und Beteiligungsgesellschaft mbh, Erfurt* % Wintershall Holding GmbH, Celle/Kassel % GAZPROM Germania GmbH, Berlin % * Trustee for ten utilities and municipal companies (Annaberg-Buchholz, Chemnitz, Dresden, Erfurt, Hoyerswerda, Leipzig, Lutherstadt Wittenberg, Neubrandenburg, Nordhausen, Rostock) As at December 31, 2013

3 highlights VNG Group annual financial statements Sales million 10,987 9,892 Cost of materials million 10,776 9,612 Personnel expenses million Depreciation and amortisation expense million Net income million Total investments million Intangible assets and Property, plant and equipment million Financial assets million Balance sheet equity million Provisions million Liabilities million 1,910 1,970 Balance sheet total million 2,931 3,018 VNG Group key performance data Number of employees at year-end 1,440 1,378 Gas sendout billion kwh Length of pipeline system at year-end km 7,200 7,200 Capacity of underground gas storage facilities at year-end billion m³

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5 Contents Annual Report 2013 Contents 04 The VNG Group 06 Foreword of the Executive Board 08 Report of the Supervisory Board 10 Management Report and Consolidated Management Report on the 2013 Financial Year 10 A. Standing ground in strong competition 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 24 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 VNG Group 3

6 The VNG Group The VNG Group is active in the entire value chain of the German and European natural gas industry and is oriented to its four core business areas consisting of Exploration & Production, Gas Trading & Service, Gas Transport and Gas Storage. With its subsidiaries and participating interests in Germany, Poland, the Czech Republic, Slovakia, Austria, Italy, France, Norway and Denmark, the VNG Group has regional ties and an international presence. Via VNG Norge AS and its subsidiary VNG Danmark ApS, the VNG Group performs its own exploration and production activities on the Norwegian continental shelf and in the region of the Danish Central Graben. This commitment contributes to diversifying the procurement sources and enhances the independence of the VNG Group. VNG Verbundnetz Gas Aktiengesellschaft, based in Leipzig, and its subsidiaries provide German and international customers with reliable and flexible supplies of natural gas from their own production facilities, long-term import agreements and the European trading markets. In their capacity as competent partners, they support the efficiency of power generation and natural gas application. In a challenging energy market, customers may rely on tailor-made, innovative gas products and services for their market success. This also involves projects and cooperations for research, development and the positioning of modern natural gas technologies in the electricity and heat market and also in the mobility field. Through the goldgas Group acquired in 2013, the activities on the private and commercial end user market were expanded and additional sales channels were opened up. As an independent transmission system operator within the VNG Group, ONTRAS Gastransport GmbH runs Germany s second largest gas transmission network, with a length of more than 7,200 km, which guarantees secure gas supplies by working in close cooperation with European transmission networks and numerous distribution grids as well as gas storage facilities. The independent VNG Gasspeicher GmbH is the third largest national storage operator with a working gas capacity of 2.6 billion m³. Closely associated with the four core business areas of the VNG Group, our subsidiaries ECG Erdgas-Consult GmbH, GDMcom Gesellschaft für Dokumentation und Telekommunikation mbh, ENERGIEUNION GmbH and VNG-Erdgastankstellen GmbH compete successfully on the energy market. The VNG Group believes in the principles of a strong civil society. Its business commitments are accompanied by targeted activities and initiatives in research and development, for democracy, education, culture and sport. The Executive Board of VNG Group: Hans-Joachim Polk, Dr Karsten Heuchert, Bodo Rodestock and Prof. Dr Klaus-Dieter Barbknecht (l. to r.) 4

7 The VNG Group Annual Report

8 Foreword of the Executive Board Dear shareholders and business partners, dear friends of the Company, We are pleased to look back on a good performance in The VNG Group has successfully maintained its course, and has been able to match the positive result reported for The consolidation and optimisation measures initiated in previous years are now having an effect. This has again been due to constantly motivated employees and our strategy which we have consistently pursued. We continue to concentrate on our core areas of Exploration & Production (E&P), Gas Trading, Gas Storage and Gas Transport. Along this value chain, we constantly assess opportunities for profitably expanding our business activities. One of the measures which we employ for this purpose is to extend our procurement portfolio in the long term to include proprietary production of VNG. With net income of 174 million, VNG AG has reported the best result in its history. The VNG Group has also reported a positive development, with a gas sendout of 362 billion kilowatt hours of natural gas and sales of approximately 11 billion. Net income in the Group is stated as 89 million, and is mainly due to the contributions to earnings made by the business areas Gas Transport and Gas Trading. In view of the fierce competition on the gas market, we are very pleased that we have been able to maintain our position as one of the most successful Eastern German companies in terms of sales. VNG has thus successfully faced the challenges posed by the changes on the national and international energy markets, and has been able to further strengthen its competitive position with a wide range of measures. With the acquisition of the goldgas Group, we intend to develop additional sales potential in the commercial and also in the private end user market without posing a threat to our strong sales partnerships with redistributors and direct users. Our major objective is to further expand the position of the VNG Group as the preferred partner for natural gas in Europe. We need a firm foundation of values for this purpose. The employees of the VNG Group have created this foundation last year: A model for the entire VNG Group is now laying a further foundation for sustainable development of our Company. The four core values of entrepreneurship, partnership, responsibility and openness form the framework of our daily actions, and will provide permanent support for the success of our Company. Our employees are committed to achieving this objective with their skills and experience, with their energy and creativity. VNG Group a passion for natural gas! Reliable partners are also needed in order to permanently assure the success of our Company. Our Russian and Norwegian partners have always supplied us reliably with natural gas, and have thus made a major contribution towards ensuring the reliability of supplies for our customers, and also the positive development of VNG. A successful energy partnership has linked us with Norway for 20 years. In June 2013, we celebrated our 40-year energy partnership with Gazprom. 6

9 Foreword Annual Report 2013 This partnership has been a success story, even in times of major historical changes, and we intend to jointly continue this success. We would also like to see such reliability with regard to the conditions of energy policy. In the coalition agreement, the new German government emphasises the equal ranking of the objectives of energy policy: Namely reliable supplies, efficiency and environmental compatibility. Natural gas has advantages in all three areas. It is climate-friendly, provides long-term reliable availability and ensures that the overhaul of German energy policy can be carried out with a minimum negative impact on society. This is applicable for all areas of application, irrespective of whether the focus is on mobility or the electricity or heat market. Particularly in the heat market, more than 50 % of consumers have realised that they can place their trust in natural gas. This trust clearly illustrates one particular aspect: The overhaul of the German energy policy cannot be achieved without natural gas! In this context, we are confident in participating in the political discussions, and also consider that VNG is in a good position to face the challenges posed by a changing energy system. All of this would not be possible without the strong motivation of our more than 1,400 employees. We should like to thank them for their commitment! They are one of the reasons why VNG can make a significant contribution to regional value creation as a company which has its roots in the region. This year, we have again received a great deal of support from the supervisory board and our shareholders. We should like to thank them for the excellent co-operation. We should also like to express our thanks to the works council for the constructive co-operation, and would also like to thank our customers for the trust they have placed in our Company. Even if it will not be easy in view of the market climate which continues to be difficult, we are convinced that the VNG Group will be able to maintain its successful course in future. A high level of commitment, forward-looking thinking and sustainable actions are and will continue to be our guiding principles. The Executive Board Dr Karsten Heuchert Prof. Dr Klaus-Dieter Barbknecht Hans-Joachim Polk Bodo Rodestock Chairman of the Executive Board Board member Trading Board member Infrastructure/ Technical Affairs Board member Commercial / Human Resources 7

10 Report of the Supervisory Board The Supervisory Board has been notified regularly, extensively and promptly by the Executive Board in written and verbal form regarding the development and situation of the Company and also with regard to major business transactions. The Supervisory Board has used these reports and the information provided as the basis for monitoring management, and in particular for considering and extensively deliberating on the development of the business areas, the financial position of the Company, issues of finance, investment and human resources planning as well as all measures which, in accordance with the articles of incorporation, require the approval of the Supervisory Board. In the 2013 financial year, the Supervisory Board held a total of five meetings. The individual meetings focused on the further development of the strategy concept 2020 which was developed by the Company, and also on the process of implementing this concept. In the business area Exploration & Production, the primary aim is to establish a profitable and self-sustaining business. A further focus was on the acquisition of production licenses on the Norwegian continental shelf, participation in various exploration activities in the Norwegian Sea, the situation of gas trading of VNG and the measures for implementing the unbundling requirements of the German Energy Industry Accounting [EnWG]. In addition, the Supervisory Board regularly discussed the impact of regulation on the Group. Further participating commitment of the Company, including restructuring under company law, was also considered in detail. In this connection, the Supervisory Board approved the acquisition of the goldgas Group, which enabled VNG to enter end user business. The Supervisory Board has used these deliberations as well as the reports and information provided by the Executive Board as the basis for verifying the adequacy of 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, 2013 as well as the combined management report and Group management report for the 2013 financial year, including the bookkeeping system, 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 examined the annual financial statements and consolidated financial statements as well as the combined management report and Group management report. Based on the final result of the examination of the Supervisory Board, no objections are raised. The auditor attended the accounts meeting of the Supervisory Board and reported to the Supervisory Board regarding the main results of the audit. The Supervisory Board has approved the annual financial statements and consolidated financial statements for the period ending December 31, 2013, which have been prepared by the Executive Board. The annual financial statements have thus been adopted. 8

