Annual Report • Apr 27, 2017
Annual Report
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Head Office: Rua Tomás da Fonseca – Torre C – 1600-209 Lisboa Share Capital: 89,529,141.00 EUR MCRC/NIPC: 509148247
| 1. INTRODUCTION 3 | |
|---|---|
| 2. GOVERNING BODIES 5 | |
| 3. RELEVANT FACTS OCCURRED IN 2016 7 | |
| 4. KEY INDICATORS 17 | |
| 5. ECONOMIC AND FINANCIAL REVIEW 18 | |
| 5.1 ANALYSIS OF RESULTS 18 | |
| 5.2 REVIEW OF THE FINANCIAL SITUATION 21 | |
| 6. INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM 22 | |
| 7. FUTURE OUTLOOK 24 | |
| 8. RELEVANT EVENTS OCCURRED AFTER THE CLOSING OF THE YEAR 24 | |
| 9. FINAL REMARKS25 | |
| 10. PROPOSED APPROPRIATION OF NET INCOME25 | |
| ANNEX I – MANDATORY STATEMENTS AND NOTES 27 | |
| ANNEX II – CONSOLIDATED FINANCIAL STATEMENTS 32 |
The corporate objective of Galp Gás Natural Distribuição, S.A., hereinafter referred to as GGND, is the undertaking of business activities in the energy sector, in particular in natural gas distribution, including the provision of services supporting business management, in the areas of management, administration and logistics, purchases and procurement, and information systems.
GGND has stakes in nine natural gas distributors in Portugal, five of which operate under concession contracts lasting 40 years, while the rest operate under licenses with an operating period of 20 years.
GGND provides its services to the companies in which it holds direct stakes, namely:
GGND, through the companies it controls, operates natural gas distribution infrastructures in Portugal, with the Energy Services Regulating Entity (ERSE) being the Portuguese regulator for the energy sector.
At the present date, the composition of the governing bodies of GGND, for the current term of office of 2015- 2018, is as follows:
| Chairman: | Rui de Oliveira Neves |
|---|---|
| Secretary: | Maria Helena Goldschmidt |
| Permanent: | Rita Picão Fernandes |
|---|---|
| Alternate: | Inês Figueira |
| Chairman: | Pedro Carmona de Oliveira Ricardo* |
|---|---|
| Deputy Chairman (independent): | Maria Leonor Galo Pedrosa dos Santos Machado de Baptista Branco* |
| Members: | Gabriel Nuno Charrua de Sousa |
| Naohiro Hayakawa* | |
| José Manuel Rodrigues Vieira* | |
| Ana Isabel Simões Dias dos Santos Severino* | |
| Maria Marta Geraldes * | |
| Yoichi Noborisaka* | |
* Elected on 27 October 2016, for the term of office in course of 2015-2018
| Chairman: | Gabriel Nuno Charrua de Sousa (CEO) |
|---|---|
| Members: | Naohiro Hayakawa (CFO) |
| José Manuel Rodrigues Vieira (COO) |
| Permanent: | PricewaterhouseCoopers & Associados – Sociedade de Revisores Oficiais de |
|---|---|
| Contas, Lda., represented by António Joaquim Brochado Correia, ROC number | |
| 1076, or by Ana Maria Ávila de Oliveira Lopes Bertão, ROC number 902. | |
| Alternate: | José Manuel Henriques Bernardo, ROC number 903. |
Representative for Relations with the Capital Market and Securities Market Commission (CMVM):
Gabriel Nuno Charrua de Sousa
During 2016, the following resigned from office:
On 28 July 2016, following a process of negotiation with potential investors, the single shareholder of GGND, at that time, Galp Gás & Power, SGPS, S.A., reached an agreement with a consortium composed of Marubeni Corporation and Toho Gas Co., Ltd., through which this consortium acquired 22.5% of the share capital of GGND, subject to certain conditions, namely its approval by the European Commission and Portuguese State. The operation was completed on 27 October 2016, from which date onwards a qualifying stake of 22.5% of the share capital of GGND, corresponding to 20,144,057 shares became imputable to MEET Europe Natural Gas, Lda., a company held in equal parts by Marubeni Corporation and Toho Gas Co., Ltd.
As a consequence of this operation, changes were made to the corporate governance model, including the composition of its governing bodies.
Indeed, by unanimous corporate decision of the shareholders on 27 October 2016, the Board of Directors, previously composed of three members, shifted to comprising eight directors.
Furthermore, by decision of the Board of Directors at a meeting held on 18 November 2016, an Executive Committee was appointed, composed of three members, which was entrusted with the Company's current management.
The natural gas distribution business is supported by the application of regulated tariffs defined by the ERSE, based on allowed revenues, which is derived from the ratios between the capital cost of the investments made, the recovery of allowed operating costs and adjustments, namely the tariff deviation.
The cost of capital is calculated as the product of the regulated asset base by the remuneration rate established by the regulator, plus the depreciation of these assets.
The tariff deviation is defined as the difference between the estimated allowed revenues for year n-2 and the "actual allowed revenues" in that same period.
The remuneration rate is calculated according to the average yield of 10-year treasury bonds issued by the Portuguese State.
The 4th regulatory period of the natural gas sector started on 1 July 2016, following the ERSE's approval of the new regulations (Tariff, Commercial Relations, Access to Networks, Infrastructures and Interconnections, Infrastructures Operation and Quality of Service).
The asset remuneration rate established by the ERSE for the Gas Year 2016-2017 was 6.20% in the Natural Gas Distribution business, compared with 7.94% in the previous Gas Year.
On 19 September 2016, GGND issued debt instruments of the value of €600 million, with maturity of 7 years and a coupon of 1.375%.
These debt instruments have a unit nominal value of €100 thousand and were issued under the €1,000,000,000 Euro Medium Term Note (EMTN) Programme of GGND, established on 25 August 2016, and listed on the regulated market of the London Stock Exchange (ISIN: PTGGDAOE0001).
On 5 October 2016, the agency Standard & Poors attributed to GGND a long-term rating of "investment grade" BBB-, one level above the rating attributed to the Portuguese Republic (BB+, non-investment grade), with stable outlook.
The activity of GGND, on a consolidated basis, generated a net income of €26.6 million in 2016, corresponding to €6.5 million less than in the same period of 2015, with EBITDA having reached €112.2 million, representing €15.3 million less than in the previous year.
In 2016 there was a reduction in the consolidated balance of the tariff deviation of the natural gas distribution business, corresponding to the difference between the revenues effectively invoiced by the companies controlled by GGND and the allowed revenues estimated by the ERSE.
In fact, by the end of 2016, the receivable balance of the tariff deviation stood at approximately €12.9 million, representing €16.1 million less than at the end of 2015.
Net operating costs reached €86.2 million, standing at 2% higher than that recorded in the same period of 2015, influenced by the continued improvement of processes in terms of customer service.
During 2016, investment amounted to €23.1 million, with approximately 68% of the total having been allocated to business development, which included the expansion of the distribution network by 147 km, construction of 4,685 branch lines and connection of 14,871 new consumer points, of which 9,569 installations required adjustment for natural gas.
The investment effort is in line with the strategic guidelines that have steered the company's investment efficiency policy, reflected in the Natural Gas Distribution Network Development and Investment Plan (PDIRD) submitted to the Directorate General for Energy and Geology (DGEG). Here, the objective is to assure compliance with the concession and regulatory obligations, and contribute to the consolidation of the Natural Gas distribution project in the concession areas at levels ensuring the sustainability of the pricing of the National Natural Gas System (SNGN).
GGND has maintained rigorous monitoring of the indicator "Investment in connections to new consumers" at economically efficient levels.
By the end of 2016, the natural gas distribution system of the companies controlled by GGND reached a total of 11,867 km of distribution network, covering a total number of 1,033,867 consumer points with an active contract, with a volume of 1,365 million cubic metres of natural gas having been distributed.
Close to 93% of the volume of gas is already distributed to consumption sites with an active contract on the free market, in line with the progressive liberalization of the natural gas sector and consequent transfer of consumption sites to the free market.
In 2016, the development of the "Asset Management System" (SGA) installed in the previous year was pursued, with the introduction of new functionalities, in particular development of the reporting component.
The second phase of the "Distribution Portal" was developed and completed in 2016, enabling the companies controlled by GGND to provide their stakeholders, namely Salespersons and Customers, with a platform for more effective and transparent relations in the management of processes.
This communication channel uses the new tools of the digital era, with access by Internet, so it is always available and personalized according to the activity and intended user engaging with companies of the GGND Group.
The "Star Programme – Positive Service" was improved during 2016, strengthening the focus on customer satisfaction through the launch of the "Star Programme – Client Experience", while maintaining the main drive of efficient management of Natural Gas Partners in the context of field activities and interaction with natural gas clients.
CERTIFICATION OF THE INTEGRATED ENVIRONMENT, QUALITY AND SAFETY MANAGEMENT SYSTEMS
The companies controlled by GGND have once again assured the certification of their integrated management systems of the Environment, Quality and Safety, that in 2016 was achieved through joint certification.
This fact was the result of an enormous effort towards harmonization of practices, procedures and processes, contributing to improve our action and that of our service providers.
The need for the continuous improvement of consumer satisfaction is an indispensable attitude for any organization to achieve success.
Throughout 2016, for the group of companies controlled by GGND consumer satisfaction was assessed by questionnaires conducted by telephone. The analysis is based on the percentage of consumers who classify the services with grades above 2, considering a scale of 0 to 4, where 4 is the highest classification. It was found that the different services are assessed positively by the great majority of the Consumers.
Accidents with damage caused in the natural gas distribution infrastructure have been examined carefully and a prevention campaign has been implemented, namely with the signing of a protocol with EDP and provision of records to city councils, by the Network Operators, over the past years.
In 2016, for the group of companies controlled by GGND, 34 accidents with damage caused by third parties were recorded.
Focusing on the Quality of Service to the natural gas consumer, as the mechanism facilitating and promoting the use of natural gas as a source of energy, and keeping in line with the standards established by the ERSE, the individual indicators on Service Quality in 2016 for the group of companies controlled by GGND are presented below:
• Number of readings with interval, compared to the previous reading, of 64 days or less
• Number of telephone calls attended in relation to emergencies and breakdowns with waiting time of 60 seconds or less
Full compliance with the indicator, consistently and surpassing the minimum required by the ERSE, except PAXG for the 2nd quarter;
Stability of the number of telephone calls attended.
• Number of emergency situations with time of arrival at the site of 60 minutes or less
Full compliance with the indicator, consistently and surpassing the minimum required by the ERSE;
Minor increase in the number of emergency situations.
• Number of technical assistance actions with time of arrival at the site of 3 hours or less
Full compliance with the indicator, consistently and surpassing the minimum required by the ERSE;
Stability of the number of situations of breakdowns requiring presence at the site.
• Number of written requests for information received in the quarter that were answered in a period of 15 business days or less
Compliance with the minimum indicator required by the ERSE, except:
For the 2nd and 3rd quarter => GDL;
For the 2nd quarter => BRG, DIAG, DOUG, LSTG, PAXG e SETG.
Growing number of written requests, with the companies controlled by GGND now including all written requests received regardless of whether they are directly from the consumer or mandated entity (Provider).
| Operational Indicators | ||||||
|---|---|---|---|---|---|---|
| UNIT | 2015 | 2016 | Variation | % Var. | ||
| Connection Points | # | 1.021.442 | 1.033.867 | 12.425 | 1,2% | |
| Gas Volume Distributed | kcm | 1.359.175 | 1.365.021 | 5.846 | 0,4% | |
| Total Network Extension | km | 11.689 | 11.836 | 147 | 1,3% | |
| 20bar network | km | 648 | 648 | - | % | |
| 4bar network | km | 11.041 | 11.188 | 147 | 1,3% |
| Financial Indicators | ||||
|---|---|---|---|---|
| (thousands of euros) | 2015 | 2016 | Variation | % Var. |
| Turnover | 216.936 | 201.516 | (15.420) | (7%) |
| EBITDA | 127.498 | 112.162 | (15.336) | (12%) |
| EBIT | 86.052 | 71.077 | (14.975) | (17%) |
| Financial Results | (29.846) | (22.110) | 7.736 | (26%) |
| Net Income | 33.088 | 26.552 | (6.536) | (20%) |
| Cash Flow 1 | 83.570 | 85.149 | 1.579 | 2% |
| Financial Debt 2 | 648.027 | 638.253 | (9.774) | (2%) |
| Net fixed assets 3 | 1.132.802 | 1.113.987 | (18.814) | (2%) |
| Other Investiments 4 | 16.447 | 17.337 | 891 | 5% |
| CAPEX | 19.696 | 23.084 | 3.388 | 17% |
1 Net Income + Amortization and Depreciation +/- Variation of Provisions
2 Bank loans (non-current) + Bonds + Shareholder loan + Bank loan and overdrafts
3Tangible Assets + Intangible Assets
4 Investmenst in associates and jontly controlled entities + Goodwill + Investments in other companies
| Income Statement | ||||
|---|---|---|---|---|
| (thousands of euros) | 2015 | 2016 | Variation | % Var. |
| Turnover | 216.936 | 201.516 | (15.420) | (7%) |
| Cost of Sales | (4.878) | (3.161) | (1.716) | (35%) |
| External Supplies and Services | (70.699) | (74.614) | 3.915 | 6% |
| Employee Costs | (23.264) | (20.650) | (2.614) | (11%) |
| Other Operating Income | 30.249 | 33.670 | 3.421 | 11% |
| Other Operating Costs | (20.846) | (24.599) | (3.753) | 18% |
| EBITDA | 127.498 | 112.162 | (15.336) | (12%) |
| Amortization, Depreciation and Provision | (41.445) | (41.085) | (360) | (1%) |
| EBIT | 86.052 | 71.077 | (14.975) | (17%) |
| Financial Results | (29.846) | (22.110) | 7.736 | (26%) |
| Profit Before Tax | 56.206 | 48.967 | (7.239) | (13%) |
| Taxes | (13.340) | (12.358) | (982) | (7%) |
| Energy sector extraordinary contribution | (9.778) | (10.057) | 280 | 3% |
| Consolidated Net Income | 33.088 | 26.552 | (6.536) | (20%) |
Turnover reached €201.5 million in 2016, showing a 7% decrease (€15.4 million) year-on-year. This variation was due to the effects of allowed revenues, essentially inherent to the change of the rate of asset remuneration, published by the ERSE.
| Net Operating Costs | ||||
|---|---|---|---|---|
| (thousands of euros) | 2015 | 2016 | Variation | % Var. |
| External Supplies and Services | (70.699) | (74.614) | 3.915 | 6% |
| Employee Costs | (23.264) | (20.650) | (2.614) | (11%) |
| Other Operating Costs | (20.846) | (24.599) | (3.753) | 18% |
| Other Operating Income | 30.249 | 33.670 | 3.421 | 11% |
| Total | (84.561) | (86.193) | 1.632 | 2% |
Net Operating costs amounted to €86.2 million, corresponding to 2% more than that recorded in 2015. This result was primarily influenced by the increased technical assistance activity and systems development, partly offset by the lower staff costs.
In 2016, considering the amount of the turnover and operating costs, GGND recorded EBITDA of €112.2 million, 12% lower than in the same period of the previous year, strongly influenced by the revised asset remuneration rate.
| Amortization, Depreciation and Provision | ||||
|---|---|---|---|---|
| (thousands of euros) | 2015 | 2016 | Variation | % Var. |
| Amortization and Depreciation | (41.073) | (41.464) | 391 | 1% |
| Provision and impairment loss on receivables | (372) | 379 | (751) | (202%) |
| Total | (41.445) | (41.085) | (360) | (1%) |
Amortization, depreciation and provisions reached €41.1 million in 2016, corresponding to 1% less than the previous year.
| Financial Results | ||||
|---|---|---|---|---|
| (thousands of euros) | 2015 | 2016 | Variation | % Var. |
| Financial Income | 1.167 | 995 | (172) | (15%) |
| Financial Costs | (32.188) | (23.954) | 8.234 | (26%) |
| Share Results of Investments in Associates | 1.175 | 849 | (326) | (28%) |
| Total | (29.846) | (22.110) | 7.736 | (26%) |
The financial results were negative by €22.1 million, having improved by €7.7 million in relation to the previous year.
In 2016, GGND achieved Profit before Tax of €49 million which, net of Income Tax and the Extraordinary Contribution of the Energy Sector, generated a Net Income of €26.6 million, 20% lower than the same period of the previous year, primarily due to the decline of Allowed Revenues.
| Financial Position | ||||
|---|---|---|---|---|
| (thousands of euros) | 2015 | 2016 | Variation | % Var. |
| Fixed Assets | 1.132.802 | 1.113.987 | (18.814) | (2%) |
| Investments in associates and jointly controlled entities | 14.169 | 15.059 | 891 | 6% |
| Other Investments 1 | 2.278 | 2.278 | 0 | % |
| Other receivables 2 | 64.642 | 48.912 | (15.730) | (24%) |
| Non-current Assets | 1.213.890 | 1.180.237 | (33.654) | (3%) |
| Equity | 256.553 | 265.143 | 8.590 | 3% |
| Non-current liabilities | 965.963 | 959.440 | (6.523) | (1%) |
| Permanent Capital | 1.222.516 | 1.224.583 | 2.067 | 0% |
| Working Capital | 8.626 | 44.347 | 35.721 | 414% |
| Operational necessity. 3 | 111.528 | 88.048 | (23.480) | (21%) |
| Operating resources 4 | 113.911 | 73.462 | (40.449) | (36%) |
| Working capital needs | (2.383) | 14.586 | 16.969 | (712%) |
| Cash and cash equivalents | 28.526 | 43.064 | 14.537 | 51% |
| Net Debt 5 | 619.500 | 595.189 | (24.311) | (4%) |
| Total Equity | 256.553 | 265.143 | 8.590 | 3% |
| Capital employed | 876.053 | 860.332 | (15.721) | (2%) |
| Debt to equity | 241% | 224% | (17%) | (7%) |
1 Goodwill + Investments in other companies
2 Includes Shareholder loan and Defered Tax assets
3Inventories + Trade receivables + Other receivables
4 Trade payables + Other payables
5 Bank loans (non-current) + Bonds + Shareholder loan + Bank loan and overdrafts - Cash and Cash Equivalents
In 2016, GGND recorded a positive Working Capital of €44.4 million, as its Fixed Capital was sufficient to cover its Non-Current Assets in addition to generating a surplus used to meet its Working Capital Needs.
