Governance

Report of the Supervisory Board

As Supervisory Board, we supervise and give advice (both solicited and unsolicited) to the management of N.V. Nederlandse Gasunie, hereafter also referred to as Gasunie or the company, with regard to formulating and achieving the company’s objectives, strategy and policy. We act as the employer of the Executive Board.

Composition and organisation

With the addition of Mr Dirk Jan van den Berg to the Supervisory Board on 1 October 2014, we have returned to normal strength, with six Supervisory Board members. As of the same date, Mr Rinse de Jong was elected as Chairman, after having served as interim Chairman for about eighteen months. In our search for prospective new Board members, we made use of the profile drawn up earlier, and called in the support of an external consultant. The profile contains the required competencies, whose focus may, of course, shift from time to time. In view of the geopolitical aspects of the international gas industry, we are very pleased to have found Mr Dirk Jan van den Berg, who has extensive experience in the field of foreign affairs. The required competencies are now covered as follows:

Competency Ms Poots Ms Jonk Mr Vermeire Mr Schoeber Mr De Jong Mr Van den Berg
General management v v v v v v
Financial management v   v v v v
Socioeconomic management v v   v   v
Energy   v v v v v
Legislation v v v v v v
Technology     v v    
IT v       v  
Politics/Public Administration v   v v v v

During our self-assessment in December 2014, we concluded that two committees (i.e., the Audit Committee and the Remuneration, Selection & Appointments Committee) are sufficient for meeting our information requirements. We prefer to deal with those topics not covered by the immediate focus areas of these committees (e.g., larger investments and strategic developments) in our plenary meetings, with all Board members present. However, the composition of both committees has been adjusted with a view to the best practices of the Dutch Governance Code and a more balanced workload. As of 1 January 2015, the Audit Committee comprises Ms Jolanda Poots-Bijl (Chair) and Messrs Jean Vermeire and Willem Schoeber. As of the same date, the Remuneration, Selection & Appointments Committee comprises Ms Martika Jonk (Chair) and Messrs Dirk Jan van den Berg and Rinse de Jong. Mr Dirk Jan van den Berg has been elected Vice-Chairman of the Supervisory Board.

The self-assessment consisted of personal written questionnaires and a discussion of the summary of the responses. The assessment took into account the feedback provided by the members of the Executive Board and the Secretary. Based on the results, actions were formulated, some of which focus on a more effective way of working of the Supervisory Board itself. The main action point was to draw up an annual calendar of topics to ensure that all important topics are covered, an approach that is also used by the Audit Committee. The most important substantive topic is the extent to which we have insight into and wish to be involved in management development within Gasunie. The frequent introduction meetings with second- and third-line staff should still be complemented with annual discussions of performance, competencies and career opportunities. A second important substantive action point is the bi-annual discussion of IT-related topics with all Board members present. So far, these topics have been on the agenda of the Audit Committee. It is important in this context to discuss the progress of the replacement of the current systems that manage the grids, the security and age profiles of the systems, and the related hardware in general. The assessment has also made it clear that we need to have more informal consultations with the other Board members in order to better understand each other’s points of view and wishes, which would also make our meetings more effective.
All members of the Board are independent in the sense of the Dutch Corporate Governance Code.

Supervision

We supervise through frequent, intensive meetings with the management of Gasunie, both in plenary sessions and via the two committees. Management in this respect consists of the Executive Committee, i.e., the two members of the Executive Board, together with the General Directors of the Dutch (GTS) and German (Gasunie Deutschland) regulated activities, the General Director of Participations & Business Development, the Director of Legal Affairs, Regulation & Communication and the Director of Personnel & Organisation. This group de facto manages the company, led by the Executive Board, which makes it the relevant group for us to consult with. In this way, we have direct access to the statutory management, which we supervise formally, as well as to those operationally responsible for Gasunie’s main activities. Where useful and necessary, we also invite other managers to give presentations to us or to inform us in any other way on a wide range of topics. This not only provides more substantive insight into the topics discussed, but also gives us insight into the management levels below the Board, which helps us to have a good understanding of the quality and succession potential of the organisation.

As Supervisory Board, we held eight plenary meetings in 2014, supplemented by three conference calls. All Board members were present on all occasions. One of the meetings took place at the Zuidwending location (now: EnergyStock), where we were informed about the gas storage installations and received a guided tour, and where we specifically discussed the topic of safety. In 2014, we also visited the central command post in Groningen, where the pipeline network is managed and gas flows are directed and monitored. A workshop was organised for us, spread over several sessions, to help us gain a better understanding of regulation in the Netherlands and Germany and to learn more about the supporting activities.