11 Report of the Supervisory Board Annual Report 2013 The Supervisory Board agrees with the proposal of the Executive Board regarding the appropriation of the cumulative profit. In its meeting on April 9, 2013, the Supervisory Board decided to re-adjust the distribution of responsibilities within the Executive Board as part of the process of further developing the corporate strategy. In its meeting on June 13, 2013, the Supervisory Board approved the amendment to the distribution of activities in the Executive Board with effect from October 1, 2013, and, to a certain extent, as of January 1, The three infrastructure business areas Network, Storage as well as Exploration & Production have now been combined in the Infrastructure/Technical Affairs division. Trading activities have been pooled in an Executive Board division Trading. The structure of divisions has been extended to include the Commercial/Human Resources division. In a further meeting on September 19, 2013, the Supervisory Board elected Bodo Rodestock with effect from October 1, 2013 as a member of the Executive Board responsible for Commercial/Human Resources activities. The member of the Executive Board previously responsible for the Gas Procurement division, Michael Ludwig, laid down his position on the Executive Board with effect from October 7, 2013, and stepped down from the Executive Board of VNG by common agreement. The Supervisory Board also appointed Hans-Joachim Polk as a member of the Executive Board with responsibility for the Infrastructure/Technical Affairs division, at the earliest possible instance; the appointment however is to become effective by no later than September 1, Prof. Dr Klaus-Dieter Barbknecht assumed responsibility for the Executive Board division Trading with effect from October 1, In addition to responsibility for the Commercial/Human Resources division, Bodo Rodestock also assumed interim responsibility for Exploration & Production. Hans-Joachim Polk joined the Executive Board of VNG with effect from December 1, The member of the Executive Board previously responsible for Infrastructure/Technical Affairs, Uwe Barthel, laid down his position on the Executive Board with effect from December 31, 2013 and stepped down from the Executive Board of VNG at his own request. Since January 1, 2014, Hans-Joachim Polk has now been responsible for Infrastructure/ Technical Affairs incl. the business area Exploration & Production. The Supervisory Board would like to express its thanks and appreciation to the Executive Board and all employees for their work in the 2013 financial year. The Supervisory Board Leipzig, February 25, 2014 Dr Rainer Seele, Chairman 9

12 Management Report and Consolidated Management Report on the 2013 Financial Year A. Standing ground in strong competition The VNG Group has again maintained course in the 2013 financial year. The consolidation and optimisation measures which had been implemented in recent years are starting to have an effect. With EBIT 1) of 182 million, the Group has also been able to face up to strong competition in a difficult market climate, and has succeeded in continuing the positive development in business reported for last year ( 187 million). At 176 million, the EBIT of VNG Verbundnetz Gas Aktiengesellschaft (VNG AG) is approximately in line with the figure reported at Group level, and is thus higher than the corresponding previous year figure ( 162 million). This positive development in earnings has meant that VNG AG has reported net income of 174 million; this is thus considerably higher than the corresponding net income of 89 million reported for the VNG Group mainly as a result of tax considerations. The individual business areas have made differing contributions to the overall economic development. The Gas Transport business area continues to make stable and positive contributions to earnings for the net income of VNG AG and the consolidated net income. Particularly as a result of the significant diversification of gas procurement, Gas Trading has been able to strengthen its position by means of longterm contracts with conditions adjusted to the market and also by way of trading markets. Success attributable to the commercial adjustment of long-term contracts with suppliers again had a positive impact on net trading income last year. On the other hand, the extremely strong competitive pressure had a negative impact on earnings in storage facility business. Further costs have resulted from the expansion of the Exploration & Production (E&P) business area. The economic and political conditions on the energy market continue to be challenging. At the same time, they are strengthening the Group s intention to continue with its business model along the entire value chain relating to natural gas and also to continue to extend this chain. Accordingly, last year the VNG Group successfully worked on extending its activities on the end user market and thus on developing additional distribution channels. As a result of its proximity to end users, natural gas is able to position itself as a safe, environmentally-friendly and economic energy medium on the heat, power and mobility market and utilise all of its advantages with its reliable infrastructure, as well as its modern, varied and efficient application technologies. The VNG Group intends to utilise the resultant opportunities to continue to generate stable results in the future. B. Background 1. Economic background Slight economic growth in Germany. Whereas economic growth in the Euro zone was still declining in the 2013 financial year as a result of the ongoing recession, gross domestic product (GDP) in Germany increased slightly by 0.4 %. The main driving force behind this development were private households and their consumer patterns. For the year 2014, the economic institutions are expecting that GDP in the Euro zone will return to growth, resulting in a corresponding improvement in the economic climate in Germany. Strong increase in demand for natural gas. In the year 2013, consumption of natural gas in the first half increased by 7 % compared with the previous year as a result of the cool temperatures. Accounting for approximately 50 % of the overall market, natural gas continues to be by far the most preferred energy medium for existing and new heating installations. On the other hand, the economic development had hardly any impact on demand for natural gas. For instance, consumption of natural gas for power generation continues to decline. Low prices on the electricity market resulting from the priority of renewable energies and inexpensive imported coal mean that it is currently virtually impossible for environmentally-friendly and efficient gas power stations to be operated economically. 2. Energy policy Natural gas is essential if the overhaul of German energy policy is to be successful. The energy medium natural 1) inclusive tax refund 10

13 Management Report Annual Report 2013 gas is essential if the overhaul of German energy policy is to be successful and if the climate objectives which have been set are to be attained. Natural gas ensures that the overhaul of German energy policy is compatible with social objectives, because efficiency and cost-effectiveness go hand-in-hand. It also permits flexible use in a wide range of applications; it is environmentally-friendly and will be available on a reliable basis in the long term. A positive aspect that can be reported is that the parties in the government coalition have included a commitment in the coalition agreement regarding the equal-ranking nature of the energy policy objectives of reliable supplies, cost-effectiveness and environmental compatibility. The intended focus on cost efficiency is also a sound basis for shaping energy policy over the next few years, and provides the energy medium natural gas with considerable opportunities for taking full advantage of its strengths. The VNG Group will accordingly continue to make an active contribution to the political processes. Natural gas has the potential to play a key role in all three energy sectors: As a traditional factor in the energy field, in central and local power generation and also in mobility. Natural gas in the heat market. Whereas discussion regarding the focus of the overhaul of German energy policy focused mainly on the power field in the past, the coalition agreement of the new German government now also properly focuses on the structure of the heat market. This market accounts for approximately 40 % of total energy consumption in Germany. Natural gas is by far the most significant energy medium in the heat market. Almost half of all homes in Germany use natural gas for heating purposes. A further 150,000 to 200,000 homes are added every year. In addition, natural gas has a good image and high satisfaction values. According to a current survey carried out by the Bundesverband der Energie- und Wasserwirtschaft e. V., approximately two thirds of all persons covered by the survey have awarded top marks to their natural gas providers. Satisfaction with regard to the reliability of supply is even more pronounced. Particularly in the heat market, natural gas applications can quickly and efficiency make a contribution towards a considerable reduction in greenhouse gas emissions. It remains to be seen what specific legal measures the German government intends to introduce for instance for speeding up the process of modernising heating systems. Natural gas in power generation. Natural gas is a valuable addition in a power system which in future will primarily be based on sources of renewable energy. Highly-efficient and climate-friendly gas power stations are able to make available their power within a few minutes and are thus able to ensure the necessary stabilisation of the network. The grand coalition has already announced that it intends to carry out a review with regard to strengthening the position of gas power stations by various means, including the medium-term development of a capacity mechanism and the reform of European emission trading. This is a step in the right direction. The natural gas network is an ideal long-term storage facility for electricity generated from renewable energies. As a result of the considerable emphasis given to powerto-gas as a storage method, the coalition agreement has opened up opportunities for successful further development of this technology. Natural gas in mobility. The long-standing demand of the gas industry for the reduced rate of tax to be extended to natural gas as a fuel also underlines the significance of this medium for the overhaul of German energy policy. In addition, the German government has identified the need to reduce pollutants in shipping as a further task which needs to be tackled. Liquefied natural gas (LNG) can make a major contribution to reducing emissions in shipping and also in the truck market. At the beginning of 2013, the European Commission announced a range of measures for setting up a refuelling station infrastructure for alternative fuels, thereby particularly emphasising the role of natural gas. European trading regulation. The European Commission has adopted a range of proposed legislation for regulating the energy trading markets which will also have a considerable impact on the VNG Group. The Regulation on Energy Market Integrity and Transparency (REMIT) 11

14 and European Market Infrastructure Regulation (EMIR) are already in force; these will result in significantly more stringent reporting, transparency and clearing obligations for energy trading. Negotiations have not yet been completed with regard to the revision of the Markets in Financial Instruments Directive (MiFID), which is expected to be extended by the Markets in Financial Instruments Regulation (MiFIR) with the main aim of regulating the financial markets. In consequence, energy utilities in future might be treated in the same way as financial service providers which are subject to regulatory requirements. C. The VNG Group an overview 1. Strategic orientation Concentration on core business. The VNG Group is convinced that natural gas will be a stable component of the German and European energy mix for ensuring sustainable, climate-friendly and future-proof energy supplies in the heat, power and mobility market. The VNG Group will therefore continue to concentrate on its core areas of activity, consisting of the entire value creation chain relating to natural gas: E&P, gas trading, gas storage and gas transport. Self-sustaining E&P business. The activities in the E&P field form part of the growth strategy of the VNG Group, and also form part of the Group s future planning. The intention is to diversify the sources and enhance the Group s independence. The aim is to develop these activities into self-sustaining business with stable contributions to earnings for the VNG Group. E&P activities will be gradually expanded, initially by way of participating in licensing rounds and also by way of active management of the license portfolio. Possibilities of investing in deposits which have already been developed are currently being considered. The VNG Group is concentrating on Norway and neighbouring regions with its subsidiaries VNG Norge AS (VNG Norge) and VNG Danmark ApS (VNG Danmark). Consistent optimisation of the trading portfolio. The trading business area utilises its opportunities in the market by means of optimum management of its trading portfolio. The process of pooling trading activities in one executive board division has also meant that the necessary organisational measures have been taken. In terms of procurement, the VNG Group will continue in future to focus on a mix of various procurement sources by means of long-term delivery agreements brought into line with changed market conditions and also by way of liquid European wholesale markets. The investments of the VNG Group in its own production of natural gas are also intended to further enhance the flexibility of sourcing in the long term. In terms of sales, Germany 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. Overall, sales activities will continue to be optimised across all customer groups, products and distribution channels. The acquisition of the goldgas Group has opened up, and will continue to open up, further sales potential in the private and also commercial end user market. This will not involve any change to the strong sales partnerships with redistributors and direct customers. On the contrary, the distribution channels for natural gas will be complemented in a meaningful manner in a dynamic and competitive market, and the value chain will be completed in this way. Storage business is currently a major challenge. The situation in storage business is challenging at present. Storage capacities have to compete with other flexibility sources. Competitive pressure is fierce as a result of the current excess supply of import, production and storage capacities. However, in the medium to long term, the VNG Group expects that the storage market will recover, and will therefore retain its sound and competitive core stock of storage facilities. All expansion and replacement measures are assessed intensively in order to identify the opportunities and risks of future marketing, and are adjusted where necessary. VNG Gasspeicher 12