As at 31 December 2016, Net Debt stood at €595.2 million, reflecting a reduction of €24.3 million compared to 2015.
Concerning financing policy, we highlight the fact that in 2016 GGND had paid up its shareholders' loans raised from its majority shareholder and, on 19 September 2016, had issued a €600 million bond, with a maturity of 7 years.
| Financial Ratios | |
|---|---|
| 31-12-2016 | |
| Net Debt / EBITDA | 5.4x |
| Debt Service Coverage Ratio | 2.1x |
As the holding of a group of regulated companies operating in geographically dispersed areas in the Natural Gas Distribution sector, the existence of a robust internal regulatory system and a disciplined approach to risk are important aspects at GGND. This regulatory framework assures that the activity is developed in accordance with strategic objectives, that the accepted risks are properly rewarded and that long term value is created for the shareholders.
The Board of Directors is the body responsible for establishing, based on the Company's strategy, the risk level that GGND is willing to accept and for assuring the alignment of the strategy with that risk level.
The Executive Committee is responsible for monitoring risk management, focusing on the main risks faced by GGND, including strategic, operational, financial and regulatory risks.
As the reorganization of GGND occurred in 2016, GGND is tightening its procedures for risk analysis and management and internal control, considering its specific area of action (Natural Gas Distribution) and the legislative and regulatory framework in which it operates.
In this context, a Compliance Programme, a Code of Conduct and an Anti-Corruption Policy have been approved, which stress the expected obligatory duties and procedures, also in the perspective of management and mitigation of the risks faced by GGND and its participated companies.
The internal control system, whose structure is under review, is intended to be based on a series of policies and procedures, aimed at assuring compliance with GGND's objectives concerning:
The control environment constitutes the basis of the internal control system. It influences the way that the Company's strategy and objectives are defined, how the operating activities are structured and how the risk culture is assumed.
GGND's control environment is intended to be based on a series of internal codes, policies, rules and procedures, which define principles of ethical conduct and assure scrutiny of the different management acts, in line with best practices and in conformity with the legal and regulatory requirements.
It should be noted in particular that the highly regulated framework in which GGND's participated companies operate has led to the establishment of a Compliance Programme and Code of Conduct, which are binding to the entire organization. This programme establishes the creation of a Monitoring Committee that includes an independent auditor, which should monitor the appropriate application of the principles laid down in the programme and the compliance of action of the companies to the established obligations.
The definition or review of GGND's objectives is the factor which triggers the risk management process. The timely identification of the factors and consequent assessment of the risks enables GGND to detect potential events that might affect the pursuit of the objectives.
In order to assure an effective internal control system, GGND promotes the exchange of significant information, maintaining permanent communication with the different agents involved, both internal and external.
Finally, plans are being made for the conduct of operational, compliance and financial audits, as well as reviews of the information systems, aimed at testing the effectiveness of the existing internal control mechanisms and providing for their continuous improvement.
The process of mandatory disclosure of financial information is monitored by the administration and supervisory bodies. In particular, regarding the presentation of annual and six-monthly financial statements, the documents are sent to the administration and supervisory bodies, which are responsible for their approval before disclosure.
GGND has identified the following risks as priority:
GGND's main risks and uncertainties are managed, monitored and communicated at the level of the counterpart, project and geographic area, according to the case.
The strategies of response to specific situations are defined in order to assure that the risks are placed within the general guidelines accepted by GGND and its group of companies.
GGND and its participated assure coverage of the identified risks by taking out the Insurance Policies deemed necessary, with a view to the transfer of the risk and minimization of potential reputation, operational and financial damage.
GGND's operations are of a long term nature, which implies that many of the risks to which it is exposed are permanent. However, the factors triggering internal or external risks are changeable and can develop and evolve over time, and may vary in terms of probability, severity and detectability.
In line with the goals presented in each companies' PDIRD 2017-2021 (Natural Gas Distribution Network Development and Investment Plan), the GGND Group shall maintain its rigorous principles underpinning the choice of investment following a perspective of economic rationality and efficiency of the investments that contribute favorably to the tariff system and sustainability of the National Natural Gas System (SNGN).
The GGND Group shall continue to invest and concentrate its efforts in developing natural gas infrastructures and increasing consumer points, aimed at giving access to this more economic and environmentally "cleaner" energy to the largest number of consumers and economic agents possible, and achieving efficiency levels that are appropriate to the investments made without, however, failing to fulfill its Public Service mission.
In 2017, GGND shall continue to focus on the continuous and sustained improvement of processes and the fine-tuning of practices and adjustment of the means supporting the business, without neglecting the strengthening of the skills of its employees.
The best practices for the promotion of awareness-raising actions on service quality will be maintained among the employees and suppliers, with SAFETY continuing to remain as the principal guideline in business management, contributing to the desired sustainability of the GGND Group.
Service quality shall always be one of its priority missions, aimed at assuring the continuous supply of natural gas to consumers, under the best safety conditions.
No materially relevant events occurred after the closing of the financial year which should be mentioned.
The Board of Directors of GGND is grateful for the cooperation provided by all who, individually or collectively, contributed to the accomplished results. We acknowledge, with great appreciation:
And lastly, and because they are the first, to our clients, for their trust given to the companies of the GGND Group, the Board of Directors of GGND would like to express its recognition and assure them that it shall do everything within its reach to improve the quality of the service provided to the final users.
On an individual basis, GGND closed the financial year of 2016 with a positive net income of €65,217,062.29 (sixty-five million, two hundred and seventeen thousand, sixty-two euros and twenty-nine cents), calculated in conformity with the International Financial Reporting Standards (IFRS).
The Board of Directors proposes, under the legal terms, that the net income for 2016 should be appropriated as follows:
| Endowment to the Legal Reserve | 3,260,853.12 Euros |
|---|---|
| Distribution of Dividends | 61,955,632.90 Euros |
Retained Earnings 576.27 Euros
Lisbon, 30 March 2017
The Board of Directors
Pedro Carmona de Oliveira Ricardo Chairman
_______________________________________________________
Maria Leonor Galo Pedrosa dos Santos Machado de Baptista Branco Deputy Chairman
_______________________________________________________
Gabriel Nuno Charrua de Sousa Member
_______________________________________________________
Naohiro Hayakawa Member
_______________________________________________________
José Manuel Rodrigues Vieira Member
_______________________________________________________
Ana Isabel Simões Dias dos Santos Severino Member
_______________________________________________________
Maria Marta Geraldes Member
_______________________________________________________
_______________________________________________________ Yoichi Noborisaka Member
(Articles 448, number 4 of the Commercial Companies Code and Article 245-A, number 1, c) of the Securities Market Code, applicable by force of number 4 of the same article)
| Shareholders | N.º of Shares | Nominal Value | % |
|---|---|---|---|
| Galp Gas & Power, SGPS, S.A. | 69.385.084 | 1,00 EUR | 77,50% |
| MEET Europe Natural Gas, Lda. | 20.144.057 | 1,00 EUR | 22,50% |
| Total | 89.529.141 | 1,00 EUR | 100,00% |
(Article 245-A, number 1, subparagraph d) of the Securities Market Code, applicable by force of number 4 of the same article)
There are no shareholders with special rights.
They are no restrictions on matters of voting rights.
(Article 245-A, number 1, subparagraph f) of the Securities Market Code, applicable by force of number 4 of the same article)
They are no restrictions on matters of voting rights.
(Articles 66, subparagraph d) and 325-A, number 1 of the Commercial Companies Code)
GGND did not acquire or divest any of its own shares during 2016. As at 31 December 2016, GGND did not hold any of its own shares.
(Article 448, number 5 of the Commercial Companies Code)
Bodies as at 31/12/2016
As of 31 December 2016, none of the members of the administration and supervisory board held shares or bonds issued by GGND.
(Article 245-A, number 1, subparagraph d) of the Securities Market Code, applicable by force of number 4 of the same article)
The shareholders of GGND attending the General Meeting are responsible for electing and replacing the members of the Board of Directors, including the respective chairman and deputy chairman.
The election of the members of the Board of Directors is conducted by list, with indication of the proposing shareholders. The votes are cast based on the whole lists rather than each member, pursuant to the law.
The Deputy Chairman shall replace the Chairman of the Board of Directors in the event of absence or impediment. In the case of definitive absence or impediment of any of the members of the Board of Directors, this body shall be responsible for their replacement through co-optation, which should be submitted for ratification to the following General Meeting.
The Memorandum of Association of GGND establishes that the members of the Board of Directors are appointed for three-year periods, with their re-election being permitted once or more times.
For the purposes of the arrangement concerning replacement of directors due to definitive absence, established in number 1 of article 393 of the Commercial Companies Code, the Company's Memorandum of Association considers that a director is definitively absent when, without justification accepted by the Board of Directors, the director fails to attend three consecutive meetings or five interpolated meetings.
Under the applicable legal terms, if the appointed directors have an employment contract in force with the Company for which they have been appointed or with a company in a controlling or group relationship with it, this contract shall be terminated if it has been concluded less than a year ago, or shall be suspended if it has lasted for more than one year.
Pursuant to article 10, number 3 of the Memorandum of Association of GGND, any decision of the General Meeting involving amendment of the Memorandum of Association must necessarily be approved by shareholders holding at least 90% of the share capital, except for amendments derived from capital increase and reductions required for compliance with legal or regulatory obligations or compliance with the Company's policy on distribution of dividends.
(Article 245-A, number 1, subparagraph i) of the Securities Market Code, by application of number 4 of the same article)
The Board of Directors of GGND is vested with the Company's administration powers typically established in the legislation for the respective corporate governance model. The Memorandum of Association of GGND does not foresee any special powers for this body, namely the possibility of the Board of Directors deliberating on an increase of the Company's share capital.
(Article 3 of Law 28/2009 of 19 June, applicable by force of article 3 of the Legal Framework for Audit Supervision approved by Law 148/2015 of 9 September)
The gross annual value of the remuneration earned, in aggregated and individual form in 2016, from the date of their election on 27 October 2016, by the members of the Company's administration body currently in office, is presented in the table below.
The member of the Company's administration body Gabriel Sousa did not earn any remuneration for the performance of duties prior to the date referred to above.
| Name | Position | Fixed Remuneration |
Other Remunerations |
Total |
|---|---|---|---|---|
| Maria Leonor Branco | Non-executive Deputy Chairman | 5,047.89 | 0.00 | 5,047.89 |
| Gabriel Sousa | Executive Director | 20,951.61 | 455.401 | 21,407.01 |
| Naohiro Hayakawa | Executive Director | 19,473.54 | 20,801.942 | 40,275.48 |
| José Vieira | Executive Director | 14,612.59 | 455.401 | 15,067.99 |
Total 81,798.37
(1) Includes the amounts relative to meals expenses
(2) Includes the amounts relative to meals and other expenses associated to the impatriation of Naohiro Hayakawa
The members of the Company's administration body not indicated in the table above did not earn remuneration in 2016.
The remuneration paid to the Company's permanent Statutory Auditor in 2016 was €2,700.
(Article 5, number 4 of Decree-Law 495/88 of 30 December, as amended by Decree-Law 318/94 of 24 December)
See Note 28 of the Notes to the Statement of Financial Position and Income Statement of the individual accounts.
Pursuant to article 245, number 1, subparagraph c) of the Securities Market Code, each of the directors indicated below declares that, to the best of their knowledge, the management report, the annual financial statements, the legal certification of accounts and all other documents presenting accounts were prepared in conformity with the applicable accounting rules, giving a true and appropriate image of the assets and liabilities, the financial situation and the results of GGND and the companies included in the consolidation perimeter. Furthermore, they also declare that the management report faithfully presents the evolution of the business, performance and position of GGND and the companies included in the consolidation perimeter, and contains a description of the main risks and uncertainties faced by GGND and the companies included in the consolidation perimeter in their activity.
Chairman: Pedro Carmona de Oliveira Ricardo
Maria Leonor Galo Pedrosa dos Santos Machado de Baptista Branco
Gabriel Nuno Charrua de Sousa
Naohiro Hayakawa
José Manuel Rodrigues Vieira
Ana Isabel Simões Dias dos Santos Severino
Maria Marta Geraldes
Yoichi Noborisaka
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION4 | ||
|---|---|---|
| CONSOLIDATED INCOME STATEMENT5 | ||
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 6 | ||
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY7 | ||
| CONSOLIDATED STATEMENT OF CASH FLOW 8 | ||
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 20169 | ||
| 1.INTRODUCTION9 | ||
| 2.SIGNIFICANT ACCOUNTING POLICIES 9 | ||
| 2.1. | Basis of presentation 9 | |
| 2.2. | Consolidation methods 19 | |
| 2.3. | Tangible assets 22 | |
| 2.4. | Intangible assets 23 | |
| 2.5. | Impairment of non-current assets, except goodwill 24 | |
| 2.6. | Leases 25 | |
| 2.7. | Inventories 25 | |
| 2.8. | Government grants and other grants 26 | |
| 2.9. | Provisions 26 | |
| 2.10. | Retirement benefits 26 | |
| 2.11. | Other retirement benefits – healthcare, life insurance and defined contribution minimum benefit plan 28 | |
| 2.12. | Foreign currency balances and transactions 28 | |
| 2.13. | Income and accruals basis 29 | |
| 2.14. | Financial costs on loans obtained 31 | |
| 2.15. | Income tax 31 | |
| 2.16. | Financial instruments 32 | |
| 2.17. | Classification in the consolidated statement of financial position 34 | |
| 2.18. | Subsequent events 34 | |
| 2.19. | Segment reporting 34 | |
| 2.20. | Estimates and judgments 34 | |
| 2.21. | Equity management policy 36 | |
| 2.22. | Risk management and hedging 37 | |
| 3.CONSOLIDATED COMPANIES 37 | ||
| 3.1. | Consolidation perimeter 37 | |
| 4.FINANCIAL INVESTMENTS 40 | ||
| 4.1. | Investments in associates 40 | |
| 4.2. | Financial assets held for sale 41 | |
| 4.3. | Results from financial investments 42 | |
| 5.OPERATING INCOME42 | ||
| 6.OPERATING COSTS 44 | ||
| 7.SEGMENT REPORTING 45 | ||
| 8.FINANCIAL INCOME AND COSTS 48 | ||
| 9.INCOME TAX 49 | ||
| 10.EARNINGS PER SHARE52 | ||
| 11.GOODWILL 53 | ||
| 12.TANGIBLE AND INTANGIBLE ASSETS54 | ||
| 12.1. | Changes in tangible assets: 54 | |
| 12.2. | Changes in intangible assets: 55 | |
| 12.3. | Main events occurring during the year ended 31 December 2016: 56 | |
| 12.4. | Amortisation and depreciation of the year 56 | |
| 13.GOVERNMENT GRANTS 56 | ||
| 14.OTHER RECEIVABLES 57 | ||
| 15.TRADE RECEIVABLES62 | ||
| 16.INVENTORIES64 | ||
| 17.OTHER FINANCIAL INVESTMENTS 64 | ||
| 18.CASH AND CASH EQUIVALENTS 65 | ||
| 19.SHARE CAPITAL 66 | ||
| 20.RESERVES 67 | ||
| 21.NON-CONTROLLING INTERESTS70 |
| 22.LOANS78 | |
|---|---|
| 23.POST-EMPLOYMENT AND OTHER EMPLOYEE BENEFITS 80 | |
| 24.OTHER PAYABLES 96 | |
| 25.PROVISIONS97 | |
| 26.TRADE PAYABLES98 | |
| 27.OTHER FINANCIAL INSTRUMENTS – FINANCIAL DERIVATIVES99 | |
| 28.RELATED PARTIES 99 | |
| 29.REMUNERATION OF THE BOARD 105 | |
| 30.DIVIDENDS 105 | |
| 31.OIL AND GAS RESERVES 106 | |
| 32.FINANCIAL RISK MANAGEMENT 106 | |
| 33.CONTINGENT ASSETS AND LIABILITIES 109 | |
| 34.FINANCIAL ASSETS AND LIABILITIES AT BOOK VALUE AND FAIR VALUE 112 | |
| 35.INFORMATION ON ENVIRONMENTAL MATTERS 112 | |
| 36.SUBSEQUENT EVENTS 112 | |
| 37.APPROVAL OF THE FINANCIAL STATEMENTS 113 | |
(Amounts stated in thousand Euros - €K)
| ASSETS | Notes | December 2016 |
December 2015 |
|---|---|---|---|
| Non-current assets: | |||
| Tangible assets | 12 | 543 | 562 |
| Goodwill | 11 | 2,275 | 2,275 |
| Intangible assets | 12 | 1,113,444 | 1,132,240 |
| Investments in associates and joint ventures | 4 | 15,059 | 14,169 |
| Financial assets held for sale | 4 | 3 | 3 |
| Other receivables | 14 | 31,754 | 49,189 |
| Deferred tax assets | 9 | 17,158 | 15,453 |
| Total non-current assets: | 1,180,236 | 1,213,891 | |
| Current assets: | |||
| Inventories | 16 | 1,207 | 1,239 |
| Trade receivables | 15 | 10,094 | 14,745 |
| Other receivables | 14 | 76,746 | 95,544 |
| Cash and cash equivalents | 18 | 43,064 | 28,526 |
| Total current assets: | 131,111 | 140,054 | |
| Total assets: | 1,311,347 | 1,353,945 | |
| EQUITY AND LIABILITIES | Notes | December 2016 |
December 2015 |
| Equity: | |||
| Share capital | 19 | 89,529 | 89,529 |
| Reserves | 20 | 3,166 | 2,670 |
| Retained earnings | 127,757 | 115,489 | |
| Consolidated net results for the year | 10 | 25,044 | 29,620 |
| Total equity attributable to shareholders: | 245,496 | 237,308 | |
| Non-controlling interests | 21 | 19,647 | 19,245 |
| Total equity: | 265,143 | 256,553 | |
| Liabilities: | |||
| Non-current liabilities: | |||
| Bank loans | 22 | 29,462 | 42,710 |
| Shareholder loans | 22 | 595,490 | - |
| Other payables | 24 | 232,870 | 834,399 |
| Post-employment and other employee benefits liabilities | 23 | 60,122 | 50,494 |
| Deferred tax liabilities | 9 | 9,410 | 15,788 |
| Provisions | 25 | 32,086 | 22,572 |
| Total non-current liabilities: | 959,440 | 965,963 | |
| Current liabilities: | |||
| Bank loans and overdrafts | 22 | 13,301 | 17,517 |
| Trade payables | 26 | 14,196 | 8,926 |
| Other payables | 24 | 44,107 | 65,340 |
| Current payable income tax | 9 | 15,160 | 39,646 |
| Total current liabilities: | 86,764 | 131,429 | |
| Total liabilities: | 1,046,204 | 1,097,392 | |
| Total equity and liabilities: | 1,311,347 | 1,353,945 |
The accompanying notes form an integral part of the consolidated statement of financial position as of 31 December 2016.
