Annual Report 2010 311 - Verbundnetz Gas AG

Annual Report | Annual Report 2010
Risk of interest rate changes
As a result of seasonal fluctuations in liquidity,
phases with and without net credit obligations
during the year are balanced out over the course
of the twelve-month period and for the most
part allow natural hedging against interest rate
changes. Derivative financial instruments were
used to adjust the interest rate risk item over the
course of the year in such manner as to achieve
low-level fixed interest rates for all long-term
financial instruments.
Shareholding portfolio management as part of
the risk management system. Opportunities and
risks arise in the shareholding portfolio as a result
of the economic and legislative situation. The
earnings forecasts regularly updated by the shareholdings
are included in risk reporting and are
continually monitored and assessed. In addition,
all domestic and foreign subsidiaries have their
own risk manual and form an integral part of the
risk management system, preparing regular risk
updates. The VNG Group monitors all the relevant
markets of its shareholdings and can respond to
identified risks in a timely manner through its
presence on the companies’ governing bodies.
Natural gas trading in a difficult market environment.
The main risks in gas trading remain the
price and volume risk. Key risk control instruments
are the targeted adjustment of supply
contracts to the new market conditions, active
portfolio management and VNG’s trading activities.
Competition on natural gas markets continued to
intensify in the 2010 financial year. Oversupply
remains a characteristic of European natural gas
markets. This oversupply is the result of the continued
relatively weak demand for natural gas and
the increase in LNG deliveries to Europe, in part
attributable to the development of new unconventional
gas reserves in the USA. Gas prices therefore
came under strong pressure, and the trend
towards uncoupling gas prices from European
importers’ oil-price-linked procurement portfolio
which emerged in 2009 was reinforced during
the year under review. VNG regularly harnesses
the opportunities as they become available to
adjust conditions under long-term procurement
contracts to the fundamental changes in market
situation.
VNG leverages the growing market dynamics and
the associated opportunities in the trading business
through the proactive management of its
extensive procurement portfolio. Intensive market
tracking and the constant transfer of information
between Purchasing, Trading and Sales is essential
for effectively harnessing market opportunities.
On this basis, VNG develops new innovative
products and price systems for the sales business,
thereby allowing the company to respond swiftly
and flexibly, offering customised solutions as part
of its customer retention strategy.
On the supply side, VNG has a broad supply portfolio
and is systematically continuing to diversify
sources of supply. In addition, the partly geographical
shift in volumes along with transport
and storage capacity commitments, e.g. under
the open season process, are important elements
in supporting sales activities. Diversification is
also aided by access to equity gas through the
gradual expansion of the E&P business. The development
of E&P activities also serves to foster
a self-sustaining business as another source of
added value for VNG.
Strong competition and the growing availability
of natural gas naturally pose major challenges for
Sales; notwithstanding, additional volume positions
were won both in Germany and other European
countries, thereby reducing the volume risk.
VNG is responding to growing demand for biomethane
products or to blend biomethane with
gas from conventional delivery contracts by es-
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