15 Management Report Annual Report 2013 GmbH (VGS) has many decades of experience in the field of setting up and operating storage facilities and also in marketing innovative storage products. With its efficient installations, it will in future continue to take advantage of all opportunities which become available in order for instance to also utilise the existing infrastructure as a storage facility for renewable energies. Network as an integral component of the VNG Group. The transmission network of ONTRAS Gastransport GmbH (ONTRAS) is currently, and will continue to be, an integral component of the VNG Group. It supports the future and long-term role of natural gas for power supply policy in Germany, also as a partner for renewable energies. In addition, ONTRAS has been generating stable contributions to earnings for the VNG Group for many years, and thus has a major role to play in the overall economic success. Transport business will continue to be optimised in line with the regulatory framework, and will be complemented by customer-specific and non-discriminatory services. 2. Investment portfolio of the VNG Group The fully consolidated companies of the VNG Group Exploration & Production VNG Norge AS, Stavanger, Norway VNG Danmark ApS, Copenhagen, Denmark Gas Transport ONTRAS Gastransport GmbH, Leipzig GDMcom Gesellschaft für Dokumentation und Telekommunikation mbh, Leipzig GEOMAGIC GmbH, Leipzig Gas Storage VNG Gasspeicher GmbH, Leipzig Participating interests of strategic importance. The Group structure essentially reflects the strategic focus of the VNG Group. Accordingly, participating interests are normally only acquired and held if they are of strategic importance for the core business areas. VNG AG has directly and indirectly acquired all companies of the goldgas Group in order to establish a long-term position for itself in the end user market in Germany and Austria. The goldgas Group was successfully integrated in the VNG Group in the 2013 financial year. On the other hand, the shares in Gas Service Freiberg GmbH and in enerxess GmbH have been sold. As part of the process of optimising the Group structure, the holding company VNG-Beteiligungs-GmbH has been merged with VNG-Erdgascommerz GmbH. The Group structure along the entire value chain was as follows at the end of 2013: Gas Trading & Service VNG Verbundnetz Gas Aktiengesellschaft, Leipzig BALANCE VNG Bioenergie GmbH, Leipzig CCM Communication-Center Mitteldeutschland 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, Eschborn 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 13

16 Gas Trading & Service 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 France S.A.S., Paris, France 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, Republic of Slovakia 3. Personnel development in the VNG Group Growth in personnel due to new Group companies. As of December 31, 2013, the VNG Group employed a total of 1,440 employees in the parent company and in the fully consolidated companies and, despite regional expansion, continued to be an important employer in eastern Germany. The VNG Group employed more than 1,000 persons at the location in Leipzig alone. The increase in the number of employees compared with 2012 is mainly due to the integration of the newly acquired goldgas companies. Headcount in the VNG Group and at VNG AG year end figures 1,600 1,455 1,440 1,400 1,320 1,343 1,378 1,200 1, VNG AG VNG Group Restructuring of the executive board divisions. As part of the process of further developing the corporate strategy, the supervisory board of VNG AG has approved a new business distribution arrangement in the executive board of VNG AG. The infrastructure areas of gas transport, gas storage as well as E&P have accordingly been combined in an executive board division Infrastructure/ Technical Affairs. Complete trading business has now also been pooled in one division. A new division has also been created: Commercial/Human Resources. Sustainable personnel development. Human Resources works within the VNG Group mainly to retain suitably qualified and motivated employees for the Group, and to recruit further staff. Demographic developments mean that there is increasing competition for the best specialists and senior executives. Special programs for the development of future executives have been set up to provide management knowledge to young members of staff with strong potential. The VNG Group maintains contact with numerous universities and again supported numerous students on practical experience programs in the 2013 financial year. Commercial and technical training programs have resulted in 31 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. Promoting efficiency and satisfaction. In addition to promoting personal and professional skills, providing flexible working hours and also appropriate compensation, the Group also provides its staff with support in matters of health and the need to combine family and career requirements. In 2013, VNG AG, ONTRAS and VGS were again awarded the certificate of the Hertie Foundation, confirming the status as a family-friendly company. According to a survey carried out by the University of St. Gallen, ECG Erdgas-Consult GmbH is one of the 100 best employees in the German SME sector, and has been rewarded with the Top Job Award. The award was preceded by an analysis of human resources work. Employees stated that they particularly appreciated the positive corporate and team culture as well as the family-friendly measures. 14

17 Management Report Annual Report Social responsibility and commitment Targeted support for the common good. For the VNG Group, social responsibility means much more than success against the competition in the energy industry and securing future-proofed jobs. As a Group with regional roots, it joins forces with committed citizens to support selected projects and initiatives designed to strengthen the common good. The networks known as Verbundnetze have for a long time been at the forefront of the Group s social commitment. Accordingly, the Verbundnetz der Wärme aims to focus public attention on people working in an honorary capacity in all areas of social action, in order to acknowledge their work and to encourage others to follow suit. With more than 200 members, this network again focused on the project entitled Engagement macht Schule (commitment in schools) in 2013, the aim of which is to encourage children and young people to take part in voluntary activities. In the 2013 financial year, the Verbundnetz für den Sport was refocused. Whereas the focus had previously been on supporting young sporting talent in competitive sport, greater emphasis is to be placed on non-competitive sport for children and youngsters in future. The Verbundnetz für kommunale Energie operated as a non-partisan discussion platform for decision makers from municipal authorities and companies. has also provided significant impetus for developing a new independent image for the VNG Group in the 2013 financial year. In the field of higher education, the VNG Group has been providing support for cooperations with universities in Germany, Russia, Norway, Poland and the Czech Republic for more than a decade. Via the VNG Campus initiative, more than 300 grants have been awarded for German students to spend time studying during terms in other European countries. The VNG Foundation is also involved in various activities at the Hochschule für Technik, Wirtschaft und Kultur Leipzig, including the award of a Germany bursary to students who excel as a result of their achievements and social commitment. Intensive dialog regarding raw material cooperations. In 2013, the VNG Group was also intensively involved in the German-Russian Raw Material Forum (Deutsch-Russisches Rohstoff-Forum). Scientific, economic and political representatives discussed various aspects at the 6 th German-Russian Raw Material Conference held in Khanty- Mansiysk in Siberia; the discussions also included ways in which raw materials can be used efficiently in order to protect the environment and resources, as well as possibilities of technical and scientific cooperation. The VNG Foundation once again supported in 2013 numerous projects and initiatives in the fields of science and education, art and culture as well as non-profit commitment. Via the VNG Foundation, the VNG Group is also a member of Wissensfabrik Unternehmen für Deutschland e. V. This association is involved in specific educational projects relating 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. Via the Wittenberg-Zentrum für Globale Ethik (Lutherstadt Wittenberg), VNG AG has been working together with other companies to develop guidelines for entrepreneurial action, and aims to integrate this code of responsible conduct in the day-to-day practical activities of senior executives. The cooperation with this body D. Review of operations in the business areas 1. Gas trading a) Business development Continuing pressure on the sales margin. Last year, there was again fierce competition on the domestic and international trading markets, with corresponding pressure on the sales margins. This also means that the costs for structuring and flexibility in the sales markets are currently not showing an adequate return. Optimum management of the trading portfolio. The Gas Trading business area utilises its opportunities within a 15

18 competitive environment by means of optimum management of its trading portfolio. It has used a wide range of measures to strengthen its competitive position. These include the long-term diversification of gas procurement by way of adjusting long-term sourcing contracts with suppliers to market realities and also via the trading markets, the range of customised and innovative products and services as well as by the development of new distribution channels, e. g. on the end user market. Diversification in terms of procurement. In the 2013 financial year, the VNG Group purchased a total of approximately 365 billion kwh of natural gas (2012: 319 billion kwh). The optimisation of the portfolio again resulted in a higher level of sourcing via the spot and futures markets. Nevertheless, the level of sourcing by way of long-term contracts from Russian, Norwegian and German sources continued to be a key element in a sustainable, secure and reliable supply policy. In recent years, VNG AG has been able to agree structural changes to the long-term sourcing contracts with its suppliers to bring them into line with the changed market conditions; these had a positive impact on results last year. If the negotiations are able to reach agreement regarding an adequate adjustment in future, some contracts will be terminated on a mutually acceptable basis. This has also resulted in changes in the procurement structure. Most of the volumes sourced in the VNG Group were procured via VNG AG. The gas sourcing of the VNG Group is broken down as follows: Sources Russia billion kwh Norway billion kwh Germany billion kwh Spot / futures markets and other billion kwh Further increase in sendout on the wholesale markets. The gas sendout of the VNG Group in the 2013 financial year totalled 362 billion kwh of natural gas (2012: 324 billion kwh). The increase in gas sendout was mainly attributable to a further strong increase in the level of sales to wholesale and trading companies. The purpose of using spot and futures markets for sales and purchasing of natural gas is to achieve optimum portfolio management and also provide protection against market price risks. On the other hand, the gas sendout delivered to redistributors declined. The gas sendout of the VNG Group in 2013 was broken down as follows compared with 2012: Client groups Redistributors billion kwh Industry and power stations billion kwh Trading companies billion kwh End users billion kwh The total gas sendout of approximately 362 billion kwh is broken down as follows: Germany 112 billion kwh, other countries 42 billion kwh and the European spot and futures markets 208 billion kwh. Italy, Poland and Luxembourg were again the main sales areas of the VNG Group in other European countries. Compared with 2012, the gas sendout of VNG AG also increased consider ably in 2013, namely by 36 billion kwh to approximately 310 billion kwh. This increase is also attributable to the activities on the trading 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. The VNG Group has also established a presence in other European countries, with its trading subsidiaries in Italy, Poland, the Czech Republic, the Republic of Slovakia, Austria and France. Acquisition of the goldgas Group. In the first half of 2013, the VNG Group rounded off its core business along the entire value creation chain as a result of the acquisition of the goldgas Group. With their goldgas and goldstrom brands, the newly acquired companies supply private and commercial customers as well as large industrial clients throughout Germany. Flexible sales and service products. Customer demand for innovative products tailored to meet the needs of 16