(Amounts stated in thousand Euros - €K)
| Notes | December 2016 |
December 2015 |
|
|---|---|---|---|
| Operating income: | |||
| Sales | 5 | 5,826 | 8,026 |
| Services rendered | 5 | 195,690 | 208,910 |
| Other operating income | 5 | 33,670 | 30,248 |
| Total operating income: | 235,186 | 247,184 | |
| Operating costs: | |||
| Cost of sales | 6 | 3,161 | 4,878 |
| External supplies and services | 6 | 74,614 | 70,699 |
| Employee costs | 6 | 20,650 | 23,264 |
| Amortisation, depreciation and impairment loss on fixed assets | 6 | 41,464 | 41,073 |
| Provisions and impairment losses on receivables | 6 | (379) | 372 |
| Other operating costs | 6 | 24,599 | 20,846 |
| Total operating costs: | 164,109 | 161,132 | |
| Operating result: | 71,077 | 86,052 | |
| Financial income | 8 | 995 | 1,167 |
| Financial costs | 8 | (23,954) | (32,188) |
| Results from financial investments and impairment losses on Goodwill | 4 and 11 | 849 | 1,175 |
| Result before taxes: | 48,967 | 56,206 | |
| Income tax | 9 | (12,358) | (13,340) |
| Energy sector extraordinary contribution | 9 | (10,057) | (9,778) |
| Consolidated net result for the year | 26,552 | 33,088 | |
| Result attributable to: | |||
| Non-controlling interests | 21 | 1,508 | 3,468 |
| Galp Gás Natural Distribuição, S.A. shareholders | 10 | 25,044 | 29,620 |
| Final consolidated net result for the year | 26,552 | 33,088 | |
| Earnings per share (in Euros) | 10 | 0.28 | 0.33 |
The accompanying notes form an integral part of the consolidated income statement for the year ended 31 December 2016.
Consolidated Statement of Comprehensive Income for the year ended 31 December 2016 and 31 December 2015
(Amounts stated in thousand Euros - €K)
| December 2016 | December 2015 | |||||
|---|---|---|---|---|---|---|
| Notes | Atributtable to the Shareholders |
Non-controlling interests (Note 21) |
Atributtable to the Shareholders |
Non-controlling interests (Note 21) |
||
| Consolidated net result for the year | 1 0 |
25,044 | 1,508 | 29,620 | 3,468 | |
| Other comprehensive income for the year which will not be recycled in the future for net result of the year: | ||||||
| Actuarial Gains and losses - pension fund: | ||||||
| Actuarial Gains and losses - pension fund | 2 3 |
(10,786) | (2) | (4,136) | (1) | |
| Tax related to actuarial gains and losses - pension fund | 9 | 2,404 | - | 619 | - | |
| (8,382) | (2) | (3,517) | (1) | |||
| Other comprehensive income for the year which will be recycled in the future for net result of the year: | ||||||
| Hedging reserves: | ||||||
| Increases / (decreases) in hedging reserves (Associates) | 2 0 |
(22) | - | 4 9 |
- | |
| Deferred tax related to hedging reserves (Associates) | 2 0 |
6 5 |
- | - | - | |
| Other increases/decreases | 4 3 |
- | 4 9 |
- | ||
| Changes on the financial interests held in the share capital of subsidiaries (Note 3 and 21): | ||||||
| Increase in the financial interests held in the share capital of subsidiaries (Note 3 and 21) | 2 1 |
- | (24) | - | (24,640) | |
| - | (48) | - | (24,640) | |||
| Other Comprehensive income for the year net of taxes | (8,339) | (26) | (3,468) | (24,641) | ||
| Comprehensive income for the year atributtable to shareholders | 16,705 | 26,152 | ||||
| Comprehensive income for the year atributtable to non-controlling interests | 2 1 |
1,482 | (21,173) | |||
| Total Comprehensive income for the year | 16,705 | 1,482 | 26,152 | (21,173) |
The accompanying notes form an integral part of the consolidated statement of comprehensive income for the year ended 31 December 2016
| (Amounts stated in thousand Euros - €K) | |
|---|---|
| ----------------------------------------- | -- |
| Galp Gás Natural Distribuição, S.A. and subsidiaries Consolidated Statement of changes in equity for the year ended 31 December 2015 and 31 December 2014 (Amounts stated in thousand Euros - €K) |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Changes in the period | Notes | Share Capital (Note 19) |
Share Premium | Legal Reserves | Other reserves (Note 20) |
Hedging reserves (Note 20) |
Retained earnings - actuarial Gains and losses - pension fund (Note 23) |
Retained earnings |
Consolidated net result for the year |
Sub-Total | Non controlling interests (Note 21) |
Total |
| Balance as of 1 January 2015 | 89,529 | 100 | - | 4 3 |
(286) | (12,681) | (82) | 191,401 | 268,024 | 51,050 | 319,074 | |
| Consolidated net result for the year | 1 0 |
- | - | - | - | - | - | - | 29,620 | 29,620 | 3,468 | 33,088 |
| Other gains and losses recognised in Equity | - | - | - | - | 4 9 |
(3,517) | - | - | (3,468) | (24,641) | (28,109) | |
| Comprehensive income for the year | - | - | - | - | 4 9 |
(3,517) | - | 29,620 | 26,152 | (21,173) | 4,979 | |
| Dividends distributed / Interim dividends | 3 0 |
- | - | - | - | - | - | (59,632) | - | - (59,632) |
- | (59,632) |
| Increase / descrease in Equity Increase of equity in subsidiaries Increase of reserves by appropriation of profit Balance as of 31 December 2015 |
- - - 89,529 |
(100) - - - |
- - 2,986 2,986 |
- (122) - (79) |
- - - (237) |
- - - (16,198) |
- - 191,401 131,687 |
- - (191,401) 29,620 |
(100) (122) 2,986 237,308 |
- (10,632) - 19,245 |
(100) (10,754) 2,986 256,553 |
|
| Balance as of 1 January 2016 | 89,529 | - | 2,986 | (79) | (237) | (16,198) | 131,687 | 29,620 | 237,308 | 19,245 | 256,553 | |
| Consolidated net result for the year | 1 0 |
- | - | - | - | - | - | - | 25,044 | 25,044 | 1,508 | 26,552 |
| Other gains and losses recognised in Equity | - | - | - | - | 4 3 |
(8,382) | - | - | (8,339) | (26) | (8,365) | |
| Comprehensive income for the year | - | - | - | - | 4 3 |
(8,382) | - | 25,044 | 16,705 | 1,482 | 18,187 | |
| Dividends distributed / Interim dividends | 3 0 |
- - |
- - |
- - |
- 5 |
- - |
- - |
(8,522) - |
- - |
(8,522) 5 |
(1,068) (12) |
(9,590) (7) |
| Increase of reserves by appropriation of profit | - | - | 448 | - | - | - | 29,172 | (29,620) | - | - | - | |
| Balance as of 31 December 2016 | 89,529 | - | 3,434 | (74) | (194) | (24,580) | 152,337 | 25,044 | 245,496 | 19,647 | 265,143 |
The accompanying notes form an integral part of the consolidated statement of changes in equity for the year ended 31 December 2016
(Amounts stated in thousand Euros - €K)
| Notes | December 2016 |
December 2015 |
|
|---|---|---|---|
| Operating activities: | |||
| Cash received from customers | 319,942 | 351,473 | |
| Cash (payments) to suppliers | (104,691) | (127,854) | |
| Payments relating to employees | (12,165) | (11,224) | |
| (Payments) relating to Tax on oil products ("ISP") | (377) | (359) | |
| (Payments)/receipts of income taxes | (42,486) | (4,923) | |
| Contributions to the pension fund | 23 | (310) | (1,785) |
| Payments to early retirements and pre-retirements | 23 | (2,199) | (2,563) |
| Payments of insurance expenses with retirements | 23 | (933) | (1,162) |
| Other receipts/(payments) relating to the operational activity | (77,502) | (46,516) | |
| Cash flows from operating activities (1) | 79,279 | 155,087 | |
| Investing activities: | |||
| Receipts from: | |||
| Investment grants | 13 | (18) | 201 |
| Interests and similar income | 16 | 125 | |
| Loans obtained | 145 | - | |
| 143 | 326 | ||
| Payments relating: | |||
| Financial investments | (31) | (84,955) | |
| Tangible assets | (239) | - | |
| Intangible assets | (21,837) | (20,114) | |
| Loans granted | - | (22,754) | |
| (22,107) | (127,823) | ||
| Cash flows from investing activities (2) | (21,964) | (127,497) | |
| Financing activities: | |||
| Receipts from: | |||
| Loans obtained | 22 | 600,000 | 144,300 |
| Payments relating: | 600,000 | 144,300 | |
| Loans obtained | (603,433) | (40,632) | |
| Interests from loans obtained | (22,094) | (30,003) | |
| Interests and similar expenses | (5,354) | (1,050) | |
| Dividends distributed / Interim dividends | 30 | (9,580) | (59,746) |
| (640,461) | (131,431) | ||
| Cash flows from financing activities (3) | (40,461) | 12,869 | |
| Net change in cash and cash equivalents (4) = (1) + (2) + (3) | 16,854 | 40,459 | |
| Cash and cash equivalents at the beginning of the year | 26,176 | (14,283) | |
| Cash and cash equivalents at the end of the year | 18 | 43,030 | 26,176 |
The accompanying notes form an integral part of the consolidated statement of cash flow for the year ended 31 December 2016.
Galp Gás Natural Distribuição, S.A. (hereinafter referred to as GGND or Company) has its Head Office in Rua Tomás da Fonseca in Lisbon, Portugal and its corporate business is the exercise of activities in the energy sector, in particular in the distribution of natural gas, including the service delivery of support to corporate business, in the areas of management, administration and logistics, purchase and supply and information systems.
The Company shareholder structure as of 31 December 2016 is stated in Note 19.
As of 31 December 2016 the GGND Group ("Group") consists of Galp Gás Natural Distribuição and its subsidiaries which integrates in the natural gas distribution area.
The natural gas business segment encompasses the natural gas distribution, exercised under public interest regime, and natural gas commercialisation as last resort, according to the applicable regulation.
In October 2016, Galp Gás & Power S.G.P.S., S.A. sold 22.5% of Group Galp Gás Natural Distribuição, S.A. to Meet Europe Natural Gas, Lda.. Such sale resulted from the agreement signed at 28 July 2016 between Galp Energia S.G.P.S., S.A. and Marubeni Corporation and Toho Gas Co., Ltd.. The remaining 77.5% of the share capital of GGND is still held by Galp through its subsidiary Galp Gás & Power, S.A..
Resulting from the agreement, Group GGND is now jointly controlled by Galp Gás & Power, S.G.P.S., S.A. and Meet Europe Natural Gas, Lda..
The significant accounting policies used by the Group to prepare the consolidated financial statements are explained below. During the year ended 31 December 2016 there were changes in the accounting policies, in relation to those used to prepare the financial information for the preceding year, as expressed in Note 2.22. There were no prior year material errors.
The accompanying financial statements are presented in thousands of euros, unless otherwise stated.
GGND consolidated financial statements were prepared on a going concern basis, at historical cost, on the accounting records of the companies included in the consolidation (Notes 3 and 4) maintained in accordance with International Financial Reporting Standards as adopted by the European Union, effective for the economic year beginning in 1 January 2016. These standards include International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board ("IASB") and International Accounting Standards ("IAS") issued by the International Accounting Standards Committee ("IASC") and respective interpretations – SIC and IFRIC, issued by the Standing Interpretation Committee ("SIC") and International Financial Reporting Interpretation Committee ("IFRIC"). These standards and interpretations are hereinafter referred to as "IFRS".
The IFRS standards published by International Accounting Standard Board (IASB) and approved and published in the Official Journal of the European Union ("OJEU") during 2016, applicable to subsequent years are presented in the tables below:
| IAS Standard | Publishing date in IASB |
Date of accounting application |
Year to which it applies |
Comments |
|---|---|---|---|---|
| IFRS 14 Regulatory Tariff Deviations |
30/JAN/2014 | no estimated date | - | Not applicable |
| IFRS 16 Leases | 13/JAN/2016 | 2nd Semester 2017 | 2019 | Not applicable |
| Amendments to IAS 12 Income Taxes |
19/JAN/2016 | 2nd Quarter 2017 | 2017 | No estimated impact |
| Amendments to IAS 7 Statement of Cash Flow |
29/JAN/2016 | 2nd Quarter 2017 | 2017 | Impact on disclosures in the notes to the financial statements |
| Clarification of IFRS 15 Revenue from contracts with customers |
12/APR/2016 | 2nd Quarter 2017 | 2018 | Impact of the application of the standard still to be determined |
| Amendments to IFRS 2 Share based payments |
20/JUN/2016 | 2nd Semester 2017 | 2018 | Not applicable |
| Amendments to IFRS 4 Insurance Contracts |
12/SEP/2016 | 2017 | 2018 | Not applicable |
| IFRS annual Improvements cycle 2014-2016 |
08/DEC/2016 | 2nd Semester 2017 | 2017/2018 | No relevant accounting impacts |
| IFRIC 22 Foreign Currency Transactions and Advance Consideration |
08/DEC/2016 | 2nd Semester 2017 | 2018 | No estimated impact |
| Amendments to IAS 40 Investment Properties |
08/DEC/2016 | 2nd Semester 2017 | 2018 | No estimated impact |
| IAS Standard | Publishing date in OJEU |
Date of accounting application |
Year to which it applies |
Comments |
|---|---|---|---|---|
| IFRS 9 Financial Instruments | 29/NOV/2016 | 01/JAN/2018 | 2018 | Impact on the classification of financial instruments and in the calculation of the impairment losses on accounts receivable |
| IFRS 15 Revenue from contracts with customers |
29/OCT/2016 | 01/JAN/2018 | 2018 | Impact, still to be determined, on the revenue recognition |
| IAS Standard | Publishing date in OJEU |
Date of accounting application |
Year to which it applies |
Comments |
|---|---|---|---|---|
| Amendments to IFRS 10, 12 and IAS 28 - Investment entities: applying consolidation exception |
23/SEP/2016 | 01/JAN/2016 | 2016 | Not applicable |
| Amendments to IAS 27 Separate Financial Statements |
23/DEC/2015 | 01/JAN/2016 | 2016 | No impact |
| Amendments to IAS 1 Presentation of Financial Statements |
19/DEC/2015 | 01/JAN/2016 | 2016 | No relevant accounting impacts |
| IFRS annual improvements cycle 2012-2014 |
16/DEC/2015 | 01/JAN/2016 | 2016 | No relevant accounting impacts |
| Amendments to IAS 16 Tangible Fixed Assets and IAS 38 Intangible Assets |
03/DEC/2015 | 01/JAN/2016 | 2016 | Not applicable |
| Amendments to IFRS 11 Joint arrangements |
25/NOV/2015 | 01/JAN/2016 | 2016 | Potential impact on new acquisitions of joint operations |
| Amendments to IAS 16 Tangible Fixed Assets and IAS 41 Agriculture |
25/NOV/2015 | 01/JAN/2016 | 2016 | Not applicable |
| IFRS annual improvements cycle 2010-2012 |
09/JAN/2015 | 01/FEB/2015 | 2016 | No relevant accounting impacts |
| Amendments to IAS 19 Defined Benefits Plan: Employees contributions |
09/JAN/2015 | 01/FEB/2015 | 2016 | No relevant accounting impacts |
IFRS 14 – Regulatory Tariff Deviations
The standards permits an entity which is a first-time adopter of International Financial Reporting Standards to continue to account, with some limited changes, for 'regulatory deferral account balances' in accordance with its previous GAAP, both on initial adoption of IFRS and in subsequent financial statements. Regulatory deferral account balances, and respective movements, are presented separately in the statement of financial position, income statement and other comprehensive income, and specific disclosures are required.
As GGND is not a first-time adopter of the IFRS, will not apply this standard. Additionally, it is expected that the European Union will not endorse this standard.
This standard specifies how leases should be recognised, measured, presented and disclosed. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16's approach to lessor accounting substantially unchanged from its predecessor, IAS 17.
GGND is still determining the impact of this new standard on its activities. However the Group believes that it should not be relevant for leases related to the Gas activity, since it is concessionary, under IFRIC 12 and for that reason the standard does not apply (IFRS 16 p.3).
