VNG remains on track

VNG Group able to continue positive result from previous year / VNG AG reports its highest profit to date / Further increase in natural gas sendout

Leipzig, (PresseBox) - "The VNG Group has remained on track and was able to continue the positive results of the previous year," said Dr. Karsten Heuchert, Chairman of the Executive Board of VNG - Verbundnetz Gas Aktiengesellschaft (VNG) at the Annual Press Conference for the 2013 financial year. With a net profit of €174 million (previous year: €132 million), VNG AG recorded its highest profit figure to date. The net profit of the VNG Group for the year, including all the consolidated companies, was €89 million (previous year: €103 million). This figure was mainly the result of profit in the business areas of gas transport and gas trading. The contribution of trading to profit was further increased in 2013. "In this area, the adjustment of long-term contracts also played a role," Heuchert added. "But we must not slacken the pace. The market environment will not become easier in the medium term," Heuchert also emphasised. Economic and political conditions still pose considerable challenges to all companies in the natural gas industry. In addition, natural gas trading continues to be characterised by tough competition.

VNG Group expands trading business area

The VNG Group has consistently expanded its trading business area over the past few years. On the one hand, the trading activities of the VNG Group offer producers market access for large quantities of gas. On the other hand, these activities offer customers tailor-made products and provide them with access to wholesale markets. In classical natural gas sales, the approach of the VNG Group is consistently based on customer nearness.With a total of 10 sales offices throughout Germany, the Group has laid the foundations for close cooperation in a spirit of partnership. In other European countries, the trading subsidiaries of the VNG Group are also represented locally. "We will continue to orient ourselves towards the requirements of the market. This will also include the development of new sales channels, for example in the residential customer market," Heuchert remarked. The acquisition of the goldgas group in 2013 will open up additional sales potential in the commercial and residential sectors. "This development will by no means jeopardise our strong sales partnerships with resellers and direct customers but will supplement them," he underlined.

A broad base in purchasing and sendout - increase in sales

The VNG Group, including its foreign sales subsidiaries, recorded sendout of about 362 billion kWh in 2013 (previous year: about 324 billion kWh), representing a rise of 12 percent. VNG AG accounted for the largest part of the Group figure, with sendout also rising significantly to almost 310 billion kWh (previous year: 274 billion kWh). This corresponded to an increase of about 13 percent. The increase in sendout compared with the previous year was mainly the result of growing trading on European spot and futures markets.

The sales of the VNG Group rose, mainly as a result of higher gas sendout, to almost €11 billion (previous year: €9.9 billion). VNG AG also increased its sales, to about €8.8 billion (previous year: €7.8 billion).

On the purchasing side, the VNG Group remains committed to a blend of different purchasing sources. The Group purchases natural gas on European wholesale markets and via long-term delivery contracts. Last year, the Group was able to agree on significant adjustments to long-term purchase contracts. The VNG Group achieved further optimization through the termination of certain contracts.

Natural gas purchases by the VNG Group in 2013 reached about 365 billion kWh (previous year: about 319 billion kWh), about 14 percent above the figure for the previous year. On the basis of long-term contracts, the VNG Group took natural gas from Russia (about 65 billion kWh), Norway (about 43 billion kWh) and from German producers (about 11 billion kWh). The quantity of natural gas procured through trading rose to about 233 billion kWh last year. VNG AG accounted for the largest part of the gas purchased, with about 312 billion kWh (previous year: about 269 billion kWh).

Exploration & production - investment in the future

The investments of the VNG Group in natural gas production within the Group are also to further improve flexibility on the procurement side. Activities in Norway are part of the growth strategy and are intended to further safeguard the independence of the VNG Group. "For us, this is definitely an investment in the future. We intend to expand our production prudently and to develop exploration and production business in a profitable way. Our top priority is to achieve stable contributions to the profit of the VNG Group and to develop this business area to the point where it is self-supporting," Heuchert explained. Six new licences were added last year and six more in January this year. Together with its subsidiary VNG Danmark, VNG Norge now has 38 Norwegian and two Danish licences - including 13 licences as operator - and three participations in producing fields in Norway.

Key areas along the value stream form a firm foundation

"Our strategy is to continue our focus on all stages of the natural gas value stream," Heuchert continued. He said that the exploration & production, gas trading, gas transport and gas storage business areas provided a secure foundation for the future and that they together ensured a very high level of security of supplies. The Group intended to grow along this value stream. Heuchert clearly stated that transport business was a key component of this structure, which the VNG Group would continue to retain.

Infrastructure makes a key contribution to security of supplies

With a transmission system network with a total length of more than 7,200 kilometres, the Independent transmission system operator ONTRAS makes a key contribution to the profit of the VNG Group and to its business success.

The situation in storage business is extremely challenging. Storage facilities are currently in competition with other flexibility mechanisms. Heuchert said that the competitive pressure was very high as a result of the excess supply of import, production and storage capacities.

"Just how important storage facilities can be became especially evident last winter. Heating demand and therefore also natural gas demand were extremely high. In this situation, our storage facilities provided the ideal means of meeting growing demand for natural gas," Heuchert explained. VNG-Gasspeicher (VGS) currently has a working gas capacity of about 2.6 billion cubic metres. By 2025, a total of 12 storage caverns will also be commissioned stepby- step at the Katharina storage facility near Bernburg. In the final stage of completion, the gas storage capacity of this facility will be about 600 million cubic metres.

Natural gas is still far from reaching its full potential

In the opinion of the Chairman of the Executive Board, natural gas has not been given sufficient prominence in the implementation of the energy transition. "Unfortunately, natural gas often still lags far behind power in the perception of politicians and its considerable importance for the heating market is all too often neglected," Heuchert remarked. Natural gas can already contribute to carbon dioxide reduction in all three segments - power generation, heating and mobility. It is outstandingly well-suited for combination with renewable energies. He commented that this German government was also committed to giving equal emphasis to the energy policy goals of secure supplies, economics and environmental compatibility. The question would be how these goals were to be achieved by specific measures. Heuchert is convinced: "Natural gas will be essential for the reliable, socially compatible achievement of these goals."

Particularly in the heating market, efficient natural gas systems can help to save large quantities of carbon dioxide emissions in a cost-effective way. The modernisation rate for heating systems is only about 3 percent per year. If this rehabilitation bottleneck were eliminated, carbon dioxide emissions could be reduced by up to 45 million tonnes. This would represent half of the savings target set by the German government for the heating market. "The general public would probably have no reservations. On the contrary, more than 50 percent of consumers use natural gas for heating. Natural gas is already playing a key role in the energy transition for consumers. Indeed, it is playing a greater role than is generally recognised by politicians," Heuchert emphasised.

Foundations laid for success

As natural gas specialists, we are working to anchor this fantastic energy more firmly on the market," Heuchert stated. He said that this was why the VNG Group was involved in various initiatives for the development and marketing of new technologies associated with natural gas.

"Our objective is to further strengthen the position of the VNG Group as the preferred partner for natural gas," Heuchert continued. He said that the Group was well positioned from the gas field through to the customer and had strengthened the foundations needed for continuing to pursue a successful course in the future in 2013. "But we must keep up our efforts," he warned.

For the 2014 financial year, the VNG Group aims for a slight improvement in profit and VNG AG is aiming for a profit at the same level as that recorded in 2013. Heuchert added: "We will do our best to ensure that the VNG Group continues to make a contribution to the regional value stream in the long term. We would like to thank our employees, who support us with their competence and experience, their energy and creativity. The VNG Group means passion for natural gas!"

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