19 Management Report Annual Report 2013 the market has resulted in a very high product diversity on the sales market. As a marketing and procurement specialist in all aspects of natural gas, the VNG Group utilises all opportunities and offers flexible sales and service products which meet the specific requirements and needs of customers. The VNG Group provides support for customers for their own portfolio management, supplies them with market information and provides them with access to the wholesale markets. Promotion of modern natural gas technologies. In 2013, the VNG Group also promoted efficient, environmentally-friendly and economic natural gas technologies such as condensing heating technology and micro-cogeneration systems (BHKW). For instance, within the framework of ÖkoEnergie (eco-energy) project, the Group cooperated with other partners and replaced all old heating systems in the hotel and catering industries along the Baltic coast with modern micro-cogeneration systems (BHKW) based on natural gas or biomethane. Due to a wide range of new vehicle models using natural gas and also as a result of increasing registration numbers of such vehicles, the VNG Group is currently building further refuelling stations offering biomethane in central Germany. b) Opportunities and risks distribution channels in traditional customer 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 portfolio. Extensive projects due to European trading regulations. At the European level, the main considerations for the VNG Group are the effects of new and foreseeable laws and directives for regulating the wholesale energy markets (EMIR, REMIT and MiFID). In its capacity as an energy trader, the VNG Group actively observes and supports the process and adapts at an early stage to new regulations, some of which are very wide-ranging. The increasing regulatory requirements are consuming more and more resources. Adjusting the business processes and further developing IT systems. The expansion of business and the ongoing changes in the background conditions of trading business are also posing major challenges to the stability and reliability 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. 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 in an overall portfolio. Taking account of natural hedging effects in the portfolio, the VNG Group also uses derivative financial instruments to limit potentially negative changes to results of the gas trading portfolio. Broad position established on sales and purchasing side. The contract-specific risks have been reduced considerably as a result of bringing the long-term sourcing portfolio into line with conditions reflecting market reality and also as a result of cancelling individual contracts. On the sales side of the equation, the VNG Group is developing new products and opening up new 2. Exploration & Production a) Business development Consistent expansion of the license portfolio. At the beginning of 2013, VNG Norge was able to extend its portfolio when four new licenses were awarded by the Norwegian state. VNG Norge acts as the operator for two of these new licenses. In addition, VNG Norge has also acquired two further license participations from third parties. For expanding its reserves as the basis of future production of oil and gas, the VNG Group concentrates on participating in exploration work in the region of the Haltenbank in the Norwegian Sea, in the northern part of the North Sea, the Viking-Graben and also the Danish Central-Graben. 17

20 Operator in ten production licenses. At the end of 2013, VNG Norge held shares in 32 production licenses on the Norwegian continental shelf and also shares in two licenses in the Danish North Sea via its subsidiary VNG Danmark. VNG Norge is the operator in ten of its licenses, and is thus able to shape the exploration programmes in these licenses. In addition, the company also participates in the production fields Brage, Njord and Hyme. The Hyme field commenced oil and gas production in the first quarter of As a result of maintenance and repair work, production in the Njord and Hyme fields will probably be suspended until the summer of In this connection, the company is also considering measures which will enable the useful life of the production platform and thus production in the Njord and Hyme fields to be considerably extended. b) Opportunities and risks Balanced portfolio for spreading risk. The VNG Group has a balanced portfolio of licenses in the exploration phase and also in the production phase. The main risks are to be seen in potential incorrect assessments of geological structures and the resultant aborted holes. As the licenses are increasingly further developed, the extent of the business risks declines. The result of this business area very much depends on the development of the market prices of natural gas and oil. Overall, with regard to the composition of its portfolio, the VNG Group concentrates on prospects where the risks are manageable, aims to achieve shareholdings which are commensurate for the level of risk involved, and also works together with experienced partners within the framework of syndicates. Successful exploration drillings. VNG Norge and VNG Danmark were involved in seven exploration drillings in Oil and gas were found in three drillings. In the case of the successful drillings, in the Snilehorn prospect in the Norwegian Sea and the Solsort prospect in the Danish North Sea, these finds can also be exploited financially. The size of the finds is currently being evaluated. 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 international safety standards of environmental and health protection as well as industrial safety. Research and development. VNG Norge carries out research 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 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 various 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. 3. Gas storage a) Business development Storage capacities fully booked. At present, VGS has a working gas volume of around 2.6 billion m³ at its existing underground gas storage facilities in Bad Lauchstädt, Bernburg, Etzel, Kirchheilingen and Buchholz. Together with its partners, VGS is establishing further capacities at the locations of Etzel and Jemgum in Lower Saxony. The underground storage facilities have been or are fully booked in the storage year 2013/14. Short-term storage capacities are in certain cases marketed via the trading platform store-x. Together with GAZPROM Germania GmbH, VGS is also involved in establishing the underground storage facility Katharina via Erdgasspeicher Peissen GmbH. 18

21 Management Report Annual Report 2013 Storage capacities exposed to fierce price pressure. Despite the existing demand for storage capacities, storage charges are exposed to fierce competition. The major contribution made by natural gas storage facilities towards ensuring reliable supplies, network stability and portfolio optimisation is currently not being sufficiently rewarded by storage customers as a result of the excess supply of flexibility. The VNG Group set aside appropriate risk provisioning for this purpose last year. technological safety standard which is also consistent with mining law. This considerably reduces the probability of disruptions. Annual training plans designed to ensure 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 VGS facing up to the 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 constructing and operating storage facilities and also with the development of innovative products and customised solutions. Accordingly, with the new online product easystore, storage customers are able to put together the appropriate combination of working gas volume as well as entry and exit capacities quickly, easily and independently. Expansion and replacement measures for storage capacities are constantly reviewed in order to assess the corresponding opportunities and risks for future marketing, and are adjusted where necessary. b) Opportunities and risks a) Business development Reliable partner. ONTRAS owns and operates a transmission network with a length of more than 7,200 kilometres and with more than 500 interconnection points. As a reliable partner, ONTRAS combines the interests of transport customers, traders, regional network operators and biogas producers. Implementation of legal requirements for gas transport. ONTRAS is organised in the form of an independent transport network operator, and is thus a fully equipped network company. Compliance with the unbundling requirements was certified by the Bundesnetzagentur in 2013, subject only to minor conditions, most of which have already been satisfied. Market environment for storage bookings. The further intensification of competition between storage operators is tending to result in a higher proportion of only shortterm 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 innovations, 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. 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 underground and overground installations guarantee a high ONTRAS in incentive regulation. ONTRAS has been subject to incentive regulations since January 1, It is confident that, as was the case for 2010 to 2012, it will also be able to receive certification for 100 % efficiency for defining the revenue cap for the second regulatory period from 2013 to It is expected that the notice will be received in the first half of 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 supply reliability in future. The plan which was published in April 2013 does not specify any investment obligations of ONTRAS. At present, the 2014 network development plan is being processed; this plan specifies that the transmission network operators will for the first time be obliged to take account of non-binding 19

22 long-term forecasts for the downstream network level. The 2014 plan will also probably not specify any investment obligations of ONTRAS. Installation of power-to-gas and biogas network connections. The VNG Group is committed to using the existing network and storage facility infrastructure by renewable energies. Accordingly, the largest power-to-gas installation in Europe (Falkenhagen; Brandenburg) has been supplying hydrogen to the network of ONTRAS since June Two further facilities for connecting such installations to the network of ONTRAS are currently being installed, and are expected to be put into service in 2014 and 2015 respectively. 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, it also holds a stake in an additional 18 European transmission operators as well as PRISMA European 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, the commercial director of ONTRAS has been the chair of the newly established Vereinigung der Fernleitungsnetzbetreiber Gas e. V. since The aim of this association is to pool and coordinate joint activities, such as the preparation of the annual network development plan, coordination of the work in the Association of European Transmission Network Operators (Verband europäischer Fernleitungsnetzbetreiber; ENTSOG) as well as representation of the members with regard to politicians, the media and the public. period 2013 to 2017; the corresponding notice is not expected to be received before the first half of ONTRAS and the competition. ONTRAS continues to take advantage of the opportunities offered by the transport market, and in particular is reviewing the possibilities of rendering non-regulated services. In competition with other transport companies, ONTRAS offers its customers a wide range of flexible and inexpensive products and services. The company has also identified opportunities in the development and further development of national and international cooperations with other network opera tors. 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 guarantee supplies to customers. Technical safety and the availability of the gas transmission network and the corresponding installations were guaranteed at all times throughout All damage to the installations caused by the flooding in various regions of central Germany in May and June 2013 has been remedied. Additional investments foreseeable. As a network operator, ONTRAS is obliged, upon receiving an application from a potential connectee, to give priority to connecting installations for processing biogas to the network and to bear at least 75 % of the network connection costs. The increasing number of connectees is resulting in considerable additional investments, which however, will be recognised within the framework of the charge regulation process. There might also be investment requirement within the framework of the network development plan. b) Opportunities and risks ONTRAS subject to regulation. The economic development in the gas transport business area very much depends on the extent of the regulated charges. ONTRAS will probably also receive certification of 100 % efficiency for defining the revenue cap for the regulatory E. Annual financial statements of VNG AG and consolidated financial statements of the VNG Group Long-standing sales partnerships with customers and a high level of staff satisfaction are major guarantees for the financial success of the VNG Group, and create stability in times of major challenges. This is the rea- 20