The amendments to IAS 12 refer to the recognition of deferred tax assets for unrealised losses, and clarify the following aspects:
d) An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law restricts the utilisation of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type.
It is not expected that this clarification to IAS 12 will have any impact on the calculations and records for deferred taxes made by GGND.
IAS 7 – Statement of Cash Flows: Disclosures
Requires an entity to disclose a reconciliation on the changes in financial liabilities with cash flows (financing activities), namely:
This amendment will have impact on the future disclosures to be presented in the notes to the financial statements.
Clarification to IFRS 15 Revenue from contracts with customers
Changes refer to additional guidelines to be followed to determine the performance obligations of a contract, at the moment of revenue recognition of an intellectual property license, the revision of indicators to classify the main relation versus agent, and new regimes predicted to simplify the transaction.
GGND is analysing future impacts of the standard on the activity revenue recognition.
Amendments to IFRS 2 Share based payments
The amendment clarifies the measurement basis for payments transactions based in cash-settled and accounting of modifications to the payment plan based on shares that change its classification as cashsettled to equity-settled.
Additionally, the amendment introduces an exception to IFRS 2, now demanding that a share base payment plan is handled as equity-settled when the employer is obliged to retain the tax amount for the employee and pay such amount to the fiscal authorities.
The amendment has no impact according to GGND, given no share base payments exist.
Amendments to IFRS 4 allow two distinct solutions for insurance companies: a temporary exemption to IFRS 9 for entities which satisfy specific requirements (applied at the reporting entity level); and overlay approach.
However it is predicted that IFRS 4 will be replaced by the next new insurance contracts standard. Consequently, it is expected that the temporary exemption and overlay approach will no longer be applicable when the new insurance standard is in place.
Such amendment has no impact in GGND given that the Group does not pursue insurance activities.
IFRS annual improvements cycle 2014-2016
IFRS 1 – First-time Adoption of International Financial Reporting Standards
This improvement to IFRS 1 eliminates short term exemptions predicted for first time adopters.
IFRS 12 – Disclosure of Interests in Other Entities
The improvement clarifies the scope of the standard application, specifying that the disclosure requirements apply to interests in entities mentioned in the standard (e.g. subsidiary, joint-ventures, associated and unconsolidated 'structured entities') held for sale or as discontinued operations in accordance with IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations, and the only exemption refers to the disclosure of the entities resumed financial information.
IAS 28 – Investments in Associates and Joint Ventures
The improvement clarifies that the adoption of the option to measure by fair value through income the investments in associated companies and joint-ventures, held by a venture capital organisation or other similar entities, is made by investment in each associated company or joint-venture (in an individual basis without demanding the consistency by investment class), in the initial measurement.
GGND considers that the amendments clarify the existing standard and have no relevant impacts in measurement or financial presentation.
Interpretation regarding the exchange rate to be used when reporting transactions that are denominated in a foreign currency. The Interpretation applies when the entity pays or receives in advance due to foreign currency contracts and defines as follows:
GGND considers the standard has no impact given that GGND already accounts for according with the standard.
Amendments to IAS 40 Investment properties
The amendments intends to clarify that in order to transfer to/from investment properties, a usage alteration is needed. In order to conclude if a usage alteration to investment properties was noted, an evaluation needs to be performed to confirm if the property achieves the definition predicted in the Standard. This alteration must be supported by evidences, given that a change of intention by management on its own is not sufficient to support a transfer.
GGND predicts such amendments have no impact.
IFRS 9 – Financial Instruments
IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement, and introduces the following changes:
GGND believes that IFRS 9 will change the form of impairment recognition on receivables, the classification and measurement of financial assets and may affect hedge accounting, as it will be more aligned with the economic hedging. GGND is still determining the impact of this standard.
IFRS 15 – Revenue from contracts with customers
This standard applies only to contracts with customers to provide goods or services, and requires an entity to recognise revenue when the contractual obligation to deliver the goods or services is satisfied and by the amount that reflects the consideration the entity is expected to be entitled to, in accordance with the methodology established in the standard.
GGND is analysing the future impact of this standard particularly in the recognition of revenue in the developed activities.
Amendments to IFRS 10, 12 and IAS 28 Investment entities: applying consolidation exception
This amendments clarify that the exemption from the obligation to prepare consolidated financial statements by investment entities applies to an intermediate parent which is a subsidiary of an investment entity. The policy choice to apply the equity method is extended to an entity which is not an investment entity, but has an interest in an associate, or joint venture, which is an investment entity.
Not applicable.
Amendment to IAS 27 – Separate financial statements
This amendment allows entities to use equity method to measure investments in subsidiaries, joint ventures and associates in separate financial statements.
GGND does not change it accounting policy of accounting financial investment by acquisition cost in separate financial statements, so the amendment has no impact.
Amendments to IAS 1 – Presentation of financial statements
This amendments to IAS 1 results from an IFRS disclosure initiative, and provides guidance on materiality and aggregation of captions, financial statements estructure, accounting policies disclosure, presentation of other comprehensive income generated by investments mensured according to the equity method and the presentation of subtotals in the IFRS financial statements.
GGND considers the amendment has no relevant impact in the financial statements.
This improvement clarifies that when an asset (or disposal group) is reclassified from "held for sale" to "held for distribution", or vice versa this does not constitute a change to a plan of sale or distribution.
This improvement provides guidance on what is meant by continuing involvement in a transfer (derecognition) of financial assets, for the purpose of required disclosures.
This improvement clarifies that, when determining the discount rate for post-employment defined benefit obligations, this must refer to high quality bonds with the same currency at which liabilities are denominated.
This improvement clarifies the meaning of "information disclosed elsewhere in the interim financial report" and requires the cross referencing to that information.
GGND considers that the amendments in question clarify the existing rules, having no material effect on the disclosures and values presented.
Amendments to IAS 16 Tangible fixed assets and IAS 38 Intangible assets
This amendment clarifies that the use of revenue-based methods to calculate the depreciation / amortisation of an asset is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an asset.
GGND considers this amendment as not applicable, as GGND does not depreciate/amortise their assets based on revenue obtained, but their technical use.
This amendment adds new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business, through the application of IFRS 3's principles, except on the remeasurement to fair value of any interest previously held.
This amendment to IFRS 11 applies to GGND joint agreements future acquisitions.
This amendment defines the concept of a bearer plant and removes it from the scope of IAS 41 – Agriculture, to the scope of IAS 16 – Property, plant and equipment, with the consequential impact on
measurement. However, the consumable biological assets produced will remain within the scope of IAS 41 - Agriculture.
This amendment does not apply to GGND Group subsidiaries and therefore has no relevance in the measurement or presentation of the financial statements.
Amendments to IAS 19 Defined benefit plans – Employee contributions
This amendment applies to contributions from employees or third parties to defined benefit plans and aims to simplify the accounting when contributions are not associated to the number of years of service (dependence on other factors).
GGND believes that this amendment has no relevant accounting impacts.
Annual Improvements 2010 - 2012
IFRS 2 - Share based payments
This improvement amends the definitions of vesting conditions and considers that only two types of conditions exist, the performance conditions and the service conditions. The new definition of performance condition foresees that only conditions relating to the entity are considered.
IFRS 3 - Business combinations
This improvement clarifies that an obligation to pay contingent consideration is classified in accordance with IAS 32, as liability or equity, if it meets the financial instrument definition. The contingent consideration which classifies as a liability shall be measured at fair value through profit and loss. The contingent consideration which classifies as equity is only measured at fair value in the initial recognition.
This improvement amends IFRS 8 to require disclosure of the judgments made by management in aggregating operating segments and the reconciliation of segment assets with the entity's total assets in financial statements, when the information is reported.
IFRS 13 - Fair value: measurement and disclosure
This improvement clarifies that the ability to measure short-term receivables and payables at the invoiced amounts where the impact of not discounting is immaterial, was not removed by IFRS 13.
GGND believes that these amendments to the standards have no material impact on its accounting policies.
Estimates that affect the amounts of assets, liabilities, income and costs were used in preparing the accompanying consolidated financial statements. The estimates and assumptions used by the Board of Directors were based on the best information available regarding events and transactions in process at the time of approval of the financial statements.
In the preparation and presentation of consolidated financial statements GGND complies with the IAS / IFRS and their interpretations SIC / IFRIC adopted by the European Union and applicable at 31 December 2016.
The consolidation methods adopted by the Group are as follows:
Investments in companies in which the Group holds control, namely if it has cumulatively:
were included in these consolidated financial statements in accordance with the full consolidation method. The companies consolidated by the integral consolidation method are detailed in Note 3.
Equity and net result for the year corresponding to third party participation in subsidiaries are reflected separately in the consolidated statement of financial position and in the consolidated income statement, respectively, in the caption "Non-controlling interests". The gains and losses attributable to non-controlling interests are allocated to them, even if negative.
The assets and liabilities of each Group company are recorded at fair value as of the date of acquisition, as established in IFRS 3, and can be reviewed over a period of 12 months after that date. Any excess of cost over the fair value of the net assets and liabilities acquired is recognised as Goodwill (Note 2.2.c)). If the difference between the cost and the fair value of the net assets and liabilities acquired is negative, it is recorded as income of the year.
When, at the date of the control acquisition, the Group already holds a previously acquired interest, its fair value is used to determine Goodwill or negative Goodwill.
Transaction costs directly attributable to business combinations are immediately recognised in profit and loss.
Non-controlling interests include the third parties' portion of the fair value of the identifiable assets and liabilities as of the date of acquisition of the subsidiaries.
When control is acquired for a percentage below 100%, according with the purchase method, noncontrolling interests may be measured at fair value or at the ratio between acquired assets fair value and acquired liabilities fair value, being the option defined for each transaction.
The results of subsidiaries acquired or sold during the year are included in the consolidated income statement from the date of acquisition or the date of the exercise of control up to the date of disposal.
Subsequent disposal or acquisition transactions of financial investments on non-controlling interests, which do not involve changes in control, do not result in recognition of gains, losses or Goodwill, being any resulting difference between the transaction amount and the carrying amount of the transacted investment recognised in Equity.
Whenever necessary, adjustments are made to the financial statements of subsidiaries to be in accordance with the Group's accounting policies. Transactions (including unrealised gains and losses on sales between Group companies), balances and dividends distributed between Group companies are eliminated in the consolidation process, except for losses arising from impairment losses in transferred assets.
Where the Group has, in substance, control over other structured entities, even if it does not have a direct participation in their capital, these are consolidated in accordance with the full consolidation method. When such entities exist, they are detailed in Note 3.
Investments in associates (companies in which the Group has significant influence but does not have control or joint control through participation in the company's financial and operating decisions, usually where it holds between 20% to 50% of the company's voting rights or capital) are recorded in accordance with the equity method.
Investments in affiliates (companies in which the Group does not have significant influence or control, normally where it holds less than 20% of voting rights or capital), are recorded at fair value or alternatively, at cost, when the affiliates are not listed and their value cannot be measured reliably.
"Investments in affiliates" are classified as "Assets held for sale" in accordance with the classification of IAS 39 and are classified as non-current assets.
In accordance with the equity method, investments are recorded at acquisition cost and subsequently adjusted by the Group's share of the post-acquisition changes in net equity (including net result) of the associates, recorded in the income statement caption "Share of results of investments in associates", as well as by dividends received.
The excess of acquisition cost in relation to the fair value of the identifiable assets and liabilities of the associate at the date of acquisition is recognised as goodwill and included in the value of the investment. If the difference between acquisition cost and fair value of the assets and liabilities acquired is negative, it is recognised in the income statement caption "Share of results of investments in associates", after confirmation of the fair value.
An assessment of investments in associates is performed when there are indications that the investment may be impaired, and impairment losses that are noted are then recorded. When impairment losses recognised in prior years no longer exist, they are reversed.
When the Group's share of cumulative losses of an associate exceeds the book value of the investment, the investment is written-off, except where the Group has assumed commitments in favour of the associate, in which case the Group recognises a loss and a liability for the amount for which the Group has taken responsibility.
Unrealised gains and losses on transactions with associates are eliminated in proportion to the Group's interest in the associate and recorded against the investment in the associate. Unrealised losses are also eliminated, but only up to the point that the loss does not provide evidence that the transferred asset is impaired.
Investments in associates and assets held for sale are detailed in Note 4.
The positive differences between the acquisition cost of subsidiaries and the fair value of the identifiable assets and liabilities of these companies at the date of acquisition (or during a period of 12 months after that date), are recognised as goodwill (when it results from goodwill in Group companies) (Note 11) or as investments in associates (when it results from associates). The negative differences are recognised immediately in the income statement.
The positive differences between the acquisition cost of investments in foreign entities and the fair value of the identifiable assets and liabilities at the date of acquisition (or during a period of 12 months after that date), are recognised in their functional currencies and translated to the Group's functional currency (Euros) at the rate of exchange at the end of the reporting period. Exchange rate differences resulting from the translation are recorded in equity in the caption "Translation reserve".
Goodwill on acquisitions prior to the date of transition to IFRS (1 January 2004) has been maintained at the amounts recorded in accordance with generally accepted accounting principles in Portugal (deemed cost) as at that date and was subject to impairment tests at the reporting date. Goodwill stopped being amortised as at that date, but is subject to impairment tests, at least annually, to determine if there are impairment losses.
Any impairment losses are recorded immediately in the statement of financial position as a deduction to the amount of the assets and are recorded in the income statement caption "Results from investments in associates" and "Impairment losses on Goodwill", included in financial results.
If the initial recognition of a business combination can only be determined provisionally at the end of the period in which the concentration occurred ( due to the fact that the fair value attributed to the identifiable assets, liabilities and contingent liabilities of the acquired entity can only be determined provisionally) GGND Group recognises the business combination using the information available. The amounts determined provisionally are adjusted when the fair value of the assets and liabilities are accurately determined, up to a period of 12 months after the acquisition date. During that period, Goodwill or any other recognised gain will be adjusted by an amount equal to the adjustment to the fair value at the assets acquisition date, liabilities and contingent liabilities identifiable being recognised or adjusted and the comparative information presented for the periods prior to the completion of the initial accounting of the combination. This includes any depreciation, amortisation or other additional gain or loss recognised as result of completing the initial recognition.
When performing impairment testing on Goodwill, the Goodwill amount is added to the respective cash generating unit. The recoverable value of Goodwill is estimated on the basis of value in use and is determined by the present value of the estimated future cash flows of the cash generating unit. The recoverable value is estimated on the respective cash generating unit, according to the cash discounted flow method. The discount rate used reflects GGND Group WACC before tax (Weighted Average Cost of Capital) for the reporting segment and country to which the cash generating unit belongs to.
Tangible assets acquired until 1 January 2004, up to the date of the IFRS transaction, are registered according to IFRS 1, by deemed cost, at revaluated acquisition cost when applicable, in accordance with the legal disposals, deducted of depreciations and impairment losses.
Tangible assets acquired after that date are registered at acquisition cost deducted of depreciations and impairment losses. The acquisition cost includes invoice price, transportation, assembly and incurred financial costs during the construction phase.
Depreciations are calculated based on deemed cost (for acquisitions previous to 1 January 2004) or acquisition cost, by the straight line method, applied from the date in which the asset is available for use, as intended by management. It is used between the most appropriate economic rates, the ones that allow the fixed asset reintegration, during the estimated useful life considering, when applicable, the concession period.
Average annual depreciation rates used may be presented as follows:
| 2016 Rates | 2015 Rates | |
|---|---|---|
| Buildings and other constructions | 2% | 2% |
Gains or losses arising from the write-off or disposal of tangible assets are determined by the difference between selling price and net book value at the date of the write-off/disposal. When applicable, the net book value is registered under "Accumulated impairment losses". Gains and losses noted are registered in the income statement under "Other operating income" or "Other operating expenses", respectively.
As result of IFRIC 12, GGND recognises natural gas assets included in the concession arrangements and exploration licenses whose remuneration is defined by ERSE in accordance with the intangible assets model. Consequently, the tangible assets of regulated activities are recognised as intangible assets, in the caption "Service Concession Arrangements", and amortised in accordance with their economic useful life by the straight line method, applied from the date in which the asset is available for use. It is used between the most appropriate economic rates, the ones that allow the fixed asset reintegration, during the estimated useful life considering the concession period or usage expectation.
The natural gas infrastructures, namely the gas distribution networks, are amortised over the concession period (45 years) or exploration license (20 years).
The Group capitalises costs relating to the conversion of natural gas consumptions, which involves costs incurred adapting the installations. The Group considers that it can control the future economic benefits resulting from this conversion through the continued sale of gas to its clients (Decree-law
140/2006, 26 July). These costs are amortised on a straight-line basis up to the end of the company's natural gas distribution concession period.
Impairment tests are performed as of the financial statements date and whenever a decline in the asset value is identified. Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recorded in the income statement caption "Amortisation, depreciation and impairment loss of tangible assets".
The recoverable amount is the greater between fair value and value in use. Fair value is the amount that would be obtained from selling the asset in a transaction between independent knowledgeable parties, less the costs directly attributable to the sale. Value in use corresponds to the present value of the future cash flows generated by the asset during its estimated economic useful life. The recoverable amount is estimated for the asset or cash generating unit to which it belongs. The discount rate used reflects the weighted average cost of capital before tax (WACC) used by the GGND Group for the reporting segment and country of the asset. The cash generating unit subject to impairment analysis depends on the reporting segment: in the refining and distribution segment the cash generating unit is the service station network in each country; in the exploration segment the cash generating unit is the property (commonly referred as Block) or the country, depending on the stage of the investment; and in the gas & power segment the cash generating unit is the set of assets generating the economic benefits.
Impairment losses recorded in previous periods are reversed when it is concluded that they no longer exist or have decreased. Such tests are made whenever there are indications that an impairment recorded in an earlier period has reverted. Reversal of impairment is recognised as a decrease in the income statement caption "Amortisation, depreciation and impairment loss of tangible assets". However, impairment losses are only reversed up to the amount the asset would be recorded (net of amortisation or depreciation) if the impairment loss had not been recorded previously.