Topics covered

In the course of 2014, we discussed many topics, including a number of fixed agenda items, such as safety, risk management, financial results, taxation, financing, regulation, the business plan, automation and related safety aspects, remuneration, and governance. These topics were prepared before the meetings by one of the two committees. In addition, we dealt with a relatively large number of special topics which we believed had to be brought to the attention of all Board members or which required an opinion of the Board. Some of these topics were discussed several times, to review their progress or to work them out in more detail or depth. This was the case if the topic was important for Gasunieʼs business operations, for the future of gas as part of the energy mix, or for Gasunieʼs role in the provision of energy in north-west Europe (the gas roundabout). Examples of these special topics are the following:

The role of Gasunie in Europe

Gasunie is the parent company of two regulated network companies – one in the Netherlands (Gasunie Transport Services) and one in north-west Germany (Gasunie Deutschland). This means that Gasunie has a special position in the relevant European partnerships, which benefits the end users thanks to the effective use of linked networks, better utilisation of the capacity, and improved efficiency. These effects all support the earlier decision to expand the Dutch gas network into a gas roundabout for Europe. These efforts are ongoing, and in the past year, we spoke intensively, both internally and with third parties, about a possible collaboration with other gas infrastructure companies in order to arrive at further expansion of the gas roundabout, including by increasing opportunities for the supply and throughput of gas.

The role of gas in a sustainable energy supply

We have noted with some concern that discussions about sustainable energy supply in the future almost always exclusively focus on electricity. In our opinion, not enough attention is given to the role that gas plays, and can play in the future, as a relatively clean fuel for heat production, transport, the centralised generation of electricity, and as a storage option for electricity (power-to-gas). In particular, we believe that gas could be deployed much more extensively to achieve a significant reduction in CO2 emissions during the (still long) transition period towards a fully renewable energy supply in the distant future; for example, by using biogas from renewable sources. Both we and Gasunie’s management believe that this role should be given more emphasis, especially given the significant importance of this energy source for Dutch society.

A positive development in this context is the agreement that was reached in 2014 on break-bulk LNG. In view of the implementation of legislation concerning admissible emissions at sea that affect the environmental quality of fuel for vessels in the North Sea and the Baltic Sea, initiatives have been developed regarding the role of Gate LNG terminal in Rotterdam, in which Gasunie has a share of 47.6%. The terminal is being made suitable for the distribution of LNG to end users, such as sea-faring and inland vessels and road transport. This will not only lead to less environmental pollution, but also to a higher throughput of LNG in the terminal.

Corporate social responsibility

The transition towards a sustainable energy supply is a separate ‘pillar’ of Gasunieʼs strategy. Besides the fact that the role of gas in a sustainable energy supply is important for public opinion regarding the emission of greenhouse gases such as CO2, the way in which Gasunie carries out its tasks is also relevant. In order to make good progress in this respect, the activities relating to sustainable energy supply have been brought together in a separate department. In December, we received a progress report that connects the many initiatives and developments and discusses the various CO2 reduction technologies both qualitatively and quantitatively, while assessing their feasibility.

Gasunie strives to structurally reduce its emissions. To this end, it has entered into a covenant with the network operators in Denmark, Sweden, Belgium, France and Switzerland with the aim of achieving a climate-neutral gas supply in 2050. Intermediate targets have been formulated as part of this covenant, some of which have also been included in the targets on which Gasunie’s collective variable remuneration is based.

Reliability of gas deliveries

As transporter of a substantial part of the energy used in the Netherlands, Gasunie has a special responsibility to do this in a safe, reliable and affordable way. With the main structure of the pipeline system now complete, the emphasis of activities is shifting towards maintenance and replacement, to ensure the safe and reliable delivery of gas in the future. To this end, an extensive programme has been set up that will be carried out over many years. Maintenance and replacement differ greatly from large new-build projects, and this affects the kinds of expertise that are needed and the way in which Gasunie organises itself internally, as well as how it cooperates with third parties. This means that Gasunie and its technical staff are going through a learning process, because increasing complexity requires changes to trusted routines. We are kept well informed and closely follow the safety performance.

The role of the Groningen gas field

Both directly and indirectly, we are affected by the earthquakes caused by the extraction of natural gas in Groningen. Gasunie has many installations and pipelines in the Groningen gas field and has ascertained the robustness of these installations and pipelines in relation to possible earthquakes, as well as the safety of both local residents and its own employees. In order to avoid any risks with regard to transport pipelines that were laid in the 1960s, these pipelines will be replaced, a programme that has already started.

The decision of the Dutch government to structurally reduce the production of Groningen gas, which taken in the light of safety considerations, affects the delivery to end-user markets, because the quality of Groningen gas differs from that of gas extracted from the “small fields” and gas imported from Norway and Russia. To enable safe and uninterrupted gas usage, the existing capacity for converting one quality into the other needs to be expanded. We have discussed future developments, the speed at which they are taking place, and the necessary investments.

Labour unrest

After the implementation of a new pension scheme in 2013, intensive talks took place during 2014 with employees and their representatives in organised consultation about Gasunie’s remuneration policy and the necessity of bringing it more in line with the market. This met with strong resistance, resulting in the formation of an action committee and a great eagerness to take action. Both the management and employees’ representatives took many initiatives, including individual ones, to normalise the internal relationships, and in the autumn, good agreements were successfully concluded. These included in particular a two-year collective labour agreement, as well as a decision to evaluate, with the help of independent consultants, Gasunie’s total package of employment conditions and how it compares with those of similar companies.