23 Management Report Annual Report 2013 son why the needs of customers, business partners and employees are extremely important. In addition to these non-financial indicators, the VNG Group and the Group s business areas are managed on the basis of key financials (EBIT; earnings after tax) as well as further financials such as gearing and the cash flow indicator Funds From Operations (FFO). Unlike the cash flow from operating activities in accordance with the German Accounting Standard DRS 2 (Deutscher Rechnungslegungs Standard), the FFO does not take account of the business-specific and reporting-date-related volatility of working capital. The purpose of this parameter-based management is to secure a strong credit rating for the VNG Group. The individual parameters are as follows: VNG Group VNG AG EBIT incl. tax refund million Earnings after tax million Funds From Operations* million Cash flow from operating activities million Financial liabilities** million Equity ratio % * 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 In 2013, the VNG Group held up well in a market climate which continues to be difficult with EBIT 2) of 182 million (2012: 187 million). This is due mainly to the positive contribution to earnings made by the gas transport and gas trading business areas. The significant diversification of gas procurement by way of long-term contracts with conditions adjusted to the market as well as via the trading markets has further improved the competitive position of trading. The increase in gas sendout to approximately 362 billion kwh was the main reason behind the increase in revenues of the VNG Group which have now risen to approximately 11 billion. Whereas margins continue to be under pressure and whereas the costs incurred for flexibility and structuring are not adequately recognised, the success attributable to the commercial adjustment of long-term contracts with suppliers again had a positive impact on EBIT last year. Gas transport made a higher contribution to consolidated net income than was the case last year. On the other hand, in gas storage, risk provisioning recognised in relation to storage assets as a result of the difficult market situation had a negative impact on earnings. In addition, business-specific costs incurred in connection with the upstream activities also reduced the EBIT of the Group; however, approximately 78 % of the activities are financed by the Norwegian state (income from tax refunds). 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. 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 improved compared with last year because the interest costs of financial liabilities in particular have declined as a result of a lower average borrowing requirement in conjunction with generally low financing costs. 2) inclusive tax refund 21

24 In addition to tax income from a tax refund, which is recognised in EBIT, current tax expenses as well as expenses resulting from the reversal of deferred taxes particularly as a result of the use of tax loss carry-forwards have had an impact on the tax result. Taking account of the negative net interest income and also the tax result, the VNG Group has reported net income of approximately 89 million (2012: 103 million); this figure is lower than the previous year forecast mainly as a result of the risk provisioning recognised in the gas storage segment. EBIT of VNG AG is stated as approximately 176 million, and is slightly lower than the corresponding figure reported for the Group; however, it is higher than the previous year EBIT of 162 million reported for VNG AG. The earnings after tax of VNG AG (approximately 174 million compared with 132 million in the previous year) are considerably higher than the corresponding figure reported for the VNG Group, because the costs of deferred taxes in particular have not influenced the result. Tax reimbursements attributable to other periods have also had a positive impact on the result of VNG AG compared with the previous year and also compared with the previous year forecast. 2. Financial situation The FFO of the VNG Group has declined due to a lower cash-effective result and higher exploration payments. In addition, changes in working capital related to reference date factors have contributed to a downturn in the cash flow from operating activities. As was the case last year, the cash outflows of VNG AG from investing activities ( 129 million; 2012: approximately 91 million) mainly relate to investments in the network, storage and exploration assets as well as loan payments to companies with which the company is connected by a participating interest. In connection with financing activities, the VNG Group mainly raised new financial obligations of approximately 72 million due to external financing partners. In 2013, a dividend of 35 million for 2012 was paid to the shareholders. On the other hand, financial obligations of approximately 286 million were repaid in the previous year as a result of a higher cash flow from operating activities. The FFO of VNG AG has developed in line with the corresponding figure at the VNG Group. Distributions of previous year results of subsidiaries, in particular ONTRAS and VGS, have had a positive impact on the cash flow from operating activities. On the other hand, the process VNG Group VNG AG Cash and cash equivalents at the beginning of year million Cash flow from operating activities million Thereof funds from operations (FFO) million Thereof other payments from operating activities million Cash flow from investing activities million Cash flow from financing activities million Changes result from exchange rates and consolidated group million Cash and cash equivalents at end of year million

25 Management Report Annual Report 2013 of spinning off network and storage business had a negative impact on the cash flow from operating activities of VNG AG in the previous year. The cash outflows of VNG AG for investments were approximately 69 million higher compared with the corresponding previous year period, and mainly related to equity increases at subsidiaries as well as the acquisition of the goldgas Group. In connection with financing activities, VNG AG raised new financial liabilities of approximately 89 million from external financing partners. On the other hand, the cash pool liabilities due to subsidiaries declined by approximately 62 million. Taking account of the dividend payment of 35 million, the outflow of cash from financing activities amounted to approximately 8 million. The companies in the VNG Group were solvent at all times. As of the reporting date, committed credit lines of almost 1 billion had not been drawn down. 3. Assets and liabilities The balance sheet structure of VNG AG and the VNG Group changed as follows compared with 2012: Compared with the previous year, the balance sheet total of the VNG Group has declined by approximately 88 million ( 2.9 %). The percentage of fixed assets is slightly higher than the corresponding previous year figure. Higher levels of investments in network, storage and exploration assets have been offset particularly by higher levels of depreciation. Within current assets, inventories have increased as a result of a higher storage volume. This has been opposed by the decline in the receivables of the trading companies, so that on balance current assets have increased by only one percentage point. On the other hand, the deferred tax assets have declined considerably compared with the previous year. Compared with 2012, the equity ratio of the VNG Group has improved to the current level of 20 %. The balance sheet total of VNG AG has declined by million compared with the previous year ( 5.0 %). The percentage of fixed assets has increased particularly as a result of capital increases carried out at subsidiaries. Compared with the VNG Group, the percentage of current assets has declined. Compared with the previous year, the equity ratio has improved by seven percentage points to the current figure of 27 %. VNG Group VNG AG Assets Intangible assets and property, plant and equipment % Financial assets % Inventories % Receivables and other assets % Other assets % % Equity and liabilities Equity % Liabilities % %

26 F. Group-wide management of opportunities and risks Risk diversification by means of strategic positioning. With its activities, the VNG Group has established a position along the entire value chain relating to natural gas. The purpose of this strategic positioning is to promote risk diversification, and also enables the VNG Group to take advantage of the opportunities within a dynamic market environment. The VNG 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). Extensive reporting. For ensuring that there is a permanent balance between opportunities and risks, the VNG Group has an extensive risk management system in which all subsidiaries and business areas are integrated. The principles of group risk management are implemented in the individual companies 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 monitoring 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 opportunity/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 permanently monitored. In the case of major participating interests, the VNG Group has introduced instruments and procedures of functional management which enable the VNG Group to improve its focus on its objectives and also which enable opportunities 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. No issues relevant for compliance purposes. 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. Last year, there were no issues which were relevant for compliance purposes. Integrated management system certified. VNG AG also has a certified integrated management system with the elements of quality, environmental and information security. Compliance with international information security standards was again confirmed for VNG AG in 2013 by TÜV NORD CERT GmbH. This year s audit focused on the organisational implementation of the third single energy market package carried out last year within trading and also, for the first time, the processes in trading logistics. Systematic financial risk management. The financial risk structure of the VNG Group is virtually unchanged compared with last year. The VNG Group is exposed particularly to risks arising from changes in raw material prices, exchange rates and interest rates as well as credit risks. The fundamentally conservative approach of the company is reflected in its systematic financial risk management 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. 24

27 Management Report Annual Report 2013 Commodity futures are used for minimising price risks arising from gas purchasing and sales contracts. Currency exposures are mainly concentrated at VNG AG, and are completely hedged. Contracts with Group companies outside the Euro zone 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 partners. The peak financing requirement established in rolling multiple-year liquidity planning is also covered in risk scenarios. Increase in number of business partners reflected in credit risk management. The main credit risks are attributable to the continued increase in the number of gas supply and trading agreements with national and international business partners. Credit risks also arise from financial instruments agreed for the purpose of hedging currency, raw material price and interest rate risk positions. 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 management on the basis of all available information and using 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 is a factor of success for the overhaul of German energy policy. Natural gas is the most flexible energy medium, and thus provides major potential for the electricity, heat and mobility markets. The VNG Group is convinced that natural gas will continue to be a factor of stability in the German and European energy mix. Sustainable, climate-friendly, future-proofed and economic energy supply is not possible without natural gas. This concept is also recognised in the coalition agreement of the new German government. Concentration on core business. The VNG Group will therefore continue to deploy its business model along the entire natural gas value creation chain, and will expand its core business areas, thereby ensuring that they are profitable and sustainable. However, The process of establishing self-sustaining E&P business will initially require further financial resources in the course of the next few years. Gas trading will continue to face the challenges posed by the fiercely competitive environment and also the requirements arising from increasing regulation. The storage market will also continue to be challenging. However, in the opinion of the VNG Group, it will recover in the medium to long term and, in the same way as regulated transport activities, will retain its strong strategic significance in the long run. Preferred partner for natural gas in Europe. As natural gas specialists, the motivated employees of the VNG Group will take advantage of the opportunities arising on the energy market. The aim is to further strengthen the position of the VNG Group in Europe as a preferred partner for natural gas. A new and uniform image of the VNG Group will support this objective, and take account of the further development of core business. Values such as partnership, transparency, responsibility and entrepreneurship shape the forward-looking and sustainable actions of individual employees. Continuation of the positive development in earnings. The VNG Group does not expect to see any substantial improvement in the market climate in the medium term. The considerable efforts designed to take advantage of 25

28 opportunities on the market and for further improving efficiency will therefore not be relaxed in any way. The ongoing diversification of gas procurement subject to terms adjusted to reflect current market conditions, optimum management of the trading portfolio, the range of customer-specific products and services as well as the technical and economic reliability of the network and storage infrastructure will continue to assure the market success of the Group. The VNG Group has created the conditions necessary to enable it to continue the positive development in results in future in a challenging and dynamic market environment. In this context, the VNG Group aims to achieve a slight improvement in earnings for the 2014 financial year and VNG AG aims to achieve a result roughly in line with the corresponding previous year figure as well as an associated slight increase in the equity ratio. It is expected that an equivalent development will be reported for the FFO and the cash flow from operating activities. The ongoing investment activities, particularly in the E&P and transport fields, will have an impact on the extent of financial liabilities. There have been no major events after the reporting date. 26