The gas business CGU is defined as the gas networks and its concessions.
Lease contracts are classified as:
Finance and operating leases are classified based on the substance rather than the form of the legal contract.
Tangible assets acquired under finance lease contracts and the corresponding liabilities are recorded in accordance with the financial method. In accordance with this method the cost of the assets (the lower between fair value and discounted amount of the lease instalments) is recorded in tangible assets, the corresponding liability is recorded and interest included in the lease instalments and depreciation of the fixed assets, calculated as explained in Note 2.3, are recorded as a financial cost and amortisation and depreciation cost in the income statement of the year to which they relate, respectively. In the case of operating leases, the lease instalments are recorded as costs for the year, on a straight-line basis over the period of the contract, in the income statement caption "External supplies and services".
The Group does not hold materially relevant operating or finance leases.
Inventories (goods, raw and subsidiary material) are stated at the lower acquisition cost (in case of goods, raw and subsidiary material) or net realisable value.
Net realisable value corresponds to the normal selling price less costs to complete production and costs to sell.
Whenever cost exceeds net realisable value, the difference is recorded in the operating cost caption "Cost of sales".
Cost includes the invoice price and transport and insurance costs. The cost of sales is determined on a weighted average basis.
Government grants are recorded at fair value when there is certainty that they will be received and that Group companies will comply with the conditions required for them to be granted.
Non-repayable government grants for tangible and intangible assets – concession agreements are recorded as deferred income in the caption "Other payables" and recognised in the consolidated income statement as other operating income, in proportion to the depreciation and amortisation of the granted assets.
Provisions are recorded when, and only when, the Group has a present obligation (legal, contractual or constructive) resulting from a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed and adjusted on each consolidated balance sheet date so as to reflect the best estimate at that date.
GGND measures the uncertain tax positions, including provisions for taxes, by the tax estimate amount and not by probabilities.
Some GGND Group companies have assumed the commitment to pay their employees' pension supplements for retirement due to age, disability and pensions to survivors, as well as early retirement and pre-retirement pensions. With the exception of early retirement and pre-retirement pensions, these payments are calculated on an incremental basis in accordance with the years of service of the employee. Early retirement and pre-retirement pensions mainly correspond to the employee's wage. When applicable, these commitments also include the payment of Social Security of pre-retired personnel, voluntary social insurance of early retirees and retirement bonuses payable upon normal retirement.
The Group has created autonomous pension funds managed by external entities ("Fundo de Pensões GGND") to cover their liabilities relating to pension supplements for retirement due to age, incapacity and survivor pensions to current employees and retired personnel. These liabilities are covered by specific provisions included on the statement of financial position caption "Post-employment and other employee benefits liabilities" (Note 23).
In addition, the GGND pension plan does not cover the liability assumed by GDL to reimburse retirement pension supplements payable by EDP to its retired personnel and pensioners relating to GDL, as well as retirement and survivor supplements payable to retired personnel at the time of creating the Fund. These liabilities are covered by specific provisions included in the balance sheet caption "Post-employment and other employee benefits liabilities" (Note 23).
At the end of each reporting period the companies obtain actuarial valuations by a specialised entity in accordance with the Projected Unit Credit Method and compare the amount of their liabilities with past services with the market value of the funds and with the balance of the liabilities recognised, in order to determine any additional liabilities that need to be recorded.
Actuarial gains and losses determined in each year and for each of the benefits granted, resulting from adjustments to the demographic assumptions, experience adjustments, are recorded in the statement of comprehensive income impacting the financial position.
Net interest related with retirement benefits is reflected in the income statement caption "Personnel costs - retirement benefits and other benefits".
The benefit plans identified by the GGND Sub-Group for the calculation of these liabilities are:
On 31 December 2002 the Portuguese Insurance Institute authorised the creation of the Galp Energia defined contribution Pension Fund. In 2003 Galp Energia, S.G.P.S., S.A. created a defined contribution Pension Fund for its employees and allowed employees of other Group companies to join this fund. Petróleos de Portugal – Petrogal, S.A., GDP – Gás de Portugal, S.G.P.S., S.A., Lisboagás GDL – Sociedade Distribuidora de Gás Natural de Lisboa, S.A. and Galp eNova S.A. (on 17 December 2003 Galp eNova S.A. was merged into Galp Energia, S.A.) as associates of the Fund, allowed their employees to elect between this new defined contribution pension plan and the previous defined benefits plan. When the new plan is chosen, Group companies contribute with an annually defined amount to the fund, corresponding to a percentage of the salary of each employee, which is recorded as a cost for that year.
The Group's costs with respect to healthcare, life insurance and defined contribution minimum benefit plan are recognised over the period the employees entitled to these benefits are in service of the respective companies, the liability being reflected in the statement of financial position caption "Postemployment and other employee benefits liabilities" (Note 23). Payments to the beneficiaries are deducted from the liability.
At the end of each reporting period the companies obtain actuarial valuations calculated by a specialised entity in accordance with the Projected Unit Credit Method and compare the amount of their liabilities with the market value of the funds and with the balance of the liabilities, in order to determine the additional liabilities to be recorded.
Actuarial gains and losses determined in each year are recorded as explained in Note 2.9 above.
Transactions are recorded in the individual financial statements of subsidiaries in their functional currencies, at the exchange rates in force at the dates of the transactions.
Gains and losses resulting from differences in exchange rates in force on the dates of the transactions and those prevailing at the date of collection, payment or at the end of the reporting period are recorded as income and expenses, respectively, in the consolidated income statement caption "Exchange gain/ (loss)", except for those relating to non-monetary items, that are recorded directly in equity.
Natural gas selling income and services rendered (natural gas distribution) income are recognised in the income statement when the risks and benefits inherent to the possession of the assets are transferred to the buyer or when services are rendered and the amount of the income can be reasonably measured. Sales and services rendered are recorded at the fair value of the amount received or receivable, net of taxes, discounts and other costs incurred to realise them.
Costs and income are recorded in the period to which they relate, independently of when they are paid or received. When the actual amounts of costs and income are not known, these are estimated.
The "Other current assets" and "Other current liabilities" captions include the income and costs from the current period for which revenues or expenses will only occur in future periods, as well as revenues or expenses that have already occurred, relating to future periods and that will be recorded to profit and loss in upcoming periods.
The interest received is recorded in accordance with the accruals principle, taking into account the debt amount and the effective interest rate during the period until maturity.
Revenue from dividends is recognised when it established the right of the company to recognise the appropriate amount.
The regulated tariffs used for invoicing natural gas in the national natural gas system are regulated by Entidade Reguladora do Sector Energético ("ERSE"), so that they allow the recovery of the estimated regulated revenue calculated at the beginning of each gas year calculated for each regulated activity. Regulated revenue includes, in addition to operating costs for each activity, the following remuneration: (i) for the commercialisation activity, remuneration for the purchase and sale of natural gas, which corresponds to the effective cost of natural gas and remuneration of the operating commercialisation costs plus a commercialisation margin; (ii) for the activities of receipt, transport and storage of natural gas, remuneration on the fixed assets net of depreciation and grants relating to these activities, (iii) for the activity of distribution of natural gas, remuneration on the fixed assets net of depreciation and grants relating to these activities. The regulated revenue of the pass-through activities/functions assumes the recovery of the costs incurred. Consequently, each activity is compensated for the costs incurred plus an additional remuneration, when applicable.
Following the above, and as the Group holds credit risk related to the tariffs invoiced to commercialisation companies and final customers, the regulated companies of the Group include in their income the tariffs that incorporate the remuneration/recovery of all activities.
Following the above, and as the Group holds credit risk related to the tariff invoiced to final customers, the regulated Group companies, as trading companies to end customers, include in their income, the tariffs that include the remuneration/recovery of all the previous activities.
Given the regulatory framework and legislation in place, the differences between regulated revenues meet some conditions (measurement reliability; financial asset remuneration; entitlement to their recovery and transmissibility, among other) that support their recognition as income and asset in the year they are calculated, namely that they can be reliably measured and the certainty that economic benefits will flow to the Company.
The regulated revenue calculation formula for the "Gas Year t", as published in the ERSE's Tariff Regulation, includes a component related to the adjustment over "Civil Year s-2" and "Civil Year s-2". This rationale is also applied to the negative tariff deviations, which are recorded as liabilities and costs.
In previous years, differences to the regulated revenue recorded by the Company were incorporated in the respective tariff calculations in accordance with the established mechanisms.
In the distribution and last resort commercialisation activity, the Group books in accruals and deferred income the difference between the effective invoicing through sales of the natural gas regulated tariff and the regulated revenue defined for each Gas Year by ERSE, allocated to each semester in accordance with the agreed seasonality coefficient of included for the compensation mechanism by the natural gas companies – Regulated revenue (Notes 14 and 24).
Since the natural gas regulated system is intended to result in a uniform tariff (applicable to all the country's regions) and considering the various levels of efficiency of the companies in the regulated market, ERSE published the compensation mechanism to be practiced between the companies in the sector, so as to allow approximation of income recovered by application of the regulated tariffs to regulated revenue of these companies. Therefore ERSE, in its documents "Tariffs and prices of natural gas" for each Gas Year, identifies the amount of compensation to be transferred (charged) between companies of the national gas system. In order to ensure a practical, objective and transparent procedure for the referred settlement, the companies have agreed seasonal coefficients to be applied in the issuance of the invoice for the uniform tariff. The seasonality differences between distribution and commercialisation activities reflect the difference in payment terms.
The meter reading, invoicing and respective collection related to the gas distribution and commercialisation activities are performed directly by the companies or, in respect of the meter reading and collection activities, by subcontracted external partners.
Natural gas sales not yet invoiced are recorded monthly in the caption "Other receivables" based on the customers historical information by consumption class, and corrected in the income statement in the period in which they are invoiced (Note 14).
Under the captions "Other receivables" is presented a monthly estimation based on historical information (daily average consumptions, days not invoiced and tariffs) or readings performed depending on the client's situation and corrected in income on the period in which it is invoiced (Note 14).
Regarding construction contracts included under IFRIC12, the construction of concession assets is outsourced to specialised entities which themselves assume the risk of construction activity, and income and costs associated with building of these assets (Notes 5 and 6) are then recognised.
Financial costs on loans obtained are recorded as financial costs on an accruals basis.
Financial costs on loans to finance investments in tangible assets are capitalised in fixed assets in progress in proportion to the total costs incurred on the investments, net of government grants received (Note 2.7), up to the time they start operating (Notes 2.3), the remaining financial costs being recorded in the income statement caption "Financial costs" (Note 8). Any interest income on amounts obtained from loans that are obtained directly to finance tangible assets in construction is deducted from the capitalised financial costs.
Financial costs included in tangible assets are depreciated over the period of useful life of the assets.
Income tax is calculated based on the taxable results of the companies included in the consolidation in accordance with the applicable tax rules in force in the area each GGND Group company head office is located.
Deferred taxes are calculated based on the liability method and reflect the temporary differences between the amounts of assets and liabilities recorded for accounting purposes and their amounts for tax purposes.
Deferred tax assets and liabilities are calculated and reviewed annually using the tax rates expected to be in force when the temporary differences revert.
Deferred tax assets are recorded only when there is reasonable expectation of sufficient future taxable income to use them or whenever there are taxable temporary differences that offset the deductible temporary differences in the period they revert. Temporary differences underlying deferred tax assets are reviewed at each statement of financial position date in order to recognise deferred tax assets that were not recorded in prior years as they did not fulfil all requisites and/or to reduce the amounts of deferred tax assets recorded based on the current expectation of their future recovery (Note 9).
Deferred taxes are recorded in the income statement for the year, unless they result from items recorded directly in equity, in which case the deferred tax is also recorded in equity.
Financial assets and liabilities are recorded in the statement of financial position when the Group becomes a contractual party to the financial instrument.
The financial assets and liabilities are not offset, unless there is legal or contractual conditions that allow it.
Investments are classified as follows:
Held-to-maturity investments are classified as non-current investments, unless they mature in less than 12 months from the consolidated statement of financial position date. These investments have a defined maturity date, and the Group intends and has the ability to retain them up to their maturity. As of 31 December 2016 the Group does not own held-to-maturity investments.
Investments at fair value through profit or loss are classified as current investments.
Available-for-sale investments are classified as non-current assets, for the investments in affiliates.
All purchases and sales of these investments are recorded on the date of the signature of the respective purchase and sale contracts, independently of the financial settlement date.
Investments are initially recorded at cost, which is the fair value of the price paid, including transaction costs.
After initial recognition, investments at fair value through profit or loss and available-for-sale investments are revalued to fair value by reference to their market value at the financial statements date, with no deduction for transaction costs which could be incurred upon sale. For equity instruments not listed on a regulated market, where it is not possible to reliably estimate their fair value, these are maintained at cost less any non-reversible impairment losses.
Gains and losses resulting from changes in the fair value of available-for-sale investments are recognised in the equity caption "Fair value reserve" until the investment is sold, redeemed or in some way disposed of, or until the fair value of the investment falls below cost over a long period, at which time the accumulated gain or loss is recorded in the income statement.
This assets are derecognised when (i) the Groups' contractual rights to receive its future cash flows expire, (ii) the Group has substancially tranfered all risks and benefits associated with its ownership or (iii) otherwise, retains part, but not substancially, of the risks and benefits associated with its ownership, the Group has tranfered the control of such assets.
Receivables are initially recorded at fair value and subsequently measured at amortised cost, less any impairment losses, recognised in the caption "Impairment losses on receivables".
Usually, amortised cost of these assets does not differ from their nominal value.
Financial liabilities and equity instruments are classified in accordance with substance of the contractual arrangement, independent of their legal form.
Loans are recorded at their nominal received amount, net of issuance expenses pertaining to those loans. The loans are measured at amortised cost.
Financial costs are calculated at the effective interest rate and recognised in the income statement on an accrual basis, then they are not related with qualified fixed assets investments.
Financial costs include interest and any origination fees incurred relating to project finance.
Accounts payable are initially recorded at fair value and subsequently measured at amortised cost, by the effective interest rate method. Usually, the amortised cost of these liabilities does not differ from their nominal value.
The amounts included in the caption "Cash and cash equivalents" includes cash, bank deposits, term deposits and other treasury applications that mature in less than three months, and that can be realised immediately with insignificant risk of change in their value.
For cash flow statement purposes the caption "Cash and cash equivalents" also includes bank overdrafts included in the statement of financial position caption "Bank loans and overdrafts".
Assets realisable and liabilities payable in more than one year from the consolidated financial statements date are classified as non-current assets and non-current liabilities, respectively.
Events that occur after the financial statements date that provide additional information on conditions that existed at the end of the reporting period are recorded in the consolidated financial statements. Events that occur after the financial statements date that provide information on conditions that exist after the financial statements date, if material, are disclosed in the notes to the consolidated financial statements (Note 36).
A business segment is a group of assets and operations of the Group that are subject to risks and returns different from other operational segments, being reported on a consistent way with the management internal reporting.
The accounting policies for segment reporting are consistently used in the Group. All inter-segmental revenues are at market prices and are eliminated in the consolidation process.
Financial information related to income for identified segments is provided in Note 7, where they are identified and characterised.
The preparation of financial statements in accordance with generally accepted accounting principles requires estimates to be made that affect the recorded amount of assets and liabilities, the disclosure of contingent assets and liabilities at the end of each year and income and costs recognised each year. The actual results could be different depending on the estimates made.
Certain estimates are considered critical if: (i) the nature of the estimates is considered to be significant due to the level of subjectivity and judgment required to record situations in which there is great uncertainty or are very susceptible to changes in the situation and; (ii) the impact of the estimates on the financial situation or operating performance is significant.
The accounting principles and areas that require the greatest number of judgments and estimates in the preparation of financial statements are: (i) tangible and intangible assets, investments in associates and goodwill impairment tests; (ii) provision for contingencies; (iii) demographic and financial assumptions used to calculate retirement benefits; (iv) accounts receivable impairment; (v) tangible and intangible assets useful lives and residual values; (vi) deferred taxes.
The Group performs annual impairment tests on goodwill, as explained in Note 2.2.c). The recoverable amounts of the cash generating units were determined based on their value in use. In calculating value in use, the Group estimated the expected future cash flows from the cash generating units, as well as an appropriate discount rate to calculate the present value of the cash flows. The amount of goodwill is referred in Note 11.
Identifying impairment indicators, estimating future cash flows and determining asset fair value imply a high judgment level from the Board of Directors in respect to the identification and evaluation of the different impairment indicators, expected cash flows, applicable discount rates, useful lives and residual amounts.
The final cost of lawsuits, settlements and other litigation can vary due to estimates based on different interpretations of the rules, opinions and final assessment of the losses. Consequently, any change in circumstances relating to these types of contingency can have a significant effect on the recorded amount of the provision for contingencies.
See Note 23.
The credit risk of the accounts receivable balances is evaluated at each reporting date, taking into consideration historical client information and its risk profile. Accounts receivable are adjusted by the evaluation made by management of the estimated collection risks existing at the date of the statement of financial position, which may differ from the actual risk for impairment to be incurred.
Determining the assets useful lives, as well as the method of depreciation/amortisation to apply, is essential to determine the depreciation/amortisation amount to recognise in each period's consolidated statement of comprehensive income. These two parameters are defined accordingly to the best judgment made by the Board of Directors for the assets and businesses in question, and also considering the practices adopted by companies in the sector internationally.
Deferred tax assets are recognised only when there is strong assurance that future taxable profits will be available for use of the temporary differences or when there are deferred tax liabilities for which a reversal is expected within the same period that the deferred tax assets are reversed. Evaluation of deferred tax assets is made by management at the end of each period, taking into account expectations for the Group's future performance.