We support the management’s intention to reward Gasunieʼs employees in line with the market, as in the long term, this will provide the best development opportunities for everyone involved. However, we followed these developments with some concern and also received a letter from the action committee. In our contacts with the Works Council and individual employees, we saw confirmed the image that had arisen; namely, that Gasunie is an excellent employer, that appreciation of efforts is just as important as remuneration, that employees did not seem to understand why it was necessary to adjust the remuneration policy to the market, and that this resulted in a lack of trust. We are very pleased with the efforts of management and employees to restore mutual trust to its previous high level, and we are aware of the many, often personal, initiatives that were taken by both sides.

We support the solution that was chosen and have confirmed this in writing to the action committee.

Regulations

In the course of 2014, various initiatives were started that could drastically change regulations regarding energy provision. Gasunie and its experts are closely involved in this and attend practically all meetings, in which they are kept fully informed, not just about actual developments, but also about possible undesirable effects. The complex legislation with regard to energy that has evolved over many years is being streamlined by the Ministry of Economic Affairs (STROOM project). We are pleased that discussions about the roles of the various players in making the energy supply more sustainable have led to the available knowledge of infrastructure companies such as Gasunie being put to good use on a permanent basis.

A second development concerns a study that the Dutch supervisor, Authority for Consumers & Markets (ACM), wishes to carry out to determine the extent to which Gasunie is working effectively and efficiently. As there are no other national gas infrastructure companies active in the Netherlands, the ACM can only compare Gasunie with foreign gas companies. Further investigation has shown that the legal tasks of Gasunie are much broader than those of the foreign companies selected for the comparison. The discussions with the ACM aim to establish the best possible basis for comparison. The Ministry of Economic Affairs, in its role as “line ministry”, and the Ministry of Finance (as shareholder) are involved in these wide-ranging discussions.

Audit Committee

The Audit Committee met four times in 2014. Besides the members of the committee, the CFO, the operational auditor and the external auditor were present on all occasions, as well as senior staff members of the Finance department. The agenda included regular items, such as the periodical internal and external reporting, the budget, taxation, financing, the operational auditor’s periodical reports and working schedule, the audit plan of the external auditor, the management letter, the management’s Document of Representation, the risk matrix and management of the main risks, and the developments in information technology and the organisation and effectiveness of IT security with regard to a safe and reliable gas transport. The Audit Committee also met to discuss the reconsideration of the long-term business objectives and the consequences of the impairment tests.

The chair of the Audit Committee held regular consultations with the external auditor without members of Gasunie’s management being present. She was also involved in the selection of a new external auditor in the context of the mandatory firm rotation for public-interest entities for the legal audit of the consolidated financial statements. As of the financial year 2015, PricewaterhouseCoopers (PwC) will be responsible for auditing Gasunie’s financial statements. The Audit Committee recommended the new auditor to the Supervisory Board, which in turn adopted this recommendation to facilitate the decision-making by the General Meeting of Shareholders in April 2014. The discussions and findings of the Audit Committee will be reported orally in the plenary meetings of the Supervisory Board. The Committee’s meeting documents and minutes will be put at the disposal of all Supervisory Board members.

Whistleblower complaint

In 2014, an employee reported a possible flaw in a tender procedure. This was discussed in the Audit Committee. At the request of the Chairman of the Audit Committee, it was also discussed during the next meeting of the Supervisory Board. Because internal investigation showed that there had indeed been a flaw in the internal process, the Executive Board asked an independent law firm to look into the tender processes at Gasunie. This led to a number of concrete recommendations for improving the processes. These will be implemented by Gasunie.

Remuneration, Selection & Appointments Committee

The Remuneration, Selection & Appointments Committee met four times in 2014. Besides regular subjects, such as the degree to which the targets for defining the variable remuneration for 2013 were achieved, setting new collective and individual targets based on the budget for 2015, the 2013 Annual Report and the remuneration section with regard to 2014, the committee also discussed the settlement of the contract of the previous chair of the Executive Board, the declaration procedures and the Executive Board’s employment conditions policy.

The Committee carried out preparatory work with regard to appointing a new member of the Supervisory Board and filling the vacancy of Chairman of the Supervisory Board. To this end, several consultations were held with the shareholder and interviews were held with candidates.

At the beginning of 2014, we agreed with the members of the Executive Board on a reduction of the variable remuneration from 35% of the basic salary to 20%. This reduction is largely compensated for by an increase of the basic salary, which equals half of the reduction for 2014 and 40% of the reduction for later years. The amount of compensation is determined mainly by the extent to which members of the Executive Board have succeeded in the past to achieve the agreed targets. This adjustment in employment conditions results from the government’s wish to maximise variable remuneration in the financial sector at 20% and, in line with this, to apply the same percentage to state participations, such as Gasunie. We are pleased that the members of the Executive Board have agreed to this adjustment. The adjustment and the consequences for the underlying performance are described in more detail in Remuneration policy for the Executive Board.