29 Management Report Annual Report

30 Balance Sheet of vng AG as at December 31, 2013 Assets A. Fixed assets Notes Dec. 31, 2013 Dec. 31, 2012 I. Intangible assets 11,210 8,887 II. Property, plant and equipment 4,242 5,247 III. Financial assets 1,012, ,091 B. Current assets 1,027, ,225 I. Inventories 1 484, ,990 II. Receivables and other assets 2 1,070,230 1,342,401 III. Cash and cash equivalents 3,934 3,147 1,558,734 1,774,538 C. Prepaid expenses 9,861 11,378 2,596,254 2,733,141 Equity and Liabilities A. Equity Notes Dec. 31, 2013 Dec. 31, 2012 I. Subscribed capital 3 328, ,000 II. Retained earnings 4 193,151 96,147 III. Balance sheet profit 173, , , ,151 B. Provisions 5 107, ,398 C. Liabilities 6 1,788,224 1,978,106 D. Deferred income 5, ,596,254 2,733,141 28

31 Balance Sheet Annual Report 2013 Consolidated Balance Sheet of vng group as at December 31, 2013 Assets A. Fixed assets Dec. 31, 2013 Dec. 31, 2012 I. Intangible assets 45,930 28,601 II. Property, plant and equipment 641, ,989 III. Financial assets 279, ,106 B. Current assets 966, ,696 I. Inventories 541, ,529 II. Receivables and other assets 1,259,506 1,339,198 III. Cash and cash equivalents 27,987 24,032 C. Special loss item from provisions formed pursuant to Article 17 (4) DMBilG (Act on the Preparation of Deutschmark Financial Statements) 1,829,182 1,853,759 2,594 2,769 D. Prepaid expenses 12,440 13,148 E. Deferred tax assets 119, ,763 F. Surplus resulting from asset offsetting and capitalised ,930,789 3,018,453 Equity and Liabilities A. Equity Dec. 31, 2013 Dec. 31, 2012 I. Subscribed capital 328, ,000 II. Retained earnings 166,292 95,583 III. Profit participation capital IV. Equity difference from currency conversion 5,751 5,560 V. Consolidated balance sheet profit 89, ,602 VI. Adjustment item for share of other shareholders , ,747 B. Special items 4,687 5,812 C. Provisions 406, ,160 D. Liabilities 1,909,772 1,970,386 E. Deferred income 6, F. Deferred tax liabilities 13,334 16,435 2,930,789 3,018,453 29

32 Income Statement of vng ag for the Period from January 1 to December 31, 2013 Notes Jan. 1 to Dec. 31, 2013 Jan. 1 to Dec. 31, Sales 7 8,761,271 7,810, Other operating income 8 196, ,967 8,957,787 7,912, Cost of materials 9 8,858,502 7,843, Personnel expenses 10 38,133 37, Depreciation and amortisation expense 4,663 3, Other operating expenses 11 59,275 83, Financial result , , Profit on ordinary activities 170, , Extraordinary expenses 13 2, Extraordinary result 2, Taxes on income (income; previous year: expense) 14 6,101 17, Other taxes Net income for the year = balance sheet profit 173, ,004 30

33 Income Statement Annual Report 2013 Consolidated Income Statement of vng group for the Period from January 1 to December 31, 2013 Jan. 1 to Dec. 31, 2013 Jan. 1 to Dec. 31, Sales 10,987,055 9,891, Changes in work in progress Work performed by the company and capitalised 3,646 4, Other operating income 250, ,832 11,241,540 10,059, Cost of materials 10,775,692 9,612, Personnel expenses 114, , Depreciation and amortisation expense 139,622 69, Other operating expenses 132, , Financial result 1,554 9, Profit on ordinary activities 77, , Extraordinary result 2, Taxes on income (income; previous year: expense) 16,432 2, Other taxes 1,523 1, Consolidated net income for the year 89, , Profit or loss attributable to other shareholders Consolidated balance sheet profit 89, ,602 31

34 VNG Verbundnetz Gas Aktiengesellschaft, Leipzig Notes to the Financial Statements 2013 General notes The annual financial statements of VNG Verbundnetz Gas Aktiengesellschaft, Leipzig (VNG), for the 2013 financial year have been drawn up in accordance with all the relevant 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, 2013, 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 The estimates concerned 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 these notes. 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 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 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 (EGHGB) to continue the previous valuations and to apply declining-balance depreciation. If straight-line depreciation had been applied in 2013, 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 with a value above 150 but not exceeding 1,000. This collective item is written off 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 depreciation no longer applies. 32

35 Notes Annual Report 2013 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 accordance 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 in the amount which will probably be required on the basis of a prudent 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 accordance 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 by 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 % p. a. (or 0 % for employees under semi-retirement arrangements) and pension increases of 1.75 % p. a. Pension obligations were discounted in accordance with Article 253 (2) Sentence 2 HGB at the average market interest rate for the assumed remaining term of 15 years (4.90 % 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 4.90 % p. a. and the Richttafeln 2005 G (actuarial tables) of Prof. Dr Klaus Heubeck. Semi-retirement provisions 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 % have been assumed for determining the semiretirement 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. Liabilities Liabilities are stated at the amounts repayable. 33

36 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 applicable, 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 applicable, 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) Sentence 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 VNG 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 % (15.8 % for corporation tax and 15.2 % 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 %. 34

37 Notes Annual Report 2013 Notes to the balance sheet Fixed assets Fixed assets and changes in the fixed assets shown in the balance sheet are detailed in the statement of changes in fixed assets (appendix to the notes). Current assets (1) Inventories Dec. 31, 2013 Dec. 31, 2012 Raw materials, consumables and supplies Merchandise (especially natural gas inventories in storage facilities) 484, , , ,990 The application of the Lifo method resulted in a difference in the sense of Article 284 (2) No. 4 HGB of 28,971 as at December 31, 2013 (2012: 73,439). Depreciation in accordance with Article 253 (4) HGB was recognised in the amount of 3,785 (2012: 18,048). (2) Receivables and other assets Dec. 31, 2013 Dec. 31, 2012 Trade receivables 734, ,767 Accounts receivable from affiliated companies 235, ,268 Accounts receivable from companies with which the company is connected by a participating interest 42,133 50,889 Other assets 58,648 61,477 1,070,230 1,342,401 Accounts receivable from affiliated companies include accounts receivable in connection with profit transfer totaling 167,683 (December 31, 2012: 228,275), trade receivables totaling 65,785 (December 31, 2012: 52,705), turnover tax totaling 983 (December 31, 2012: 3,288) and liquidity management totaling 739 (December 31, 2012: 0). Trade receivables from companies with which VNG is connected by a participating interest amounted to 42,133 (December 31, 2012: 50,889). All receivables and other assets had a remaining term of up to one year. 35

38 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 or at the level of the affiliated companies included in the Group for tax purposes. Deferred tax assets were mainly the result of losses carried forward 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 account from provisioning pursuant to Article 17 (4) DMBilG (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, 2013 Dec. 31, 2012 Statutory reserve pursuant to Article 150 (2) AktG 32,800 32,800 Other retained earnings formed pursuant to Article 272 (3) HGB 160,351 63, ,151 96,147 Pursuant to a resolution of the ordinary general meeting of April 9, 2013, a figure of 97,004 was paid into the other retained earnings out of the cumulative profit in accordance with Article 272 (3) HGB. Liabilities (5) Provisions Dec. 31, 2013 Dec. 31, 2012 Provisions for pensions and similar obligations 19,811 16,946 Provisions for taxes 32,108 35,912 Other provisions 55, , , ,398 36

39 Notes Annual Report 2013 The changeover of provisions for pensions in connection with the BilMoG on January 1, 2010 resulted in a difference of 3,750 compared with the old valuation. In 2013, the entire remaining difference ( 2,933) was paid into the pension provisions and recognised as an exceptional expense. In accordance with Article 28 (1) Sentence 2 of the Act Introducing the German Commercial Code, provisions for indirect pension obligations to be met by an assistance 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, 2013, was 2,130. Provisions for taxes concern corporation tax in the amount of 18,554 and trade tax in the amount of 13,554. The other provisions mainly concern obligations in connection with outstanding invoices, risks in connection with gas business, human resources and other uncertain obligations. (6) Liabilities Dec 31, 2013 Remaining term up to 1 year (prior year) Liabilities to banks 595,144 19,610 (30,087) Advance payments 9,386 9,386 (6,837) Trade payables 797, ,056 (994,224) Liabilities to affiliated companies 280, ,158 (321,366) Liabilities to companies with which the company is connected by a participating interest 9,085 9,085 (9,334) Other liabilities 97,395 16,462 (59,891) (thereof taxes) 13,499 13,499 (42,197) (thereof social security contributions) 8 8 (0) 1,788,224 1,131,757 (1,421,739) Remaining term more than 5 years (prior year) 31,000 (0) 0 (0) 0 (0) 0 (0) 0 (0) 76,186 (76,678) 0 (0) 0 (0) 107,186 (76,678) Dec 31, ,272 6, , ,366 9, ,073 42,197 1,978,106 0 Liabilities to affiliated companies concern investment transactions made by these companies as part of cash management in the amount of 240,881 (December 31, 2012: 301,218), tax liabilities in the amount of 23,604 (December 31, 2012: 14,543), trade payables in the amount of 15,330 (December 31, 2012: 3,024) as well as the absorption of losses in the amount of 343 (December 31, 2012: 2,581). 37

40 Liabilities to companies with which VNG is connected by a participating interest concern trade transactions ( 885; December 31, 2012: 1,134) and outstanding capital contributions not called up ( 8,200; December 31, 2012: 8,200). As was the case last year, borrower s note loans of 76,000 were disclosed under the other liabilities. There are also liabilities of 13,499 due to the Finanzamt (revenue authorities); of this figure, 7,311 legally arise only after the closing date. Contingencies Contingent liabilities to be reported pursuant to Article 251 HGB amount to 34,713. These include guarantees of 24,036 given by VNG for trading partners of affiliated companies. Furthermore, VNG has issued hard letters of comfort for one company in which VNG holds a participating interest ( 3,000) and two affiliated companies ( 4,000). The company also undertook to provide guarantees of 3,677 for two 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 for liabilities which had been entered into by VNG before the entry of the spin-offs into the commercial register as of March 1, Other financial obligations The other financial obligations pursuant to Article 285 No. 3a HGB amount to 350 million, including obligations of 300 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 2014 financial year. VNG has undertaken long-term purchase commitments with gas suppliers to cover gas demand. 38