Galp Gás Natural Distribuição, S.A. (GGND) is the Group holding for natural gas infrastructures in Portugal and as of 31 December 2016 its consolidated equity were €265,175 k.
GGND Group's financing model is historically maintained through loans of the Galp Group sub-holding for the gas business. As a result of the long-term partnership established with Marubeni Group, announced at 29 July 2016, that predicted the acquisition of 22.5% of GGND Group (formalised at 27 October 2016), GGND established at 25 August 2016 a program of Euro Medium Term Note Program up to €1,000,000 k (Note 22). At 19 September 2017 GGND issued notes amounting €600,000 k, allowing the full reimbursement of loan granted by Galp. The indebtedness covenant of Group GGND amounts to approximately 5x Net Debt/EBITDA, in line with the natural gas infrastructures companies and lower to the established by the bank contracts, which allow a covenant up to 7x.
The Group's operations lead to exposure of the following risks: (i) market risk, as a result of the volatility of prices of oil, natural gas and its derivatives, exchange rates and interest rates; (ii) credit risk, as a result of its commercial activity; (iii) liquidity risk, as the Group could have difficulty in obtaining the financial resources to cover its commitments.
The Group has an organisation and systems that enable it to identify, measure and control the different risks to which it is exposed and uses several financial instruments to hedge them in accordance with the corporate directives common to the whole Group. The contracting of these instruments is centralised.
The companies included in the consolidation, their head offices, percentage of interest held and their main activities are as follows:
| Head Office | interest held | Percentage of | ||||
|---|---|---|---|---|---|---|
| Companies | City | Country | 2016 | 2015 | Main activity | |
| Group Companies | ||||||
| Holding | ||||||
| Galp Gás Natural Distribuição, S.A. |
Lisboa | Portugal | - | - | Pursue of activities in the energy sector, particularly of natural gas distribution including service rendering to support corporate management, administration and logistics, purchases and supply and IT. |
|
| Subsidiaries: | ||||||
| Beiragás - Companhia de Gás das Beiras, S.A. |
a) | Viseu | Portugal | 59.59% | 59.50% | Natural gas distribution in medium and low pressure, exercised in the public interest under the rules applicable in the geographical area of the concession, covering in particular the construction and operation of infrastructure to integrate the National Network for Natural Gas Distribution, the promotion of construction, facilities conversion or adequacy for natural gas use, but also other activities related to the main subject. |
| Dianagás - Sociedade Distribuidora de Gás Natural de Évora, S.A. |
Lisboa | Portugal | 100.00% | 100.00% | Natural gas distribution, exercised in the public interest regime, under the rules applicable in the geographical area of the exploration license of autonomous local distribution networks and their supply and equipments for other compatible infrastructures, as well as the pursue of directly and indirectly related activities. |
|
| Duriensegás - Sociedade Distribuidora de Gás Natural do Douro, S.A. |
Vila Real | Portugal | 100.00% | 100.00% | Natural gas distribution, exercised in the public interest regime, under the rules applicable in the geographical area of the exploration license of autonomous local distribution networks and their supply and equipments for other compatible infrastructures, as well as the pursue of directly and indirectly related activities. |
|
| Lisboagás GDL - Sociedade Distribuidora de Gás Natural de Lisboa, S.A. |
Lisboa | Portugal | 100.00% | 100.00% | Natural gas distribution in medium and low pressure, exercised in the public interest under the rules applicable in the geographical area of the concession, covering in particular the construction and operation of infrastructure to integrate the National Network for Natural Gas Distribution, the promotion of construction, facilities conversion or adequacy for natural gas use, but also other activities related to the main subject, including exploitation of spare capacity of telecommunications network installed. |
|
| Lusitaniagás - Companhia de Gás do Centro, S.A. |
Aveiro | Portugal | 96.84% | 96.84% | Natural gas distribution in medium and low pressure, exercised in the public interest under the rules applicable in the geographical area of the concession, covering in particular the construction and operation of infrastructure to integrate the National Network for Natural Gas Distribution, the promotion of construction, facilities conversion or adequacy for natural gas use, but also other activities related to the main subject, including exploitation of spare capacity of telecommunications network installed. |
|
| Medigás -Sociedade Distribuidora de Gás Natural do Algarve, S.A. |
Lisboa | Portugal | 100.00% | 100.00% | Natural gas distribution, exercised in the public interest regime, under the rules applicable in the geographical area of the exploration license of autonomous local distribution networks and their supply and equipments for other compatible infrastructures, as well as the pursue of directly and indirectly related activities. |
|
| Paxgás - Sociedade Distribuidora de Gás Natural de Beja, S.A. |
Lisboa | Portugal | 100.00% | 100.00% | Natural gas distribution, exercised in the public interest regime, under the rules applicable in the geographical area of the exploration license of autonomous local distribution networks and their supply and equipments for other compatible infrastructures, as well as the pursue of directly and indirectly related activities. |
|
| Setgás - Sociedade de Produção e Distribuição de Gás, S.A. |
Setúbal | Portugal | 99.93% | 99.93% | Natural gas distribution in medium and low pressure, exercised in the public interest under the rules applicable in the geographical area of the concession, covering in particular the construction and operation of infrastructure to integrate the National Network for Natural Gas Distribution, the promotion of construction, facilities conversion or adequacy for natural gas use, but also other activities related to the main subject, including exploitation of spare capacity of telecommunications network installed. |
The place of activity (e.g. country) of subsidiaries with non-controlling interests is the same as shown in the table above.
During the year ended 31 December 2016, through the subsidiary Galp Gás Natural Distribuição, S.A., the Group acquired 0.08842% of shares in its subsidiary Beiragás - Companhia de Gás das Beiras, S.A. by € 31 k. With this acquisition, the Group holds 59.5931% of the subsidiary's shares.
Subsidiary Beiragás - Companhia de Gás das Beiras, S.A. was previously controlled by the Group and consolidated by the full consolidation method (held by 59.50468%). The difference between the amount paid and equity book value at the acquisition date was recognised in equity €5k (Note 20).
Resulting from the increase of 0.08842%, the negative amount of €12 k was accounted for under "Non-controlling interests", referring to the variation of non-controlling interests in the captions of "Share capital", "Other reserves" and "Share premium", and the negative amount of €24 k refers to the variation of non-controlling interests under "Retained earnings" up to the date of the participation increase (Note 21).
Investments in associates, their head offices and the percentage or interest held as of 31 December 2016 and 2015 are as follows:
| (€ k) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Company | Head Office | Percentage of interest held |
Book Value | Main activity | ||||
| City | Country | 2016 | 2015 | 2016 | 2015 | |||
| Tagusgás - Empresa de Gás do Vale do Tejo, S.A. |
a) | Santarém | Portugal | 41.33% | 41.33% | 15,059 | 14,169 | Natural gas production and distribution and other pipelined fuelled gases. |
| Value of financial investments in associates | 15,059 | 14,169 | ||||||
| a) Participation held by Galp Gás Natural, S.A. |
Following the summary of the financial statements of the associates as of 31 December 2016 and 2015:
| (€ k) | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Companies | Non current assets |
Current assets-Cash and cash equivalents |
Current Total Assets assets other |
Non current financial liabilities |
Non current liabilities - Other |
Current financial liabilities |
Current Total liabilities - Other |
liabilities Equity Operating income |
Financial information of the associate entities as of 31 December 2016 (*) Operating costs- Amortisation, depreciation and impairment loss on fixed assets |
Operating costs - other |
Operating result |
Financial Financial income - costs - interests interests |
Financial income - other |
Financial costs - other |
Financial | result Income tax | Energy sector extraordinary contribution |
Net result for the year |
Comprehensive result for the year |
% share held |
Percentage held and Book value Book Value Gains / |
Losses | Comprehensive income |
| 2016: Tagusgás - Empresa de Gás do Vale do Tejo, S.A. 2015: Tagusgás - Empresa de Gás do Vale do Tejo, S.A. |
82,870 83,506 |
4,160 4,566 91,596 5,611 4,814 93,931 |
(20,276) (23,418) | - (11,466) (55,160) 36,437 17,638 (20,226) (24,378) (4,650) (10,395) (59,649) 34,282 21,505 |
(2,630) (2,522) |
(9,951) 5,057 (12,805) 6,178 |
- 6 0 (2,035) |
- | 3 - |
1 (1,680) (1,649) - (1,975) |
(662) (708) |
(693) - |
2,053 2,802 |
2,154 41.33% 2,930 41.33% |
15,059 | 849 14,169 1,175 |
891 1,228 |
||||||
| (*) Previsional accounts at closing date, considered by the Group for application of the equity method. (a) Including hedging reserves |
Changes in "Financial investments in associates" for the year ended 31 December 2016 by equity equivalence method was as follows:
| Financial investments | Initial balance |
Gains / Losses (Note 4.4) |
Adjustments to hedging reserves |
Actuarial gains and losses |
Final Balance |
|---|---|---|---|---|---|
| 2016: | |||||
| Tagusgás - Empresa de Gás do Vale do Tejo, S.A. | 14,169 | 849 | 43 | (2) | 15,059 |
| 2015: Tagusgás - Empresa de Gás do Vale do Tejo, S.A. |
12,941 | 1,175 | 50 | 3 | 14,169 |
The financial investments in associated companies, presented in the consolidated statement of financial position as "Financial assets held for sale", the head offices and the percentage or interest held as of 31 December 2016 and 2015 are as follows:
| (€ k) | ||||||
|---|---|---|---|---|---|---|
| Company | Head Office | Percentage of interest held |
Book Value | |||
| City | Country | 2016 | 2015 | 2016 | 2015 | |
| AGENEAL Agência Municipal Energia de Almada | Almada | Portugal | 0.04% | 0.04% | 3 | 3 |
| 3 | 3 |
The financial assets held for sale were reflected for accounting purposes at the acquisition cost as described in Note 2.2 paragraph c). The net book value of these investments amounts to €3 k as of 31 December 2016.
The caption "Results from financial investments" presented in the consolidated income statement for the year ended 31 December 2016 and 31 December 2015 are comprised as follows:
| (€ k) | ||
|---|---|---|
| December 2016 |
December 2015 |
|
| Effect of applying the equity method: Associated companies (Note 4.2) |
849 | 1,175 |
| 849 | 1,175 |
The Group's operating income for the years ended 31 December 2016 and 2015 is as follows:
| (€ k) | ||
|---|---|---|
| Captions | 2016 | 2015 |
| Sales: | ||
| Goods | 5,826 | 8,026 |
| 5,826 | 8,026 | |
| Services Rendered | 195,690 | 208,910 |
| 195,690 | 208,910 | |
| Other operating income: | ||
| Supplementary income | 1,247 | 1,248 |
| Revenues arising from the construction of assets under IFRIC12 | 23,191 | 19,816 |
| Investment government grants (Note 13) | 8,882 | 8,905 |
| Others | 350 | 279 |
| 33,670 | 30,248 | |
| 235,186 | 247,184 |
The captions "Sales" and "Services rendered" include the amount of €18,340 k related to commercialisation and distribution activities of natural gas as a result of (Note 14):
positive €1,642 k concerning the adjustment of the estimated regulated revenues and the value of the invoiced income in relation to distribution and commercialisation activities (Note 14);
negative €3,122 k concerning the adjustment made by ERSE in the fixation of the tariff deviations – regulated revenue of the Companies (Note 14);
negative €11,534 k concerning the corresponding regulated revenue amortisation for 2013 (Note 14);
negative €5,326 k concerning the corresponding regulated revenue amortisation for 2014 (Note 14).
As referred in Note 2.12, the total amount to be recovered was included by ERSE in the regulated revenue to be returned in the 2016-2017 Gas Year, thus the Group is recognising in the income statement the reversal of the amount of the approved tariff deviation.
Regarding the construction contracts under IFRIC12, the construction of the concession assets is subcontracted to specialised entities which assume their own construction activity risk. Income and expenses associated with the construction of these assets are of equal amounts and are immaterial when compared to total revenues and operating costs and can be detailed as follows:
| (€ k) | ||
|---|---|---|
| Captions | 2016 | 2015 |
| Revenues arising from the Construction of Assets under IFRIC12 | (23,191) | (19,816) |
| Costs arising from the Construction of Assets under IFRIC12 | 23,191 | 19,816 |
| Margin | - | - |
The results for the years ended 31 December 2016 and 2015 were affected by the following items of operating costs:
| (€ k) | ||||
|---|---|---|---|---|
| CAPTIONS | 2016 | 2015 | ||
| Cost of Sales: | ||||
| Raw and subsidiary materials | - | 15 | ||
| Goods | 3,165 | 4,863 | ||
| Exchange rate differences | (4) | - | ||
| 3,161 | 4,878 | |||
| External supplies and services: | ||||
| Subcontracts - Third party access to network | 42,212 | 42,877 | ||
| Rental costs | 1,293 | 1,307 | ||
| Maintenance and repairs | 2,673 | 3,110 | ||
| Insurance | 1,360 | 1,140 | ||
| IT services | 6,491 | 3,862 | ||
| Electricity, water, vapour and communications | 508 | 486 | ||
| Readings, billing and collection | 1,426 | 1,612 | ||
| Technical Assistance Maintenance and inspection | 3,157 | 2,978 | ||
| Other specialised services | 13,764 | 11,655 | ||
| Other external supplies and services | 1,254 | 1,236 | ||
| Other costs | 476 | 436 | ||
| 74,614 | 70,699 | |||
| Personnel costs: | ||||
| Statutory board salaries (Note 29) | 151 | 10 | ||
| Employee salaries | 16,811 | 18,631 | ||
| Social charges | 3,651 | 3,675 | ||
| Retirement benefits - pensions and insurance (Note 23) | 3,293 | 4,193 | ||
| Other insurance | 1,285 | 1,262 | ||
| Other costs | (4,541) | (4,507) | ||
| 20,650 | 23,264 | |||
| Amortisation, depreciation and impairment on fixed assets | ||||
| Amortisation and impairment of tangible assets (Note 12) | 19 | 19 | ||
| Amortisation and impairment of concession agreements (Note 12) | 41,445 | 41,054 | ||
| 41,464 | 41,073 | |||
| Provision and impairment losses on receivables | ||||
| Provisions and reversals (Note 25) | (543) | 215 | ||
| Impairment losses on trade receivables (Note 15) | 164 | 157 | ||
| (379) | 372 | |||
| Other operating costs | ||||
| Other taxes | 231 | 339 | ||
| Costs arising from the construction of Assets under IFRIC12 | 23,191 | 19,816 | ||
| Losses on fixed assets | 801 | 200 | ||
| Donations | 144 | 184 | ||
| Other operating costs | 232 | 307 | ||
| 24,599 | 20,846 | |||
| Total of operating costs | 164,109 | 161,132 |
The caption "Subcontracts – network use" refers to charges for the use of:
As of 31 December 2016 the GGND Group is constituted by Galp Gás Natural Distribuição and its subsidiaries that develop activities of natural gas distribution and commercialisation.
The Natural Gas business segment reaches Natural Gas Distribution and Last Resort Commercialisation.
In "Others", the Group considered the holding Galp Gás Natural Distribuição, S.A..
The finantial statements of the previously identified segments as 31 December 2016 and 31 December 2015 is presented as follows:
| (€ k) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Natural Gas | Others | Eliminations | Consolidated | |||||
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| Income | ||||||||
| Sales and Services Rendered | 201,236 | 216,656 | 11,482 | 9,007 | (11,202) | (8,727) | 201,516 | 216,936 |
| Between Segments External |
290 200,946 |
- 216,656 |
10,912 570 |
8,727 280 |
(11,202) - |
(8,727) - |
- 201,516 |
- 216,936 |
| Cost of Sales Cost of Sold Materials and Consumables |
- (3,165) |
- (4,878) |
- 4 |
- - |
- - |
- - |
(3,161) (3,161) |
(4,878) (4,878) |
| Production Variation | - | - | - | - | - | - | - | - |
| EBITDA (1) | 111,647 | 127,114 | 515 | 383 | - | - | 112,162 | 127,497 |
| Non-disbursable Costs | ||||||||
| Amortisations and Adjustments Depreciations and Amortisations |
(41,464) (41,464) |
(41,073) (41,073) |
- - |
- - |
- | - - |
(41,464) (41,464) |
(41,073) (41,073) |
| Impairments | - | - | - | - | ||||
| Provisions (net) Provisions |
379 (233) |
(372) (288) |
- - |
- - |
- | - - |
379 (233) |
(372) (288) |
| Impairments | (170) | (198) | - | - | - | (170) | (198) | |
| Provisions - Reversals | 777 | 73 | - | - | - | 777 | 73 | |
| Impairments - Reversals | 5 | 41 | - | - | - | 5 | 41 | |
| EBIT IAS/IFRS | 70,562 | 85,669 | 515 | 383 | - | - | 71,077 | 86,052 |
| Financial Investments Results | - | - | 849 | 1,175 | - | - | 849 | 1,175 |
| Other Financial Results | (27,418) | (27,338) | 4,459 | (3,683) | - | - | (22,959) | (31,021) |
| Interest Costs | (23,148) | (31,528) | (23,058) | (30,170) | 27,379 | 26,157 | (18,827) | (35,541) |
| Interest Income | 994 | 1,166 | 27,745 | 26,498 | (27,379) | (26,157) | 1,360 | 1,507 |
| Other Financial Charges | (5,264) | 3,024 | (227) | (11) | - | (5,492) | 3,013 | |
| Income Tax | (11,049) | (13,906) | (1,309) | 566 | - | - | (12,358) | (13,340) |
| Energy Sector Extraordinary Contribution | (10,057) | (9,778) | - | - | - | - | (10,057) | (9,778) |
| Non-controlling Interests | (1,508) | (3,468) | - | - | - | - | (1,508) | (3,468) |
| Consolidated net result of the year | 20,530 | 31,179 | 4,514 | (1,559) | - | - | 25,044 | 29,620 |
| As of 31 December 2016 and 31 Decemebr 2015 | ||||||||
| OTHER INFORMATIONS Segment Assets (2) |
||||||||
| Financial Investments (3) | 3 | 3 | 17,334 | 16,444 | - | - | 17,337 | 16,447 |
| Other Assets | 1,265,232 | 1,388,196 | 592,404 | 569,941 | (563,626) | (620,637) | 1,294,010 | 1,337,498 |
| Total Consolidated Assets | 1,265,235 1,388,199 | 609,738 | 586,383 | (563,626) | (620,637) 1,311,347 1,353,945 | |||
| Total Consolidated Liabilities | 994,649 1,068,649 | 615,181 | 649,380 | (563,626) | (620,637) 1,046,204 1,097,392 | |||
| Investment in Intangible and Tangible Assets | 15,904 | 19,816 | - | - | 15,904 | 19,816 | ||
| (1) EBITDA = Segment Resutls / EBIT + Amortisation + Provisions (2) Net amount. |
||||||||
| (3) By equity equivalence method. |
(3) By equity equivalence method.
