VNG financial statements for 2018: financial year exceeds expectations

12. April 2019
VNG AG
Adjusted EBIT rises to €159 million – VNG in a process of transformation – Group strategy “VNG 2030+” being implemented: green, digital, with gas

In the 2018 financial year, VNG recorded adjusted EBIT[1] of €159 million (2017: €129 million). “All in all, I am highly satisfied with business developments in the 2018 financial year. Despite a difficult economic and energy policy environment, we were able to continue the positive trend in the development of our business and results. We have succeeded in recording good operating results in all business areas and in implementing key steps in our strategy “VNG 2030+”,” said Ulf Heitmüller, Chairman of the Executive Board of VNG AG, at this year’s press event presenting the financial statements of VNG.

The consolidated results after interest and tax amounted to €142 million (2017: €71 million). “2018 was an extraordinarily good year for VNG. This is all the more gratifying because such results cannot be taken for granted. The results also reflect one-off effects. We have worked hard, never lost sight of our costs and efficiency and have succeeded in further strengthening our earnings power. Special thanks are due to our employees for their untiring dedication. The consolidated results were also positively influenced by the sale of our E&P business,” said Bodo Rodestock, Member of the Executive Board responsible for Finance and Human Resources. At €11.2 billion, the revenues of the VNG Group were significantly higher than the previous year’s figure (2017: €8.2 billion).

VNG in the midst of a strategic transformation process

For VNG, the 2018 financial year was characterised by major organisational changes. As a result of regulatory requirements, VNG AG spun off its domestic and foreign wholesale trading activities to a new subsidiary. Since it officially started trading in April 2018, VNG Handel & Vertrieb GmbH (VNG H&V) has been responsible for the entire wholesale trading and sales business of VNG. Furthermore, VNG withdrew from E&P in Norway and Denmark in 2018 for strategic regions. VNG Norge AS was sold to the E&P company Neptune Energy Norge AS. Externally, the strategic transformation process was evident in the adoption of a new, modern brand presentation in 2018. The brand relaunch in the 60th anniversary year of VNG is a sign of the process that the company is currently completing – the transformation of the old Verbundnetz Gas AG into the new VNG.

VNG consistently implements Group strategy “VNG 2030+”: focus on the optimization of existing and the development of new business areas

Within the framework of its strategy for the future “VNG 2030+”, VNG continues to develop its established business areas Transport, Storage, and Trading & Sales sustainably and profitably. VNG is also investing in the development of the growing areas of biogas, digital infrastructure and district solutions related to its existing business areas. “The core of our strategy is that all business areas should

shape a green, digital, gas-based future. We are now in the midst of this process and are consistently implementing our future-oriented Group strategy,” said Heitmüller.

Transport – ONTRAS again makes a significant positive contribution

In the Transport business area, ONTRAS Gastransport GmbH (ONTRAS) again made a substantial positive contribution to the consolidated operating results. As an independent transmission system operator in a regulated environment, ONTRAS continuously invests in the development of its high-pressure pipeline system with a total length of 7,000 km and more than 450 network interconnection points. With its infrastructure, ONTRAS ensures an extremely high level of reliability and security of supplies. In this context, the participation in EUGAL is a future-oriented investment and a milestone for the further development of the company. As expected, work on the European connecting pipeline from the Baltic to southern Saxony started in 2018.

Storage – VGS focusing on economical storage operation and cost leadership

Within the VNG Group, VNG Gasspeicher GmbH (VGS) operates and markets underground storage facilities in central and northern Germany as Germany’s third-largest storage facility operator. In the storage year, the total working gas capacity of about 2.2 billion m³ was fully marketed. “In a market environment which continues to be challenging, we are concentrating on the cost-effective operation of our facilities and on cost leadership in the storage market,” said Hans-Joachim Polk, Member of the Executive Board responsible for Infrastructure and Technology.

The further expansion of the Katharina underground storage facility at Peißen near Bernburg (Saxony-Anhalt), commissioned in 2017, is continuing to schedule. By the time when the final stage of expansion is reached in 2025, six further caverns with a working gas capacity of about 600 million m³ will be completed. “Technically, the conversion of power from renewable sources into gas does not present a problem. This is another reason why we are investing in innovative gas storage facilities which will offer long-term prospects, for example for the storage of CO2-free hydrogen. It will be necessary to create appropriate conditions for these developments,” Polk added.