41 Notes Annual Report 2013 Notes to the income statement (7) Sales 87 % of sales were realised in Germany, and 13 % were realised in other European countries. Sales were chiefly accounted for by income from the gas business. Sales realised on European wholesale markets were assigned to sales in Germany. They include income in the amount of 11,899 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 113,663 (2012: 52,453), resulting mainly from credit notes for previous years. (9) Cost of materials Cost of raw materials, consumables and supplies and of purchased merchandise 8,854,703 7,841,135 Cost of purchased services 3,799 2,721 8,858,502 7,843, The cost of material includes energy tax expenses ( 9,551; 2012: 13,757). The cost of materials also includes expenses of 6,991 mainly attributable to gas sourcing. (10) Personnel expenses Wages and salaries 33,024 32,040 Social security costs, pensions and assistance expenses 5,109 5,593 38,133 37, Personnel expenses include expenses incurred for pensions totaling 718 (2012: 1,136). (11) Other operating expenses Other operating expenses include expenses ( 71; 2012: 349) resulting from currency conversion. 39

42 (12) Financial result Income from participating interests (incl. income from affiliated companies 2,835; 2012: 3,643) 14,190 12,562 Income from profit transfer agreements (incl. income from affiliated companies 180,600; 2012: 228,275) 180, ,275 Income from loans carried as fixed assets (incl. income from affiliated companies 15,834; 2012: 16,082) 15,836 16,090 Interest receivable and similar income (of which receivable from affiliated companies 1,284; 2012: 905) 5,794 1,385 Amortisation of financial assets (incl. amortisation on interests in affiliated companies 16,029; 2012: 13,832) 16,029 20,484 Expenses from absorption of losses (incl. losses absorbed from affiliated companies 343; 2012: 2,581) 393 2,618 Interest payable and similar charges (incl. interest to affiliated companies 180; 2012: 339) 26,659 29, , , Interest payable includes an amount of 1,797 (2012: 4,086) with respect to interest on provisions. (13) Extraordinary expenses Extraordinary expenses of 2,933 (2012: 244) were the result of the treatment of the remaining difference from changing over the valuation of the pension provisions in connection with the German Financial Reporting Modernisation Act. (14) Taxes on income Taxes on income include tax income of 31,358 attributable to other periods. In the 2013 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 In connection with 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 derivative 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. 40

43 Notes Annual Report 2013 Derivative financial instruments are normally used for hedging underlying transactions in the case of payables and receivables 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 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 transaction 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, 2013 Face value Dec. 31, 2013 Positive fair value Dec. 31, 2013 Negative fair value Currency derivatives Currency futures 245,108 1,040 1,679 Interest rate derivatives Interest rate swaps 1,024, ,321 Commodity derivatives Commodity swaps 1,098,845 4,404 10,588 2,368,453 5,488 13,588 The fair value of derivative financial instruments depends on the development of the underlying market factors. Individual 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. Future exchange rates are determined from current 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 of the balance sheet date and accrued interest. Valuation units for hedging against foreign currency risks A loan receivable in the amount of NOK 608 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 72,476 were concluded with a term corresponding to the earliest repayment date of the loan (underlying) in The currency futures have a negative fair value of 44 as of the balance sheet date. A loan receivable in the amount of PLN 69 million as at the balance sheet date was 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 16,494; the negative fair value was 103. Furthermore, a loan receivable in the amount of DKK 101 million as at the balance sheet date was 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 13,567; the negative fair value was 2. 41

44 The contrary changes in the values of the loan receivable and the currency futures offset 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, PLN and DKK as of the due date are offset by payables in NOK, PLN and DKK respectively at a fixed NOK/Euro, PLN/Euro or DKK/Euro exchange rate. In addition, currency future contracts with a face value of 13,083 were concluded for hedging a loan payment planned for January 2014 with a face value of NOK 110 million and a term corresponding to the earliest possible repayment of this loan tranche. Positive fair values of 19 are offset by negative fair values of 18. To hedge currency risks connected with pending transactions in gas trading business, currency future contracts with a face amount of 129,488 were concluded with external partners. The terms of these contracts were in accordance with the expected due dates of the underlying transaction. As of the balance sheet date, the currency futures had a positive fair value of 1,021 and a negative fair value of 1,512. 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 financial liabilities in the amount of 74,500. The term of the loans concerned expires in In accordance with the amount of the loans, the swaps also have a face value of 74,500. 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 44 are opposed by negative fair values of 7 as of the balance sheet date. To hedge the risk of interest rate changes in connection with existing loans and loans which VNG firmly plans to take up in the future, interest rate swaps with a face value of 950,000 were concluded. As at the balance sheet date, these interest rate swaps had a negative fair value of 1,314. Valuation units for hedging against commodity price risks Commodity futures in the form of commodity swaps with a face value of 1,098,845 were concluded as microhedges to minimise price risks in connection with gas purchase and sales contracts. The agreed purchasing prices for quantities to be purchased in 2014 are fixed by means of commodity swaps with a face value of 898,415. Positive fair values of 3,603 are offset by negative fair values of 9,656. In addition, existing fixed price in gas delivery agreements have been hedged by means of commodity swaps with a face value of 200,430. These commodity swaps have terms until 2014 (face value: 45,502) and 2015 (face value: 154,928). Positive fair values of 801 are opposed by negative fair values of 932 as of the balance sheet date. 42

45 Notes Annual Report 2013 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 10,790. In addition, there is a cash pooling arrangement within the Group using normal market interest rates. In addition, in accordance with Article 6b (2) EnWG major transactions relate to technical and commercial services with VGS, totaling 3,024. Staff The average number of staff employed at VNG in 2013 was 393, consisting of 384 white-collar workers, six blue-collar workers and three assistants/student trainees. In addition, the company employed an average of 14 persons in the passive phase of semi-retirement and 18 vocational trainees. List of shareholdings In 2013, VNG acquired all of the shares in goldgas S.L. GmbH and goldgas GmbH. This was combined with the indirect acquisition of a further five companies of the goldgas Group. As a result of three acquisitions, VNG-Erdgascommerz GmbH (VNG-EC) increased its holding in ENERGIEUNION GmbH from % to 100 % last year. VNG-Beteiligungs GmbH was merged with VNG-EC as of October 31, ECG Erdgas-Consult GmbH has sold its shares in enerxess GmbH (50 %), and VNG-EC has sold its shares in Gas Service Freiberg GmbH (21.4 %). VNG holds, directly or indirectly, at least 20 % of the shares in the companies listed below (disclosure in accordance with Article 285 No. 11 HGB). The values stated for equity capital and net income or loss for the year are taken from the financial statements of the companies concerned, drawn up in accordance with the applicable national legislation. The values have been rounded. German affiliated companies Direct % Share Name and registered office of the company Equity capital Indirect % Net income or loss for the year BALANCE VNG Bioenergie GmbH, Leipzig 8,893, ) goldgas GmbH, Eschborn 999, , goldgas SL GmbH, Eschborn 12,818,548 5,937, ONTRAS Gastransport GmbH, Leipzig 10,000, ) VNG Gasspeicher GmbH, Leipzig 21,311, ) VNG-Erdgascommerz GmbH, Leipzig 167,058, ) VNG Vertriebs-GmbH Thüringen/Bayern, Erfurt 36,213 1,363 2) 43

46 Direct % Share Name and registered office of the company Equity capital Indirect % Net income or loss for the year CCM Communication-Center Mitteldeutschland GmbH, Leipzig 362, , ECG Erdgas-Consult GmbH, Leipzig 732, ) EnergieFinanz GmbH, Schwerin 769,004 6,263 2) GDMcom Gesellschaft für Dokumentation und Telekommunikation mbh, Leipzig 304, ) GEOMAGIC GmbH, Leipzig 1,538, , goldpower GmbH, Eschborn 349, , Leipziger Biogasgesellschaft mbh, Leipzig 870,603 29, MBG Mitteldeutsche Biogasgesellschaft mbh, Leipzig 3,134, , VNG-Erdgastankstellen GmbH, Leipzig 2,800, ) ENERGIEUNION GmbH, Schwerin 6,932, , BGA Bioenergie GmbH, Hof (Saale) 1,694, ,498 2) Foreign affiliated companies Direct % Share Name and registered office of the company Equity capital Indirect % Net income or loss for the year VNG Energie Czech s.r.o., Prague (Czech Republic) 1,927, , VNG Italia S.r.l., Bologna (Italy) 37,573,792 7,168,529 2) VNG Norge AS, Stavanger (Norway) 38,812,420 13,509, VNG Polska Sp. z o.o., Tarnowo Podgórne (Poland) 63,871,892 2,273, VNG France S.A.S., Paris (France) 845, ,183 2) VNG Slovakia, spol. s r.o., Bratislava (Slovakia) 9,177, ,751 2) VNG Austria GmbH, Gleisdorf (Austria) 132, ,815 2) G.EN. Gaz Energia Sp. z o.o., Tarnowo Podgórne (Poland) 47,065,268 2,055, GG goldgas Vertriebsgesellschaft mbh, Vienna (Austria) 30,480 4,520 2) goldgas GmbH, Vienna (Austria) 1,697, ,818 2) goldgas UK Ltd., London (England) 28,702 8, HANDEN Sp. z o.o., Warsaw (Poland) 1,926, , SPIGAS S.r.l., La Spezia (Italy) 17,562,132 1,942,976 4) VNG Danmark ApS, Copenhagen (Denmark) 8,115,810 4,437,236 2) 5) 2) 5) 2) 5) 2) 5) 2) 5) 10) 2) 5) 2) 5) 44