| (€ k) | |||
|---|---|---|---|
| Segments | Natural Gas | Others | TOTAL |
| Natural Gas | - | 10,912 | 10,912 |
| Others | 290 | - | 290 |
| 290 | 10,912 | 11,202 |
The core of between segments services rendered are:
The reconciliation between Segment Reporting and Income Statement for the years ended 31 December 2016 and 2015 is as follows:
| Captions of Segment Reporting | Caption of Income Statment | ||||
|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | ||
| Income | |||||
| Sales and Services Rendered | 201,516 | 216,936 | Sales | 5,826 | 8,026 |
| Services Rendered | 195,690 | 208,910 | |||
| Cost of Sales | -3,161 | -4,878 | Cost of Sales | -3,161 | -4,878 |
| Other operating income | 33,670 | 30,248 | |||
| External services and supplies | -74,614 | -70,699 | |||
| Personnel costs | -20,650 | -23,264 | |||
| Other operational costs | -24,599 | -20,846 | |||
| EBITDA IAS/IFRS (1) | 112,162 | 127,497 | Operational result before amortisations and provisions |
112,162 | 127,497 |
| Non-disbursable Costs | |||||
| Amortisations and Adjustments | -41,464 | -41,073 | Amortisations, depreciations and impairment losses on fixed assets |
-41,464 | -41,073 |
| Provisions (net) | 379 | -372 | Provisions and impairment losses on receivables | 379 | -372 |
| EBIT IAS/IFRS | 71,077 | 86,052 | Other operational costs | 71,077 | 86,052 |
| Financial Investments Results | 849 | 1,175 | Results of finanical investments and goodwill impairment losses |
849 | 1,175 |
| Other Financial Results | -22,959 | -31,021 | |||
| Financial income | 995 | 1,167 | |||
| Financial costs | -23,954 | -32,188 | |||
| Income Tax | -12,358 | -13,340 | Income tax | -12,358 | -13,340 |
| Energy Sector Extraordinary Contribution | -10,057 | -9,778 | Energy Sector Extraordinary Contribution | -10,057 | -9,778 |
| Minoraty Interests | -1,508 | -3,468 | Non-controlling interests | -1,508 | -3,468 |
| Net Result | 25,044 | 29,620 | Net Result | 25,044 | 29,620 |
Financial income and financial costs for the years ended 31 December 2016 and 2015 are as follows:
| (€ k) | ||
|---|---|---|
| Captions | 2016 | 2015 |
| Financial income: | ||
| Interest of bank deposits | 628 | 826 |
| Interest and other income with related companies (Note 28) | 367 | 341 |
| 995 | 1,167 | |
| Financial costs: | ||
| Interest of loans, bank overdrafts and others | (2,424) | (624) |
| Interest with related companies | (20,724) | (30,903) |
| Charges related to loans | (608) | (493) |
| Other financial costs | (198) | (168) |
| (23,954) | (32,188) | |
| (22,959) | (31,021) |
The Group companies headquartered in Portugal in which the Group has an interest equal or greater than 75%, if such participation ensures more than 50% of voting rights, are taxed in accordance with the special regime for the taxation of groups of companies, with taxable income being determined in Galp Energia, S.G.P.S., S.A.. The average tax rate applicable to companies with head offices in Portugal was 25%.
However, estimated income tax of the Company and its subsidiaries is accounted based on their tax results. In the year ended 31 December 2016, €15,160 k was recorded in the caption "Income tax".
| (€ k) | ||
|---|---|---|
| Captions | 2016 | 2015 |
| Galp Energia, S.G.P.S., S.A. (Note 28) | (15,397) | (37,333) |
| State and other public entities | 237 | (2,313) |
| (15,160) | (39,646) |
The following situations may affect income tax payable in the future:
| (€ k) | ||
|---|---|---|
| Captions | December 2016 | December 2015 |
| Current income tax | 19,013 | 27,040 |
| (Excess)/Insufficiency of income tax for the preceding years | (976) | (420) |
| Deferred tax | (5,679) | (13,280) |
| Income tax | 12,358 | 13,340 |
| Energy sector extraordinary contribution | 10,057 | 9,778 |
| 22,415 | 23,118 |
Below is a reconciliation of the income tax for the years ended 31 December 2016 and 2015, and detail of deferred taxes:
| (€ k) | ||||||
|---|---|---|---|---|---|---|
| December 2016 |
Rate | Income tax |
December 2015 |
Rate | Income tax |
|
| Result before taxes: | 48,972 | 25.00% | 12,243 | 56,206 | 27.00% | 15,176 |
| Adjustments to taxable income: | ||||||
| Application of the equity method | 0.42% | 207 | 0.56% | 317 | ||
| Fiscal benefits | (0.06%) | (27) | (0.06%) | (33) | ||
| Achievements of social utility | 0.00% | - | 0.59% | 330 | ||
| Income tax rates differences | 1.46% | 714 | 0.00% | - | ||
| (Excess)/Insufficiency of income tax of the | ||||||
| preceding year | (1.99%) | (976) | (0.75%) | (420) | ||
| Autonomous taxation | 0.73% | 358 | 0.63% | 352 | ||
| "PE" - Special participation and "IRP" - Tax on | ||||||
| Oil Income | 0.00% | - | 0.00% | - | ||
| Other accruals and deductions | (0.33%) | (161) | (4.24%) | (2,382) | ||
| Income tax and rate | 25.23% | 12,358 | 23.73% | 13,340 |
The tax rates used by GGND Group take into account the risk of substantively enacted tax rates do not become effective, which essentially depends on the reliability associated with the legal certainty of the legislative production.
As for the rate changes observed in Portugal, the Company considered by as substantively enacted at 31 December 2016 and 31 December 2015. The average tax rate applicable to companies with head offices in Portugal was 25%.
| (€ k) | ||||||
|---|---|---|---|---|---|---|
| Deferred tax December 2016 - Assets | ||||||
| Initial balance | Effect in results | Effect in equity | Final balance | |||
| 7 11,285 2,176 1,121 864 |
- (1,069) (161) 658 (127) |
- 2,404 - - - |
7 12,620 2,015 1,779 737 |
|||
| 15,453 | (699) | 2,404 | 17,158 | |||
| (€ k) | ||||||
| Final balance | ||||||
| 4 10,803 157 870 864 |
3 (137) 2,019 251 - |
- 619 - - - |
7 11,285 2,176 1,121 864 |
|||
| 12,698 | 2,136 | 619 | 15,453 | |||
| (€ k) | ||||||
| Deferred tax December 2016 - Liabilities | ||||||
| Initial balance | Effect in results | Deferred tax December 2015 - Assets Effect in equity |
| Adjustment to tangible and intangible assets | (4) | 4 | - |
|---|---|---|---|
| Adjustment to tangible and intangible assets – Fair Value | (3,544) | 110 | (3,434) |
| Regulated revenue | (11,031) | 6,209 | (4,822) |
| Accounting revaluations | (1,209) | 55 | (1,154) |
| (15,788) | 6,378 | (9,410) |
(€ k)
Deferred tax December 2015 - Liabilities
Financial statements and notes to the consolidated financial statements as of 31 december 2016
| Captions | Initial balance |
Effect in results |
Other adjustments |
Final balance |
|---|---|---|---|---|
| Adjustment to tangible and intangible assets | - | (4) | - | (4) |
| Adjustment to tangible and intangible assets – Fair Value | (3,766) | 112 | 110 | (3,544) |
| Regulated revenue | (22,014) | 10,983 | - | (11,031) |
| Accounting revaluations | (1,262) | 53 | - | (1,209) |
| (27,042) | 11,144 | 110 | (15,788) |
The changes in deferred taxes reflected in Equity correspond to actuarial gains and losses.
Earnings per share for the years ended 31 December 2016 and 2015 are as follows:
| (€ k) | ||
|---|---|---|
| December 2016 | December 2015 | |
| Results | ||
| Net result for purposes of calculating earnings per share (consolidated net result for the period) |
25,044 | 29,620 |
| Number of shares Weighted average number of shares for purposes of calculation earnings per share (Note 19) |
89,529,141 | 89,529,141 |
| Basic and diluted earnings per share (value in Euros): | 0.28 | 0.33 |
As there are no situations that give rise to dilution, the diluted earnings per share are equal to basic earnings per share.
The difference between the amounts paid to acquire an equity share in Group companies and the fair value of the acquired companies' equity as of 31 December 2016 and 2015 was as follows:
| Proportion of equity own at acquisition date |
Goodwill | |||||
|---|---|---|---|---|---|---|
| Subsidiaries | Acquisition year |
Acquisition cost |
% | Amount | December 2015 |
December 2016 |
| Duriensegás - Soc. Distrib. de Gás Natural do Douro, S.A. |
2006 | 3,094 | 25.00% | 1,454 | 1,640 | 1,640 |
| Lusitaniagás - Companhia de Gás do Centro, S.A. |
2002/3 and 2007/8/9 |
1,440 | 1.543% | 856 | 584 | 584 |
| Beiragás - Companhia de Gás das Beiras, S.A. |
2003/6 and 2007 |
152 | 0.94% | 107 | 51 | 51 |
| 2,275 | 2,275 |
Goodwill corresponds to values that were accounted for in the financial statements of the holding Galp Gás & Power, S.G.P.S., S.A., concerning differences in acquisition of subsidiaries in years preceding the date of the share increase of Galp Gás Natural Distribuição, S.A..
When performing impairment tests, goodwill is allocated to the respective cash generating unit. Value in use is determined by the present value of the estimated future cash flows of the cash generating unit. The recoverable amount is estimated for the cash-generating unit to which it may belong, according to the method of discounted cash flows. The discount rate used reflects GGND Group's WACC (Weighted Average Cost of Capital).
| Cash flow units | Evaluation model | Cash flow | Growing Rate | Discount rates |
|---|---|---|---|---|
| Financial | WACC between: | |||
| participation (by business segment) |
DCF (Discounted Cash Flow) |
According to corporate business |
Gordon Model with growing perpetuity of 2% |
G&P [6.3%-6.9%] |
G&P - Gas & Power
| Assumptions | ||||
|---|---|---|---|---|
| Cash flow units | Evaluation model | Cash flow | Growing Rate | Discount rates |
| Financial participation (by business |
DCF (Discounted Cash |
According to corporate business |
Gordon Model with growing perpetuity of 2% |
WACC between: |
| segment) | Flow) | G&P [6.2%-6.8%] |
G&P - Gas & Power
According to the defined assumptions for the year ended 31 December 2016 no impairment losses in Goodwill were noted.
Tangible and intangible assets are recorded in accordance with the accounting policy defined in Note 2.3 and 2.4. The depreciation / amortisation rates that are being applied are disclosed in the same notes.
Movements in tangible assets as of 31 December 2016:
| ( € k) | ||
|---|---|---|
| 2016 | 2015 | |
| Tangible assets: | Land and natural resources | Land and natural resources |
| Acquisition cost: | ||
| Balance as of 01 January 2016 | 938 | 938 |
| Gross acquisition cost as of 31 December 2016 | 938 | 938 |
| Accumulated amortisations and impairment losses: Balance as of 01 January 2016 |
(376) | (357) |
| Amortisations for the year | (19) | (19) |
| Balance as of 31 December 2016 | (395) | (376) |
| Net Amount: | ||
| As of 31 December 2016 | 543 | 562 |
| ( € k) | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Intangible assets | Service Concession Arrangements - Land |
Service Concession Arrangements - Buildings |
Service Concession Arrangements - Basic Equipment |
Service Concession Arrangements - Transport Equipment |
Service Concession Arrangements - Tools |
Service Concession Arrangements - Administrative Equipment |
Service Concession Arrangements - Returnable containers |
Service Concession Arrangements - Other equipment |
Service Concession Arrangements - R&D expenses |
Service Concession Arrangements - Industrial property |
Service Concession Arrangements - Reconversion of consumption to natural gas |
Service Concession Arrangements - Intangible assets in progress |
Intangible assets in progress |
Total intangible assets |
| 2016 | ||||||||||||||
| Acquisition cost: Balance at 1 January Additions |
11,791 355 |
9,064 | 1,137,937 - |
152 - |
4,439 - |
7,294 - |
4 - |
5,950 - |
3,712 - |
702 - |
567,774 - |
1,701 - 22,836 |
- 261 |
1,750,520 23,452 |
| Write-offs/Disposals Transfers |
24 | - (231) 19 |
(2,197) 18,693 |
8 | - (8) (642) |
(20) 29 |
- - |
- - |
- - 127 |
- 5,068 |
- - (23,326) |
- - |
(2,456) - |
|
| Gross acquisition cost at 31 December | 12,170 | 8,852 | 1,154,433 | 160 | 3,789 | 7,303 | 4 | 5,950 | 3,712 | 829 | 572,842 | 1,211 | 261 | 1,771,516 |
| Accumulated amortisations and impairment losses: Balance at 1 January Amortisation for the year Write-offs/Disposals Transfers |
(3,243) (258) |
(5,234) (332) - 148 - |
(400,524) (26,678) 1,479 - (698) |
(150) (1) |
(4,316) (54) - 8 - 698 |
(6,888) (141) 19 |
- | (4) (5,687) - (109) - - |
(2,733) (65) - - |
(319) (142) - - |
(189,183) (13,665) - - |
- - - - - - |
- - - - |
(618,281) (41,445) 1,654 - |
| Accumulated balance at 31 December | (3,501) | (5,418) | (426,421) | (151) | (3,664) | (7,010) | (4) (5,796) |
(2,798) | (461) | (202,848) | - | - | (658,072) | |
| Net amount: as of 31 December |
8,669 | 3,434 | 728,012 | 9 | 125 | 293 | - 154 |
914 | 368 | 369,994 | 1,211 | 261 | 1,113,444 | |
| ( € k) | ||||||||||||||
| Intangible assets | Service Concession Arrangements - Land |
Service Concession Arrangements - Buildings |
Service Concession Arrangements - Basic Equipment |
Service Concession Arrangements - Transport Equipment |
Service Concession Arrangements - Tools |
Service Concession Arrangements - Administrative Equipment |
Service Concession Arrangements - Returnable containers |
Service Concession Arrangements - Other equipment |
Service Concession Arrangements - R&D expenses |
Service Concession Arrangements - Industrial property |
Service Concession Arrangements - Reconversion of consumption to natural gas |
Service Concession Arrangements - Intangible assets in progress |
Intangible assets in progress |
Total intangible assets |
| 2015 | ||||||||||||||
| Acquisition cost: Balance at 1 January Additions |
11,706 | 9,053 - |
1,123,862 - |
150 - - |
4,446 | 7,044 - |
4 - |
5,953 - |
3,712 - |
334 - |
562,765 - |
3,197 - 19,818 |
- - |
1,732,226 19,818 |
| Write-offs/Disposals Transfers |
85 | - 11 |
- (1,480) 15,555 |
- 2 |
(28) 21 |
(8) 258 |
- (3) - |
- | - - 368 |
- (5) 5,014 |
- (21,314) |
- - |
(1,524) - |
|
| Gross acquisition cost at 31 December | 11,791 | 9,064 | 1,137,937 | 152 | 4,439 | 7,294 | 4 | 5,950 | 3,712 | 702 | 567,774 | 1,701 | - | 1,750,520 |
| Accumulated amortisations and impairment losses: Balance at 1 January Amortisation for the year Write-offs/Disposals Transfers |
(2,987) (255) (1) |
(4,876) (358) - |
(375,367) (26,412) - 1,282 - (27) |
(149) (1) - - |
(4,283) (61) 28 |
(6,778) (118) 8 - |
- | (3) (5,468) - (222) - 3 - |
(2,668) (65) - |
(234) (85) - - |
(175,686) (13,477) - 3 - (23) |
- - - - |
- - - - |
(578,499) (41,054) 1,324 (51) |
| Accumulated balance at 31 December | (3,243) | (5,234) | (400,524) | (150) | (4,316) | (6,888) | (3) (5,687) |
(2,733) | (319) | (189,183) | - | - | (618,280) | |
| Net amount: |
as of 31 December 8,548 3,830 737,413 2 123 406 1 263 979 383 378,591 1,701 - 1,132,240
Changes in the caption "Tangible and intangible assets" amounting € 23,452 k are mainly related to rights on regulated assets subject to natural gas distribution concession, namely to the natural gas infrastructures construction (networks, branches and other infrastructures) covered by IFRIC 12 (Note 5 and 6).
During the year ended 31 December 2016, intangible assets amounting to a net € 802 k were disposed.
Amortisation and depreciation for the years 2016 and 2015 are as follows:
| (€ k) | ||||||
|---|---|---|---|---|---|---|
| December 2016 | December 2015 | |||||
| Tangible | Intangible | Total | Tangible | Intangible | Total | |
| Amortisation / depreciation of the year Amortisation of the year – concession |
19 | - | 19 | 19 | - | 19 |
| agreements | - | 41,445 | 41,445 | - | 41,054 | 41,054 |
| Amortisations, depreciations and impairments (Note 6) |
19 | 41,445 | 41,464 | 19 | 41,054 | 41,073 |
As of 31 December 2016 and 2015 the amounts to be recognised as government grants in future years arise to €236,247 k and €245,147 k, respectively (Note 24).
