Regulated information: 2017 results

• Regulated turnover remains stable
• Net profit increases by €21.8 million, €16.2 million of which is due to the one-off impact of tax reform
• Tax reform has positive impact on future tariffs but no effect on the dividend to be paid out
• Fluxys Belgium proposes to the Annual General Meeting on 8 May 2018 a gross dividend of €1.23 per share
• Successful long-term bond issue worth €350 million
• Investments: €83.4 million, mainly for the construction of the fifth tank at the Zeebrugge LNG terminal
• Belgian network plays key role as a natural gas crossroads: border-to-border transmission volumes up 20%
• Gas-fired power plants crucial to security of electricity supply
• Belgian gas trading still growing steadily
• Transmission tariffs drop by approximately 7.5% in 2018
• Natural gas as a fuel for transport continues to rise
  
  

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1. Key financial figures 

Operating income in 2017: €510.5 million.

The Fluxys Belgium group generated turnover of €510.5 million in 2017, similar to that generated over the same period in 2016 (€509.5 million). In accordance with regulatory principles, this stable level of regulated turnover is mainly due to the drop in operating costs that offsets the increase in the regulated rate of return.

Interest rates are still low, affecting the group's net profit.

The majority of the Fluxys Belgium group’s activities are regulated. The profit from these activities is determined by different regulatory parameters, in particular the equity invested, the financial structure, and OLO interest rates.

The average OLO interest rate in 2017 amounted to 0.74%, compared to 0.49% in 2016. This increase has a positive impact on the regulated rate of return on invested capital and consequently on the annual profit for 2017, as does the increase in the profit from non-regulated activities. Both elements jointly have an impact of €5.5 million.

The reform of Belgian corporate income tax has a one-off impact of €16.2 million on deferred taxes booked in the past. However, this increase does not affect the profit or dividend to be paid out as the tax level is not an element that determines the allowed regulated return for shareholders. On the contrary, the tax reform does have a positive impact on future tariffs. Thanks to lower tax rates, from 2020 onwards Fluxys Belgium will pay relatively fewer taxes and as such the costs to be covered by the tariffs will decrease.

The net profit in 2017 amounted to €70.3 million, an increase of €21.8 million compared to the same period in 2016 (€48.5 million).

€83.4 million invested.

In 2017, investments in property, plant and equipment totalled €83.4 million, compared to €139.2 million in 2016. €64.8 million went to LNG infrastructure projects (mainly the construction of a fifth tank at the Zeebrugge LNG terminal) and €16.8 million went to transmission projects.

2. Key events

Border-to-border transmission volumes up 20%.

The discontinuation of the UK's largest storage facility has triggered a major shift in the provision of flexibility on the Northwest European market. In this market situation, the Belgian network once again played its key role as a gas crossroads, with volumes transmitted from border to border rising by 20%.

 

Gas-fired power plants crucial to security of electricity supply.

The quantities of gas transported for consumption in Belgium rose slightly (+1.4%). Offtake by distribution fell (-1.2%) as temperatures in 2017 were milder compared to 2016, while industry recorded a healthy rise (+5.1%) and offtake by power plants also increased (+3.4%). The latter reaffirms in 2017 that gas-fired power plants are the indispensable partner of renewable energy generation as their flexibility offers back-up when there is too little wind or sun. They also provided for security of electricity supply when other generation units were unavailable in Q1, Q4, as well as in April and May.

Belgian gas trading is still growing steadily.

Traded volumes on Belgium's ZTP gas trading place rose by nearly 10% in 2017 to 1008 TWh, exceeding for the first time 1000 TWh, more than five times Belgium's annual consumption. Notional trading on ZTP continued in 2017 the strong growth seen in recent years, with volumes traded rising by 46%. In December, daily traded volumes set a new record of 1.4 TWh.

Transmission tariffs drop by approximately 7.5% in 2018.

Tariffs for gas transmission have fallen since 1 January 2018. This is the result of ongoing efficiency efforts by Fluxys Belgium and low interest rates. These two factors prompted Fluxys Belgium and federal energy regulator CREG in 2017 to start the regulatory procedure for lowering gas transmission tariffs for the period 2018-2019. The tariff reduction and non-indexation of tariffs on 1 January 2018 jointly result in a transmission cost reduction of approximately 7.5%.

Major step forward in the development of LNG as marine fuel.

The commissioning of the second jetty at the Zeebrugge LNG terminal in late 2016 marked another major step forward in the development of liquefied natural gas (LNG) as a marine fuel. Thanks to the second jetty, the terminal can now also welcome small LNG bunkering vessels that load LNG in order to supply other ships using LNG as fuel. Regularly docking at the second jetty is the ENGIE Zeebrugge, the LNG bunkering vessel in which parent company Fluxys is a partner and whose home port is Zeebrugge. The second jetty also enables the terminal to respond flexibly to demand for simultaneous or consecutive berthings.

Number of CNG vehicles and filling stations continues to rise.

In 2017, the number of CNG-powered vehicles again rose considerably, from 5,400 to 9,000. More than one CNG filling station on average opened per month, with their numbers rising from 74 to 90.

Successful issue of long-term bond worth €350 million.

With a view to refinancing a loan maturing in May 2018, Fluxys Belgium responded to the keen interest shown by investors in late summer by issuing a bond in two tranches:

• One 10-year tranche of €300 million with a coupon of 1.75% (87 bps over midswap) and maturing in October 2027
• One 15-year tranche of €50 million with a coupon of 2.375% (105 bps over midswap) and maturing in October 2032

The success of the issue reaffirms the confidence of European institutional investors in Fluxys Belgium’s creditworthiness and the key role of the Belgian natural gas network as a crossroads in Northwest Europe.

3. Fluxys Belgium – 2017 profits (according to Belgian standards): proposed allocation of profits

Fluxys Belgium's net profits totalled €44.7 million, compared to €33.7 million in 2016.

This increase is essentially due to the same reasons as the changes in the consolidated results, namely the rise in rates for linear bonds (OLOs) which affects the regulated rate of return, just like the increase in the profit from non-regulated activities, including dividend yield. According to Belgian standards, the tax reform has no impact on the profits of the current financial year.

Since 2010 and barring unforeseen events, Fluxys Belgium has strived to distribute 100% of its net profit for the year plus any reserves released in line with the depreciation of the revaluation surplus.

At the Annual General Meeting of 8 May 2018, Fluxys Belgium will propose a gross dividend of €1.23 per share by freeing up €9.9 million of unavailable reserves.

Factoring in a profit of €33.6 million carried forward from the previous financial year and withdrawal from reserves of €51.4 million, the Board of Directors will propose to the Annual General Meeting to allocate profits as follows:

• €86.4 million as dividend payout
• €43.3 million as profit to be carried forward

If this proposed allocation of profits is approved, the total gross dividend per share for the 2017 financial year will be €1.23. This amount will be payable as from 17 May 2018.

4. Financial outlook for 2018

The net profit from Belgian regulated activities is determined, as per the current tariff methodology, by different regulatory parameters, in particular by the equity invested, by the financial structure, and by the interest rates (OLO). The recurring dividend will continue to evolve primarily based on the development of these three parameters. The current financial markets do not allow for accurate projections regarding the evolution of interest rates and thus the return on regulated activities.

5. External audit

The statutory auditor has confirmed that his audit activities, which have been thoroughly carried out, have not revealed the need for any significant adjustments to the accounting information contained in this press release.

6. Annexes

Download the consolidated balance sheet, the consolidated income statement, the consolidated statement of comprehensive income, the statement of changes in equity and the consolidated statement of cash flows as a pdf

Financial info