47 Notes Annual Report 2013 German participating interests Direct % Share Name and registered office of the company Equity capital Indirect % Net income or loss for the year Heizkraftwerk Halle-Trotha GmbH, Halle (Saale) 763,015 9,575,235 2) GasLINE Telekommunikationsnetzgesellschaft deutscher Gasversorgungsunternehmen mbh & Co. Kommanditgesellschaft, Straelen 41,000,000 47,965,701 2) 7) GasLINE Telekommunikationsnetz-Geschäftsführungsgesellschaft deutscher Gasversorgungsunternehmen mbh, Straelen 58,492 2,215 2) Erdgasspeicher Peissen GmbH, Halle (Saale) 30,274,688 2,997,588 2) Erdgasversorgungsgesellschaft Thüringen-Sachsen mbh (EVG), Erfurt 68,147,601 31,460,107 2) InterTransGas GmbH i. L., Leipzig 673,604 1,010,031 2) lictor GmbH, Leipzig 99,827 15,325 2) Robotron ECG solutions GmbH, Dresden 230, ,477 2) PROMETHEUS - Gesellschaft für Erdgasanwendungsanlagen mbh, Leipzig 95,868 6,391 Untergrundspeicher- und Geotechnologie-Systeme Gesellschaft mit beschränkter Haftung, Mittenwalde 8,546,717 2,961,705 2) 6) 2) 6) caplog-x GmbH, Leipzig 554, ,144 2) store-x Storage Capacity Exchange GmbH, Leipzig 856, ,610 2) EMB Energie Mark Brandenburg GmbH, Potsdam 120,034,000 25,279,000 2) MITGAS Mitteldeutsche Gasversorgung GmbH, Halle (Saale) 146,488,000 52,702,000 2) Stadt- und Überlandwerke GmbH Luckau-Lübbenau, Luckau 22,030,132 2,455,878 2) Foreign participating interests Direct % Share Name and registered office of the company Equity capital Indirect % Net income or loss for the year FlameEnergy Trading GmbH in Liqu., Vienna (Austria) 3,687, ,150 2) BLUEFIN S.r.l., Bologna (Italy) 24,872,530 76,480 3) Nitrianska teplárenská spoločnosť, a.s., Nitra (Slovakia) 12,354, ,046 2) Prievidzské tepelné hospodárstvo, a.s., Prievidza (Slovakia) 11,154, ,296 2) NYSAGAZ Sp. z o.o., Wrocław (Poland) 2,081,687 36,388 2) 5) 1) There is a profit and loss transfer agreement with VNG. 2) Figures from the annual fin. statem. as of Dec. 31, ) Figures from the annual fin. statem. as of June 30, ) Figures from the annual fin. statem. as of March 31, ) Limited liability capital, fully outstanding and not called up. 8) Profit and loss transfer agreement with VNG-Erdgascommerz GmbH. 9) Profit and loss transfer agreement with ONTRAS Gastransport GmbH. 10) Including 36,774 outstanding subscribed capital not called up. 5) Converted using the middle exchange rate on Dec. 31, ) Subscribed capital partially outstanding and not called-up, figure refers to paid-up capital. 45

48 Members of the Executive Board Dr Karsten Heuchert chairman of the Executive Board Prof. Dr Klaus-Dieter Barbknecht Board member Trading Hans-Joachim Polk (since December 1, 2013) Board member Infrastructure/Technical Affairs (since January 1, 2014) Board member (December 1 to 31, 2013) Bodo Rodestock (since October 1, 2013) Board member, Commercial/Human Resources Uwe Barthel (until December 31, 2013) Board member Infrastructure/Technical Affairs Michael Ludwig (until October 7, 2013) Board member Gas Procurement Members of the Supervisory Board Dr Rainer Seele Holger Hanson Peter Leisebein Günther Boekhoff Chairman Chairman of the Executive Board of Wintershall Holding GmbH 1 st Vice-Chairman Chairman of the Board of Management of Neubrandenburger Stadtwerke GmbH 2 nd Vice-Chairman Chairman of the General Works Council of VNG Verbundnetz Gas Aktiengesellschaft Honorary Mayor of the City of Leer Joachim Ebert Telecommunications Systems Engineer, GDMcom Gesellschaft für Dokumentation und Telekommunikation mbh Hans-Joachim Gornig Johannes Hegewald Dr Torsten Köhne Vyacheslav V. Krupenkov Christina Ledong Detlef Nonnen Josef Rahmen Andreas Reichelt Dr Reinhard Richter Dr Heiko Sanders Dr Benno Seebach Former Managing Director, GAZPROM Germania GmbH Foreman in the compressor station of the Bad Lauchstädt underground storage facility in VNG Gasspeicher GmbH Member of the Executive Board of EWE Aktiengesellschaft and Chairman of the Executive Board of swb AG Managing Director of GAZPROM Germania GmbH Deputy Chair of the General Works Council of VNG Verbundnetz Gas Aktiengesellschaft Commercial Director of eins energie in sachsen GmbH & Co. KG Chairman of the Board of Management of LVV Leipziger Versorgungs- und Verkehrsgesellschaft mbh Pipeline System Technology Officer at ONTRAS Gastransport GmbH Managing Director of DREWAG Stadtwerke Dresden GmbH Member of the Management Board of EWE Aktiengesellschaft Head of Strategic Network Planning at ONTRAS Gastransport GmbH 46

49 Notes Annual Report 2013 Petra Steuer Dr Ties Tiessen Björn Thümler Matthias Warnig Scheduling employee at ONTRAS Gastransport GmbH Member of the Executive Board of Wintershall Holding GmbH Member of the regional parliament of Lower Saxony Managing Director of Nord Stream AG Prof. Dr Mathias Wolkewitz Head of Legal, Tax and Insurance of Wintershall Holding GmbH Emoluments of board members The total emoluments of the Executive Board of VNG Verbundnetz Gas Aktiengesellschaft, Leipzig, for the 2013 financial year amounted to 2,051, (2012: 1,739,962.47). The emoluments of retired Executive Board members and their surviving dependants in the 2013 financial year amounted to 1,554, (2012: 656,410.39). Provisions for ongoing pensions for former Executive Board members and their surviving dependants amount to 10,258, (2012: 8,619,206.20). As of the reporting date, a difference related to the exercising of the option in accordance with Article 67 (1) EGHGB no longer existed (2012: 821,204.80). A provision of 138, (2012: 115,000.00) was formed in the 2013 financial year for the emoluments of the Supervisory Board. Participation 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 % in VNG Verbundnetz Gas Aktiengesellschaft, Leipzig. Consolidated financial statements VNG Verbundnetz Gas Aktiengesellschaft, Leipzig, has prepared consolidated financial statements for the year to December 31, In accordance with Article 285 No. 17 HGB, the total fees paid to the auditor are not stated as the information is given in consolidated financial statements in which the company is included. Leipzig, January 16, 2014 VNG Verbundnetz Gas Aktiengesellschaft The Executive Board Dr Heuchert Prof. Dr Barbknecht Polk Rodestock 47

50 VNG Verbundnetz Gas Aktiengesellschaft, Leipzig Breakdown and Development of Fixed Assets Jan. 1, 2013 Procurement/production costs Additions Disposals Transfers Dec. 31, 2013 I. Intangible assets 1. Purchased concessions, industrial property and similar rights and assets, and licenses in such rights and assets 35,203 2, ,446 39, Advance payments made 3,021 3, ,169 3,999 38,224 5, ,548 II. Property, plant and equipment 1. Land, land rights and buildings including buildings on third-party land 2, , Technical plant and machinery Other equipment, fixtures, furniture 9, ,041 and office equipment 4. Advance payments made and assets under construction 13, ,938 III. Financial assets 1. Shares in affiliated companies 612, , ,797 59, , Loans to affiliated companies 460, ,617 63,996 59, , Participating interests 25, , Other loans ,099, , , ,109,356 1,150, , , ,165,842 48

51 Breakdown and Development of Fixed Assets Annual Report 2013 Depreciation/amortisation Carrying amounts Jan. 1, 2013 Additions Disposals Dec. 31, 2013 Dec. 31, 2013 Dec. 31, ,337 3, ,338 7,211 5, ,999 3,021 29,337 3, ,338 11,210 8, ,488 1, ,977 1, ,689 2,352 2, ,896 1, ,696 4,242 5, ,009 16,029 85,217 80, , , , ,421 16, ,041 9,714 9, ,337 16,029 85,217 97,149 1,012, , ,570 20,692 86, ,183 1,027, ,225 49

52 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, 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 statements 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 [ Handelsgesetzbuch : 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

53 Auditor s Report Annual Report 2013 Our audit of the annual financial statements, together with the bookkeeping system, and of the combined management 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 statements have to be prepared for the activities in accordance with Article 6b (3) EnWG, has not led to any reservations. Leipzig, January 17, 2014 PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft (sgd. Rainer Altvater) Wirtschaftsprüfer (German Public Auditor) (sgd. ppa. Werner Horn) Wirtschaftsprüfer (German Public Auditor) 51

54 Business areas of VNG Group Exploration & Production Gas Trading & Service Gas Transport Gas Storage

55 Our vision: We are the preferred partner for natural gas in Europe. This is what we work for with competence and experience, with energy and creativity.

56 Exploration & production With the EXPLORATION and PRODUCTION of natural gas we play an active role in SAFEGUARD ING THE FUTURE. In so doing, we expand the economic BASIS for our business activities in the long term and enhance the SECURITY OF SUPPLY for our customers.

57

58 Gas trading & Service Our natural gas comes from international sources and high-performance business partners. Through innovative products and services we provide our customers with a high degree of security and flexibility.

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60 Gas transport With a length of more than 7,200 kilometres of high-pressure pipelines we ensure around the clock and jointly with our cooperation part ners that the right quantity of natural gas is supplied to the right location at the right time.

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62 Frankfurt/O. Gubin Lasów itz G T4 AS AT CZ NE PRAGUE Gas storage With a capacity of 2.6 billion m3, an excellent in tegration in the existing infrastructure and Lanžhot numerous storage products, we enable our customers to respond quickly to the dynamism of the energy market.

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64 IMPRINT Published by VNG Verbundnetz Gas Aktiengesellschaft Braunstrasse Leipzig Germany Corporate communication Bernhard Kaltefleiter ContaCt Phone Fax [email protected] Editorial deadline January 17, 2014 Design, layout and production Militzer & Kollegen GmbH Reproduction and printing sepio GmbH, Leipzig photographs Dirk Brzoska (p. 1) Michael Handelmann (p. 5) VNG AG (p. 8)

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66 VNG Verbundnetz Gas Aktiengesellschaft Braunstraße Leipzig Germany Postfach Leipzig Germany Phone Fax [email protected]