Remuneration structure of the Supervisory Board

The remuneration received by the members of the Supervisory Board for exercising their duties is given in the table below. The amounts exclude reimbursement of travel costs and other expenses.

Position Remuneration per year
Chairman of the SB (or Interim Chair) € 30,000
Vice-Chairman of the SB € 22,000
Member of the SB € 20,000
Chairman or member of the AC € 5,000
Chairman or member of the RSAC € 2,000

Meetings with the Works Council

The existing practice at Gasunie for members of the Supervisory Board to attend at least two meetings per year was also adhered to in 2014. In the course of 2014, Ms Martika Jonk (in the spring) and Mr Rinse de Jong (in the autumn) each attended one Consultation Meeting. The autumn meeting was preceded by a special lunch session with the employees of the location where the Consultation Meeting was held, in order to stimulate a direct dialogue between the Supervisory Board members and the employees. In view of the unrest regarding the aforementioned adjustments to employment conditions, this was also an excellent opportunity to hear employees’ arguments and views.

Consolidated financial statements

We have read the draft consolidated financial statements 2014 as drawn up by the Executive Board, as well as the auditor’s report and assurance report drawn up by the external auditor EY. We recommend that the Annual Meeting of Shareholders approve the consolidated financial statements 2014 unchanged.

Acknowledgements

The Supervisory Board wishes to thank the Executive Board, management and all employees for their dedication and hard work in 2014. Thanks to their dedication and skills, they secured the safe and uninterrupted supply of gas to Gasunie’s customers.

Groningen, 19 March 2015
Supervisory Board of N.V. Nederlandse Gasunie

Rinse de Jong, Chairman
Dirk Jan van den Berg
Martika Jonk
Jolanda Poots-Bijl
Willem Schoeber
Jean Vermeire

Composition of the Supervisory Board

(As of reporting date, 19 March 2015)

R. (Rinse) de Jong

(1948, Dutch nationality)

  • Chairman
  • Date of first appointment: 16 May 2012
  • Second term ends in 2018
  • In 2014: Member of the Audit Committee and Remuneration, Chair of the Selection & Appointments Committee
  • As of 1 January 2015: Member of the Remuneration, Selection & Appointments Committee

Board member, Stichting Aandelenbeheer BAM Groep
Board member, Stichting tot het houden van Preferente aandelen Wereldhave
Member of the Supervisory Board, USG People NV
Member of the Supervisory Board, Enexis Holding NV
Chairman of the Supervisory Board, Bakeplus Holding BV
Member of the Supervisory Board, Rabobank Arnhem and surroundings
Member of the Supervisory Board of Hogeschool van Amsterdam (HvA), as of 1 February 2015

Unpaid:
Member of the Supervisory Board, Stichting Toneelgroep Oostpool

M.J. (Jolanda) Poots-Bijl

(1969, Dutch nationality)

  • Date of first appointment: 1 September 2011
  • Second term ends in 2017
  • Chair of the Audit Committee

Member of the Executive Board and CFO, Ordina N.V.
Board member, Stichting ING Aandelen
Member of the Supervisory Board, Blokker Holding B.V.

J.P.H.J. (Jean) Vermeire

(1944, Belgian nationality)                      

  • Date of first appointment: 1 October 2007
  • Third term ends in 2018
  • In 2014: Member of the Remuneration, Selection & Appointments Committee
  • As of 1 January 2015: Member of the Audit Committee

Managing Partner, J.V. Consult BVBA (a consultancy), until September 2014
Gas and LNG Consultant, as of October 2014
Senior Fellow, Energy Delta Institute

Unpaid:
Honorary President, International Group of LNG Importers (GIIGNL)

M.M. (Martika) Jonk

(1959, Dutch nationality)

  • Date of first appointment: 1 October 2013
  • First term ends in 2017
  • In 2014: Member of the Remuneration, Selection & Appointments Committee
  • As of 1 January 2015: Chair of the Remuneration, Selection & Appointments Committee

Partner, CMS Derks Star Busmann N.V.
Member of the Supervisory Board, St. Antonius Ziekenhuis

W.J.A.H. (Willem) Schoeber

(1948, Dutch and German nationality)

  • Date of first appointment: 1 October 2013
  • First term ends in 2016
  • Member of the Audit Committee

Non-executive member of the Board of Directors, Neste Oil Oyj (Helsinki, Finland)
Non-executive chairman of the Board of Directors, EWE Turkey Holding AŞ (Istanbul, Turkey)
Non-executive chairman of the Board of Directors, Bursagaz AŞ (Bursa, Turkey)
Non-executive chairman of the Board of Directors, Kayserigaz AŞ (Kayseri, Turkey)

D.J. (Dirk Jan) van den Berg

(as of 1 October 2014)

(1953, Dutch nationality)

  • As of 1 January 2015: Vice-Chairman
  • Date of first appointment: 1 October 2014
  • First term ends in 2019
  • Member of the Remuneration, Selection & Appointments Committee