Trading & Sales – VNG H&V performs successfully in major customer and consumer segments

in 2018, the Trading & Sales business area made a substantial contribution to the positive consolidated results of VNG despite intense competition and low profit margins. Last year, VNG H&V recorded a gas sendout of 500 billion kWh, exceeding the figure for the previous year (2017: 415 billion kWh). “In the major customer segment, we won new industrial customers and were able to develop additional sales channels. Sales in the consumer segment remained stable despite significantly milder temperatures,” said Heitmüller. In 2018, VNG H&V subsidiary ENERGIEUNION GmbH celebrated 20th anniversary.

New business areas and innovation strategy

VNG significantly expanded its biogas portfolio via its biogas subsidiary VNG BALANCE Bioenergie GmbH (BALANCE) and consistently pursued its growth strategy. At the end of 2018, BALANCE acquired a total of five biogas plants at sites in Saxony-Anhalt and Lower Saxony. “Biogas can be stored, planned and controlled. It is suitable for meeting baseload demand and can be supplied at any time via existing gas infrastructure. These are advantages compared with other renewable energies,” Polk reported.

In the field of digital infrastructure, VNG is pursuing a long-term approach and is active in three focus areas: fibre-optic infrastructure, services for computer centres and applications related to critical infrastructure. “The reliable operation of critical infrastructure has always been part of our DNA. We
are now using this expertise for the transmission and storage of data,” Polk said. In the field of district solutions, VNG subsidiary VNG ViertelEnergie GmbH offers long-term decentralised energy solutions together with Tilia GmbH. The main focus is on residential and industrial areas in small and medium-sized communities of the eastern German states.

As part of its innovation strategy, VNG has acquired stakes in a total of five start-ups to date. Among other activities in 2018, VNG Innovation GmbH increased its investment in the Berlin start-up akvola Technologies GmbH and acquired shares in the start-ups Infrasolid GmbH (Dresden) and Rhebo GmbH (Leipzig). Cooperation with the Leipzig SpinLab – The HHL Accelerator, which is part of the smart infrastructure hub of the Federal Ministry for Economic Affairs, is a key component in VNG’s innovation strategy. Each year, VNG sponsors four start-ups under the heading of energy.

Outlook for 2019

For the future, VNG has set itself the goal of positioning climate-friendly gas as the ideal partner of renewable energies. In the medium to long term, green gases will become increasingly important. In addition to biogas, VNG will focus more strongly on the future-oriented topics of power-to-gas, green hydrogen and sector linking. For example, VNG is working together with project partners on a “real-world laboratory” for green hydrogen in central Germany which is to cover the entire value stream. For this purpose, VGS storage caverns are to be modified for the storage of hydrogen. Together with two regional vehicle suppliers, VNG has also concluded a letter of intent for the development of a pilot hydrogen mobility project in the town of Grimma in Saxony. The project is to include a power-to-gas plant and a refuelling station for green hydrogen.

In 2019, VNG will continue to consistently implement the Group strategy “VNG 2030+”. “Gas has outstanding prospects of becoming a key fuel in the energy system of the future together with the renewable energies in the power sector. With our strategy, we are working hard to make this vision reality,” Heitmüller concluded.  For the 2019 financial year, VNG expects adjusted EBIT to be slightly lower than the figure for 2018.
 

                       
VNG is a group of over 20 companies active in the European energy industry with a broad, future-oriented portfolio of products and services in gas and infrastructure, and more than 60 years of experience in the energy market. Headquartered in Leipzig, the Group has a workforce of some 1,100 and generated sales of €11,2 billion in the 2018 financial year.
VNG concentrates on three links in the gas value chain: Trading & Sales, Transport, and Storage. Building on these core competences in the gas business, the Group’s “VNG 2030+” strategy places a growing focus on new business fields. These include biogas, digital infrastructure, and district solutions. 

 

[1] EBIT adjusted to eliminate extraordinary and one-off effects on results.