Chairman of the University Board, TU Delft
Member of the Supervisory Board, Ziggo, until 6 November 2014

Unpaid:
Member of the International Advisory Council of the City of Wuhan (China)
Member of the International Advisory Board, PolyU, Hong Kong
Member of the International Visitor’s Program Advisory Board, Ministry of Foreign Affairs
Chairman, Atlantische Commissie
Member of the European Integration Committee of the Ministry of Foreign Affairs, Advisory Council on International Affairs
Member of the International Advisory Board, Moscow Institute of Physics and Technology
Member of the Foundation Board, Unesco-IHE

 

The order of retirement is based on the dates of birth of the members of the Supervisory Board. Account is taken of the principles and best practices for the Supervisory Board, Article 3.3 (e): “None of its members may be appointed after the third period of office of four years, or after the twelfth year in office”.

Composition of the Executive Board

J.J. (Han) Fennema

(1964, Dutch nationality)
Chairman of the Executive Board since 1 March 2014

Portfolios:

  • Business units (GTS, Gasunie Deutschland and Participations & Business Development)
  • Strategy
  • Safety
  • Human Resources

Other commitments:

  • Member of the Supervisory Board, Energy Delta Institute
  • Member of the Advisory Board, Clingendael
  • Member of the Shareholders’ Committee, Nord Stream AG

I.M. (René) Oudejans

(1961, Dutch nationality)
CFO and member of the Executive Board since 1 October 2012

Portfolios:

  • Finance
  • Treasury
  • Operations
  • Projects
  • IT
  • Legal Affairs

Other commitments:

  • Board member, Pensioenfonds N.V. Nederlandse Gasunie

Composition of Works Councils

Works Council, Gasunie in the Netherlands

Arie Dam (until 1 March 2014)
Jan Willem Kootstra (as of 9 May 2014)
Froukje van Dellen
Jan Willem van Dijk
Harry Dijkhuis (Chair)
Pieter Doller
Douwe Eleveld
Pieter Jousma
Fred Kemper
Hink Koers
John Oest
Felix Post
Martin Schoonheijm
Roelf Tiktak
Theo Wouda
Wouter Zwart

Works Councils, Gasunie in Germany

Hanover/Steimbke

Dietlind Pröve (Chair)
Tibor Holeczy (Vice-Chair)
Stephanie Böker
Frerk Lüschen
Ulrike Mielke
Heinrich Müller
Katharina Neumann

Schneiderkrug

Herbert Stengel (Chair)
Holger Beuse (Vice-Chair)
Mario Hilbig
Rolf Hollwedel
Michael Küsters
Jan Lohmüller
Holger Nitz

Corporate Governance

General

Nederlandse Gasunie is a public limited company whose sole shareholder is the Dutch state. The shares are held by the Ministry of Finance. The company is subject to a mitigated structure regime. The governance structure is based on Book 2 of the Dutch Civil Code, the Corporate Governance Code, the company’s articles of association and various internal regulations. Various provisions affecting the governance of the company are also contained in the Gas Act.

Executive Board and Executive Committee

Until Mr Geert Graaf’s departure on 1 March 2014, the Executive Board consisted of three people, and subsequently two people. In principle, the Board meets once a week. The Board is collectively responsible for the management of the company, as well as the general affairs of the various subsidiaries. Most meetings take place in the broader context of the Executive Committee. The Executive Committee consists of the Executive Board plus the managing directors of the Dutch (GTS) and German (GUD) network operators, the General Director of Participations & Business Development, the Director of Legal, Regulatory & Public Affairs, and the HR Director.

Supervisory Board

The composition of the Supervisory Board and the changes in its membership during 2014 are described elsewhere in this Annual Report. The Board meets at least four times a year. The Board acts as the employer of Gasunie’s Executive Board members, supervises the management and supports it with advice. In accordance with the Gas Act and the articles of association, important decisions to be made by Gasunie Transport Services B.V. are also submitted for approval to the Supervisory Board of Gasunie. The Board has two sub-committees: the Audit Committee (which supervises, in particular, the risk management and audit systems, the annual and semi-annual financial reporting, as well as the financing of the company and its pension schemes) and the Remuneration, Selection & Appointments Committee. The meetings of the Committees are discussed at the meetings of the complete Board, on the basis of which decisions are made.

Compliance with the Dutch Corporate Governance Code

The Dutch Corporate Governance Code is applied by state participations, and thus also by Gasunie. Where possible, the principles and best-practice provisions have been implemented in our articles of association and in various regulations. Since Gasunie is not a listed company, principles and best-practice provisions that are directly related to stock exchange listing are not applicable.

We confirm compliance with best-practice provisions II.3.4 and III.6.3, which state that transactions in which there is a conflict of interests, carried out by members of the Executive Board or Supervisory Board, must be mentioned in the Annual Report. In 2014, no such transactions took place.

A few of the principles and best-practice provisions that are applicable to our company are not applied. In accordance with the Corporate Governance Code, the few that are not adhered to are detailed below:

Executive Board

II.2.12 The remuneration report shall be posted on the company’s website.

Reason for departing from this best practice:
In our annual report, we transparently describe Gasunie’s remuneration policy, approved by the shareholder, and the actual implementation thereof by the Supervisory Board in the year under review. The Annual Report is published on Gasunie’s website.

Supervisory Board

III.5 If the Supervisory Board consists of more than four members, the Board shall appoint from its number an Audit Committee, a Remuneration Committee and a Selection & Appointments Committee.

Reason for departing from this best practice:
Because their tasks are closely related, the Remuneration Committee and the Selection & Appointments Committee are combined to form a single committee.

III.5.11. The chairmanship of the Remuneration Committee shall not be held by the Chairman of the Supervisory Board, or by a former director of the company, or by a member of the Supervisory Board who is a director of another listed company.

Reason for departing from this best practice:
The Supervisory Board is of the opinion that its Chairman should be closely involved in preparing the salary and remuneration policy, especially due to the importance of this policy. The Supervisory Board has therefore decided not to separate chairmanship of the Board from that of the Remuneration, Selection & Appointments Committee.

Available documentation

The following documents are available on the Gasunie website (www.gasunie.nl):

  • Procedure governing the activities of the Executive Board
  • Procedure governing the activities of the Supervisory Board
  • Whistleblower scheme
  • Code of Conduct

We have no specific regulations governing insider trading, holding securities, and securities transactions. The prohibition on the use of inside information has been incorporated into the Code of Conduct.

Whistleblower scheme

Pursuant to the whistleblower scheme, an employee reported a flaw in a European tender process. This led to an internal investigation, which showed that in this specific case, the internal procedural guarantees for correct compliance with the tender regulations had indeed been inadequate. In consultation with the Supervisory Board, the Executive Board subsequently decided to have an independent law firm investigate the tender processes. On the basis of its research and interviews, the law firm concluded the following: ‘The documents and interviews do not suggest systemic irregularities or subjective behaviour. There are no indications of collusion with suppliers or improper practices (gifts, etc.).’ However, the law firm has made some concrete recommendations for improving the processes. These will be implemented.

Remuneration policy for the Executive Board

The remuneration policy was adopted by the General Meeting of Shareholders on 23 April 2010, as proposed by the Supervisory Board, with due account taken of the recommendation of the Remuneration, Selection & Appointments Committee. In 2014, amendments with regard to variable remuneration were implemented, with the approval of the shareholder.

Context of the remuneration policy

Over the past few years, Gasunie has grown into an international gas infrastructure company with many international customers in a converging European market. The company is not only active in regulated markets, but also develops non-regulated activities, and is thus creating value for its stakeholders. It creates value for the Dutch economy primarily by developing a strong ‘hub’ function in a liquid market; by enabling the throughput of significant gas flows; by enabling trade and competition between gas suppliers in the domestic gas market; and by creating flexibility (through storage facilities). All this makes Gasunie a very valuable asset to the Dutch economy. The management of the company therefore bears a great responsibility.

The aims and principles underlying the remuneration policy

The aim of the remuneration policy is to attract, motivate and retain Executive Board members of the right quality and experience, both from within the company and in the form of proven talent from the market. The remuneration reflects the responsibility borne by the management, and is considered in the light of the applicable remuneration principles in the market (as explained below). Gasunie needs this management talent in order to achieve its essential strategic objectives in the context described above. This policy is implemented based on the following considerations:

  • In principle, having the State as a 100% shareholder, Gasunie applies the same criteria that are applied to the remuneration policy in state-owned companies. If the Supervisory Board feels that this may lead to unacceptable risks for the company, it will consult with the shareholder.
  • Gasunie bases remuneration packages for members of the Executive Board on a market comparison, based on a relevant reference group in the labour market. This group consists of public, semi-public, private and international companies (in a weighted ratio of 50-25-25), with activities similar to those of Gasunie (energy, distribution, installation and construction).
  • The structure of the remuneration of members of the Executive Board is determined on the basis of market comparisons that also take into account the remuneration ratios within the company, thus creating a logically continuing salary line from the posts in the Executive Board to the posts under the Executive Board
  • Application of the variable remuneration policy depends on the achievement of short- and long-term targets with respect to operational and strategic performance.

Remuneration structure

The remuneration consists of:

  • A fixed component (basic annual salary)
  • A variable component, dependent on the attainment of both short- and long-term targets, as specified in the pages below
  • The employer’s contribution to the pension premium
  • Other secondary employment conditions.

Basic annual salary

When appointing members of the Executive Board, at the request of the shareholder, the Supervisory Board will limit the sum of the fixed and variable annual salary on appointment to a maximum of € 350,000 (2010 level). The Supervisory Board decides on the level of annual salary increments. If the maximum salary has been reached, further growth is limited to the structural increments laid down in the collective labour agreement. On the basis of these increase percentages, the aforementioned maximum amounts to € 375,000 at the price level of December 2014.

Variable remuneration

The variable remuneration is based on the remuneration policy that has been approved by the shareholder. As of 2014, we lowered the maximum variable remuneration from 35% to 20% of the basic annual salary. This is in line with the policy direction taken by the Dutch State to limit variable remuneration in the financial sector, and, in the same spirit, to lower variable remuneration in state participations, as established in 2013 in the Policy on Government Participations. In 2014, we compensated this reduction by raising the basic annual salary according to a conversion factor of 50% of the nominal reduction of the variable remuneration. In the years after 2014, we will apply a compensation of 40%. We have chosen partial compensation, because, in our experience, not all targets set will be fully realised. Over the period 2008 up to and including 2013, the members of our Executive Board realised on average 71%.

The targets that must be attained in order to qualify for variable remuneration are agreed annually. These targets should be both measurable and ambitious. The Supervisory Board is authorised to adjust the variable component within the limits mentioned below if it is likely to lead to unfair outcomes due to exceptional circumstances during the performance period. An example of this is the downward adjustment of the variable remuneration at the time of a fatal accident which fell outside the applied target definition. The Supervisory Board is also authorised to reclaim from members of the Executive Board a variable bonus that was awarded on the basis of inaccurate data (financial or otherwise).

The Supervisory Board has chosen performance criteria that relate to the implementation of Gasunieʼs strategic goals, both short- and long-term. For each pillar of the strategy, one or more performance criteria have been developed. The three strategic pillars of Gasunie and the associated performance criteria are as follows:

  • To optimise the value of our existing assets (financial targets and Asset Utilisation Rate or a comparable criterion)
  • To strengthen our leading position as a cross-border gas infrastructure company in Europe (Economic Value Added)
  • To enable the transition towards more sustainable energy use (Corporate Social Responsibility).

In defining the company’s strategy, account is explicitly taken of the social impact of Gasunieʼs activities and their effects on the environment and society. Criteria have therefore also been defined to assess performance in the areas of Safety and Security of Supply. Given the nature of the variable remuneration elements (the absence of option packages and associated remuneration mechanisms), the possibility of carrying out a scenario analysis, as mentioned in the Corporate Governance Code, is not relevant.

Variable short-term remuneration (maximum 13%)

The purpose of the variable short-term remuneration is to reward the attainment of the previously agreed challenging targets in a number of (primarily operational) key areas. These operational targets apply to all Gasunie staff; attainment of some of these targets (i.e., the collective Gasunie targets) will also lead to other groups of employees being rewarded.
The criteria for awarding the variable remuneration relate mainly to the implementation of the strategy. The strategy has been approved by the Supervisory Board and tested against Gasunieʼs public interest. This is reflected in, for example, challenging, quantified targets relating to safety, security of supply and cost-efficiency.

This variable component is subject to an upper limit of 13% of the basic annual salary. In addition, a long-term bonus of up to 7% may be awarded (see below).

The breakdown of this 13% for 2014 is as follows:

Collective Gasunie targets (10%):

Safety

3%
  • Total Recordable Frequency Index
  • Pipeline damage incidents
  • Measures taken following incidents
 

Security of supply

2%

  • Number of transport interruptions
 

Financial results

3%
  • Net operating costs
  • Return On Invested Capital
 

Corporate Social Responsibility

2%
  • Improving registration and reporting in conformity with Greenhouse Gas Protocol
  • Auditable restrictions of CO2-equivalent emissions by more than 15 kilotonnes (compared to 1990)
  • Auditable restrictions of CO2-equivalent emissions by more than 20 kilotonnes (compared to 1990)
 
   

Individual targets (3%):

 
General contribution of the Board member to Gasunie’s result (to be determined by the Supervisory Board) 3%

 

Variable long-term remuneration (maximum 7%)

Gasunie also pays its Executive Board members a variable bonus, linked to the value creation in the long term. Up to and including 2014, this variable long-term bonus had three components. The first is the Operational Cost Index for the TSOs, which reflects the ratio of operating costs to the asset base for which the costs are incurred. The second component is the Asset Utilisation Rate, also for the TSOs; this component indicates the extent to which the assets are actually used (the commercial utilisation level). The third component is the EVA™ (Economic Value Added). This performance is measured over a period of three years and is dependent on the development of the EVA (EVA = (ROIC – WACC) × Invested Capital) for the non-regulated activities. If the three components are realised in full, the variable salary amounts to 3%, 2% and 2% of the basic annual salary respectively.

As of 2015, the Asset Utilisation Rate will no longer be used as a criterion. Due to the unpredictable effect of short-term bookings, this ratio can only be influenced to a limited extent on an annual basis, and is therefore not suitable for measuring performance. This does not alter the fact that the utilisation rate of the network is important. The actions to be taken by the Board geared to the long-term utilisation of the network form part of the individual target ‘General contribution of the Board member to Gasunie’s result’. As of 2015, this general contribution will be increased from 3% to 5%, and the other two targets will each receive a weighting of 2.5%.

Procedure

The targets for eligibility for variable remuneration are agreed at the start of the relevant year between the Supervisory Board and the members of the Executive Board, once the Chairman of the Executive Board has discussed a proposal to this end with the Remuneration, Selection & Appointments Committee.
In the following year, the extent to which those targets have been met is evaluated by the external auditor and an assurance report with limited assurance is provided. This result is then adopted by the Supervisory Board, following a recommendation to that effect by the Remuneration, Selection & Appointments Committee.

Variable remuneration is paid out following the General Meeting of Shareholders’ approval of the annual accounts of the year for which the targets were set.

Pension

The members of the Executive Board fall under the same pension scheme as other staff.

Other secondary employment conditions

Gasunie has put together a package of secondary employment conditions for its Executive Board members which also apply to other staff.

Other conditions

Term of office

Members of the Executive Board are appointed for a period of four years. Mr Han Fennema may be reappointed once for a maximum of a further four years, unless special circumstances justify a different term, to be mutually agreed. Mr René Oudejans may be reappointed for subsequent terms of four years. The members are employed by Gasunie on the basis of a permanent contract, which ends when they reach state pension age.

Notice period

For members of the Executive Board a notice period of two months applies. As of 1 July 2013, this notice period for new members of the Executive Board was extended to 3 months.

Compensation for dismissal

Compensation for dismissal for Executive Board members will be limited to a maximum of one year’s basic salary, in accordance with the Corporate Governance Code, except where such a limitation is clearly unreasonable.

Change of control

Executive Board members are covered by a ‘change of control’ clause, which states that if they are forced to leave the company due to a merger with or the acquisition of the company by an external party, or in the event of a fundamental change in the nature, management or structure of the company that is beyond the control of the Executive Board, they will be awarded compensation up to a maximum of one year’s basic salary, regardless of which party terminates the employment contract.

Balanced composition

With two men, the composition of the Executive Board is not in compliance with a balanced composition as mentioned in Article 2:166 of the Dutch Civil Code, which states that a balanced composition means that an Executive Board should at least contain 30% women. When new members need to be appointed, we aim to comply with this provision. Nevertheless, when filling in the post of Chairman of the Executive Board, matching the candidates and the desired profile did not result in a more balanced composition.

Remuneration package 2014

Based on the policy outlined above, the Supervisory Board agreed the following basic annual salaries and variable bonuses for members of the Executive Board active on 31 December 2014:

In euros Basic annual salary 2014 Variable bonus (for performance 2014)
Mr J.J. Fennema € 295,798 € 43,998
Mr I.M. Oudejans € 272,958 € 40,601
     

Targets and payment of variable bonuses relating to 2014 performance

Targets and payment of variable bonuses relating to 2014 performance
    Mr J.J. Fennema Mr I.M. Oudejans
  Maximum Realised Realised
1. Collective Gasunie targets      
1.a. Safety
Combined safety target, consisting of:
- Total Reportable Frequency Index
- Pipeline damage
- Measures following incidents
3.00%    
Target in the field of safety – 75% realised   2.25% 2.25%
1.b Security of supply
Better performance in the field of security of supply: number of transport interruptions caused by an asset
2.00%    
Target in the field of security of supply – fully realised   2.00% 2.00%
1.c Financial results 3.00%    
Net operational costs – fully realised      
Return On Invested Capital – fully realised   3.00% 3.00%
1.d Corporate social responsibility
- Improving registrations and reports in conformity with the Greenhouse Gas Protocol
- Auditable restriction of CO2-equivalent emissions by more than 15 kilotonnes (compared to 1990)
- Auditable restriction of CO2-equivalent emissions by more than 20 kilotonnes (compared to 1990)
2.00%    
Target in the field of CSR fully realised   2.00% 2.00%
Subtotal 10.00% 9.25% 9.25%
       
2. Individual targets 3.00%    
General contribution of EB member to Gasunie’s result (to be determined by the Supervisory Board)   2.50% 2.50%
Subtotal 3.00% 2.50% 2.50%
       
3. Variable long-term remuneration element      
3.a Operational Cost Index – fully realised 3.00% 3.00% 3.00%
3.b Asset Utilisation Rate – not realised 2.00% 0.00% 0.00%
3.c Economic Value Added – not realised 2.00% 0.00% 0.00%
Subtotal 7.00% 3.00% 3.00%
       
Total 20.00% 14.75% 14.75%
Realisation percentage   73.75% 73.75%

For the allocation of other remuneration package components in 2014, see note 23 to the consolidated financial statements.

Composition of the Executive Board

Mr Geert Graaf acted as Interim Chairman of the Executive Board until 1 March 2014. As of 1 January 2014, Mr Han Fennema was appointed as a member of the Executive Board, and as of 1 March 2014 as Chairman of the Executive Board and CEO. Mr Geert Graaf terminated his employment at Gasunie on 1 March 2014. Upon his departure, financial agreements were made with regard to the applicable non-competition clause (see page 66 of the Consolidated Financial Statements).