During the years ended 31 December 2016 and 31 December 2015, grants amounting €8,882 k and €8,905 k, respectively (Note 5) were recognised in the consolidated income statement noted in Note 2.3. and 2.4. according to the assets useful life.
The non-current and current caption "Other receivables" as of 31 December 2016 and 31 December 2015 is detailed as follows:
| (€ k) | ||||
|---|---|---|---|---|
| December 2016 | December 2015 | |||
| Caption | Current | Non-current | Current | Non-current |
| State and Other Public Entities: | ||||
| Social Security | 130 | - | 125 | - |
| Subsoil occupation levies | 26,954 | 18,848 | 24,696 | 28,068 |
| Other receivables - associates, joint ventures and other related parties | ||||
| (Note 28) | 1,600 | - | 2,818 | - |
| Personnel | 78 | - | 103 | - |
| Paid guarantees | 19 | - | 28 | - |
| Advanced payments to suppliers | 13 | - | 1 | - |
| Loans to associates, joint ventures and other related parties (Note 28) | - | 5,375 | 145 | 5,008 |
| Ceding rights contract of telecommunications infrastructures usage | - | - | 61 | - |
| Other receivables | 1,715 | - | 1,642 | - |
| 30,509 | 24,223 | 29,619 | 33,076 | |
| Accrued income: | ||||
| Sales and services rendered not yet invoiced – natural gas | 24,754 | - | 28,898 | - |
| Regulated revenue - ERSE regulation | 11,880 | 7,528 | 22,814 | 16,080 |
| Adjustment to tariff deviation - "pass through" - ERSE regulation | 4,737 | - | 3,665 | - |
| Tariff adjustment - ERSE regulation | 3,601 | - | 3,197 | - |
| Financial neutrality - ERSE regulation | - | - | 6,102 | - |
| Receivable interest | - | - | 5 | - |
| Other accrued income | 458 | - | 742 | 31 |
| 45,430 | 7,528 | 65,423 | 16,111 | |
| Deferred charges: | ||||
| Prepaid insurance | 59 | - | 238 | - |
| Interest and other financial costs | 55 | - | 78 | - |
| Prepaid rentals | 7 | - | 8 | - |
| Other deferred costs | 689 | 3 | 181 | 2 |
| 810 | 3 | 505 | 2 | |
| 76,749 | 31,754 | 95,547 | 49,189 | |
| Impairment of other receivables | (3) | - | (3) | - |
| 76,746 | 31,754 | 95,544 | 49,189 |
(a) Amounts restated in accordance with Note 2.23.
"Impairment of other receivables" amounting € 3k noted no changes during the years ended 31 December 2016 and 2015.
The caption "Subsoil occupation levies" amounting to €45,802 k refers to levies on subsoil occupation already paid to local municipalities. According to the natural gas supply concession agreement between the Portuguese Government and the Group companies, and in accordance with the Resolution of the Council of Ministers No. 98/2008, dated 8 April, companies have the right to pass on the full amount of subsoil levies paid to the local authorities for the area under concession to marketing entities or to end customers.
The amount of €1,600 k recorded in the current and non-current caption "Other receivables– associates, joint ventures, affiliates and related entities" refers to receivable amounts from unconsolidated companies (Note 28).
The caption "Accrued income – sales and services rendered not yet invoiced", amounting to €24,754 k, is mainly related with the billing of natural gas consumption and electricity in December 2016, to be invoiced in the following months and is detailed as follows:
| (€ k) | ||
|---|---|---|
| Companies | TOTAL | Natural Gas |
| Lusitaniagás - Companhia de Gás do Centro, S.A. | 10,990 | 10,990 |
| Lisboagás GDL - Sociedade Distribuidora de Gás Natural de Lisboa, S.A. | 9,216 | 9,216 |
| Setgás - Sociedade de Produção e Distribuição de Gás, S.A. | 2,606 | 2,606 |
| Duriensegás - Soc. Distrib. de Gás Natural do Douro, S.A. | 1,092 | 1,092 |
| Beiragás - Companhia de Gás das Beiras, S.A. | 400 | 400 |
| Medigás - Soc. Distrib. de Gás Natural do Algarve, S.A. | 246 | 246 |
| Dianagás - Soc. Distrib. de Gás Natural de Évora, S.A. | 159 | 159 |
| Paxgás - Soc. Distrib. de Gás Natural de Beja, S.A. | 45 | 45 |
| 24,754 | 24,754 |
There are core activities and "pass-through" activities within the Operators of Natural Gas Distribution Networks ("ORD") and in the Last Resort Commercialisation Companies ("CUR"). This classification relates to the nature of each and in the first there is intrinsic value creation to the company. In the second activity the company is limited to billing its customers, and to pass on to the companies the amounts due for their core activities.
In the case of Distribution Network Operators, the "pass-through" activity is called "Access Activity to National Natural Gas Transportation Network and National Natural Gas Distribution Network performed by Distribution Networks Operators ", and for last resort retailers, the "pass-through" functions are called "Natural Gas Purchase and Sale" and "Purchase and Sale of Access to National Natural Gas Transportation Network and National Natural Gas Distribution Network". These activities / functions performed by various participants are regulated by ERSE through a regulatory mechanism of costs and revenues for regulated tariffs, resulting from the sector legislation. This regulatory mechanism gives rise to deviations, positive or negative, which vary within different periods of billing/collections and existing tariff structures in the various regulated activities.
In general terms, in the case of the pass through activities:
For National Natural Gas Distribution Network, they charge to retailers the amounts related to the access tariffs to the Natural Gas Transportation Network (UGS and URT tariffs), passing on these values to REN , which is the holder of this infrastructure;
For Last Resort Retailers, they charge to the end customers the tariffs for access to the transport and distribution infrastructures (UGS, URT and URD tariffs), which pass on the National Natural Gas Distribution Network (the fraction of transportation access fee is then passed by these to REN) and the cost of natural gas is simply passed on to the Retailer of Last Resort Wholesaler in the Energy Tariff;
The caption "Accrued income – Adjustments to tariff deviation – Energy tariff – ERSE regulation" contains the following detail:
| Gas Year between Gas Year Regulated estimate Real Revenue regulated Natural gas commercialisation Regulated Other 2015 difference revenue 2016 and distribution activities Revenue reclassifications amortisation and Adjustments / reversal invoiced (Note 5) (Note 5) revenue (Note 5) 2013 4,263 - - - - 1st Semester of 2013 23,727 - - - - 2nd Semester of 2013 (3,304) - - - - (3,304) Reclassification (809) (809) - - - (1,618) Adjustment to Year 2013 Reversal of 2013 Regulated (11,534) - (11,534) - - (23,068) revenue 12,343 (809) (11,534) - - 2014 215 - - - - 1st Semester of 2014 12,524 - - - - 2nd Semester of 2014 6,924 - - - (3,946) Reclassification (438) (2,313) - - - Adjustment to Year 2014 Reversal of 2014 Regulated - - (5,326) - - revenue 19,225 (2,313) (5,326) - (3,946) 2015 (9,644) - - - - 1st Semester of 2015 11,137 - - - - 11,137 2nd Semester of 2015 (3,620) - - - 3,946 326 Reclassification (2,127) - - - 3,946 1,819 2016 - - - (13,690) - 1st Semester of 2016 - - - 15,332 - 2nd Semester of 2016 - - - 1,642 - 29,441 (3,122) (16,860) 1,642 - (€ k) |
Natural gas commercialisation and |
2015 | Gas Year Real Regulated Revenue |
Gas Year Regulated Revenue difference amortisation / |
Adjust between estimate regulated revenue and |
Other reclassifications |
2016 |
|---|---|---|---|---|---|---|---|
| 11,101 | |||||||
| 1,642 | |||||||
| 15,332 | |||||||
| (13,690) | |||||||
| (9,644) | |||||||
| 7,640 | |||||||
| (5,326) | |||||||
| (2,751) | |||||||
| 2,978 | |||||||
| 12,524 | |||||||
| 215 | |||||||
| - | |||||||
| 23,727 | |||||||
| 4,263 | |||||||
| Adjust |
| distribution activities | Adjustments (Note 5) |
reversal (Note 5) |
invoiced revenue (Note 5) |
|||
|---|---|---|---|---|---|---|
| Accrued Charges (Note 24) | (9,453) | - | 723 | (13,404) | 13,827 | (8,307) |
| Accrued Income (Note 14) | 38,894 | (3,122) | (17,583) | 15,046 | (13,827) | 19,408 |
| 29,441 | (3,122) | (16,860) | 1,642 | - | 11,101 |
The caption "Adjustment to tariff deviation – regulated revenue" amounting €11,101 k is related to the difference between the estimated regulated revenue published for the regulated activity and the revenue for the real invoices issued (Note 2.12). These amounts are remunerated at a rate plus a spread defined by ERSE.
The amounts to be paid or received for each gas year are presented for each activity by net amount, depending on their nature in each gas year, as this is the manner in which the regulated revenue deviations allowed by ERSE are approved.
From 2010, financial statements for "ERSE - Entidade Reguladora do Sector Energético", started to be reported in accordance with the calendar year. Consequently the opening balances have been reclassified to reflect the calendar year.
During the year ended 31 December 2016, the differences for the Group's Regulated Revenue for the calendar year 2014 were settled, amounting to a recoverable amount of € 7,639 k. As the accrual made is lower than the amount agreed, the Group recognised in the caption "Services rendered" the respective decrease amounting to € 2,313 k.
As mentioned in Note 2.12 the total amount to be recovered was included by ERSE in the regulated revenues to be recovered in the gas year 2016-2017, thus the Group recognised the reversal of the amount of the approved tariff deviation in the income statement.
Items contained in Section IX of the Tariff Regulations: "Compensation for the application of tariff uniformity of the Tariff Regulations" define the Compensations and Transfers between Regulated Entities. These amounts, enshrined in the annual publication of ERSE for Regulated Revenues are designed to ensure the recovery of the regulated revenues and ensure economic and financial equilibrium for the Regulated Entities.
Finally, it should be noted that ERSE has established this compensation and transfer mechanism to allow the establishment of a uniform national tariff, since from the consumption structure in each distribution area (absolute size of the consumption and weight on the domestic and industrial sectors) there are distributors which are not able to achieve a recovery of the revenue ("insufficient" tariff), while in others there is an over- recovery ("high" tariff). Thus, in the latter case ("payers") the excess income recovered is transferred to the former ("receivers"), ensuring a balanced recovery of the regulated revenues.
Accruals for compensations related to the uniform tariff amount to €3.601 k.
| (€K) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Ageing Other Receivables |
Not overdue |
Overdue up to 90 days |
Overdue up to 180 days |
Overdue up to 365 days |
Overdue up to 545 days |
Overdue up to 730 days |
Overdue over 730 days |
Total |
| 2016 Gross amount | 108,334 | 102 | 30 | 3 | - | 3 | 31 | 108,503 |
| Impairments | - | - | - | - | - | - | (3) | (3) |
| 108,334 | 102 | 30 | 3 | - | 3 | 28 | 108,500 | |
| 2015 Gross amount | 143,195 | 137 | 140 | 821 | - | 443 | 3 | 144,739 |
| Impairments | - | - | - | - | - | - | (3) | (3) |
| 143,195 | 137 | 140 | 821 | - | 443 | - | 144,736 |
The Group considers as not overdue amounts balances of other receivables and income and charges accruals amounting €53,771 k and €82,041 k in 2016 and 2015, respectively.
The amounts of other receivables that are overdue but for which no impairment has been recognised correspond to credits which have payment agreements, are covered by credit insurance or for which there is an expectation of partial or total settlement.
The caption "Trade receivables" as of 31 December 2016 and 31 December 2015 includes the following detail:
| ( € k ) | ||
|---|---|---|
| December 2016 | December 2015 | |
| Captions | Current | Current |
| Trade receivables - current accounts | 10,057 | 14,666 |
| Trade receivables - doubtful accounts | 587 | 1,138 |
| 10,644 | 15,804 | |
| Impairment on trade receivables | (550) | (1,059) |
| 10,094 | 14,745 |
The movements in the caption "Impairment of trade receivables" for the years ended 31 December 2016 and 2015 were as follows:
| ( € K ) | |||||
|---|---|---|---|---|---|
| Impairment on trade receivables | Initial Balance | Increases | Decreases | Utilisation | Final Balance |
| 2016 | 1,059 | 169 | (5) | (673) | 550 |
| 2015 | 982 | 198 | (41) | (80) | 1,059 |
The increase and decrease in the caption "Impairment of trade receivables" amounting to €164 k net was recorded in the caption "Provision and impairment losses on receivables" (Note 6).
The following is an ageing schedule of Group "Trade receivables" as of 31 December 2016 and 2015:
| ( € K ) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Ageing Trade Receivables |
Not overdue |
Overdue up to 90 days |
Overdue up to 180 days |
Overdue up to 365 days |
Overdue up to 545 days |
Overdue up to 730 days |
Overdue over 730 days |
Total |
| 2016 Gross amount |
8,417 | 1,465 | 110 | 94 | 225 | 81 | 262 | 10,654 |
| Adjustments | - | - | (13) | (63) | (131) | (81) | (262) | (550) |
| 8,417 | 1,465 | 97 | 31 | 94 | - | - | 10,104 | |
| 2015 Gross amount |
9,100 | 2,239 | 1,770 | 511 | 454 | 842 | 888 | 15,804 |
| Adjustments | - | (5) | (9) | (121) | (45) | (67) | (812) | (1,059) |
| 9,100 | 2,234 | 1,761 | 390 | 409 | 775 | 76 | 14,745 |
The amounts of other receivables that are overdue but for which no impairment has been recognised correspond to credits which have payment agreements, are covered by credit insurance or for which there is an expectation of partial or total settlement.
The average collection period for not overdue trade receivables balance is lower than 30 days.
| (€ k) | ||
|---|---|---|
| CAPTIONS | December 2016 | December 2015 |
| Raw, subsidiary and consumption materials: | ||
| Other raw and various materials | 1,269 | 1,273 |
| 1,269 | 1,273 | |
| Impairment to raw, subsidiary and consumable materials | (155) | (155) |
| 1,114 | 1,118 | |
| Goods | 93 | 121 |
| 93 | 121 | |
| 1,207 | 1,239 |
As of 31 December 2016, the caption "Other raw and various materials" amounting € 1.269 k, mainly relates to materials to be applied on the construction and maintenance of Groups' infrastructures and counter meters.
The movement in "Inventories impairment" for the years ended 31 December 2016 and 2015 are as follows:
| (€ K ) | ||
|---|---|---|
| Initial balance | Utilisations | Final balance |
| 155 | - | 155 |
| 155 | - | 155 |
| 177 | (22) | 155 |
| 177 | (22) | 155 |
Not applicable.
For the years ended 31 December 2016 and 31 December 2015 the caption "Cash and cash equivalents" is detailed as follows:
| (€ k) | ||
|---|---|---|
| Captions | December 2016 | December 2015 |
| Cash Cash deposits Other treasury applications |
34 39,530 3,500 |
42 24,484 4,000 |
| Cash and cash equivalents in the consolidated statement of financial position | 43,064 | 28,526 |
| Bank overdrafts (Note 22) | (34) | (2,350) |
| Cash and cash equivalents in the consolidated statement of cash flow | 43,030 | 26,176 |
The caption "Other treasury applications" includes applications of treasury surplus, with maturities up to three months, in respect to the following Group companies:
| (€ k) | ||
|---|---|---|
| Companies | December 2016 | December 2015 |
| Beiragás - Companhia de Gás das Beiras, S.A. | 3,500 | 4,000 |
| 3,500 | 4,000 |
The funds that the Group has classified as "Cash and Cash equivalents" have no restrictions or relevant legal conditions in order to be used or distributed as dividends to their shareholders.
As of 31 December 2016 share capital amounting € 89,529,141.00 compounded by 89,529,141 shares with nominal value amounting one euro each, entirely subscripted and realised by the following shareholders:
| 2016: | |||
|---|---|---|---|
| No. of Shares | Participation (%) | Imputable participation (%) | |
| Galp Gas & Power, S.G.P.S., S.A. Meet Europe Natural Gas, Lda. |
69,385,084 20,144,057 |
77.50% 22.50% |
77.50% 22.50% |
| Total | 89,529,141 | 100.00% | 100.00% |
| 2015: | |||
| No. of Shares | Participation (%) | Imputable participation (%) | |
| Galp Gas & Power, S.G.P.S., S.A. | 89,529,141 | 100.00% | 100.00% |
| Total | 89,529,141 | 100.00% | 100.00% |
As of 31 December 2016 and 31 December 2015 "Translation reserves" and "Other reserves" are detailed as follows:
| (€ k) | ||
|---|---|---|
| Captions | December 2016 |
December 2015 |
| Reserves Legal Reserves |
3,434 | 2,986 |
| 3,434 | 2,986 | |
| Hedging reserves: Reserves - financial derivatives Reserves - Deferred tax on financial derivatives |
(259) 65 |
(237) - |
| (194) | (237) | |
| Other reserves: Reserves - Increase of 10.7532% in 2012 and 0.3438% in 2013 in the participation in the share capital of the subsidiary Lusitaniagás - Companhia de Gas do Centro, S.A. |
413 | 413 |
| Reserves - Increase of 33.05427% in 2015 in the participation in the share capital of the subsidiary Setgás - Sociedade de Produção e Distribuição de Gás, S.A. |
(492) | (492) |
| Reserves - Increase of 0.08842% in 2016 in the participation in the share capital of the subsidiary Beiragás - Companhia de Gás das Beiras S.A. |
5 | - |
| (74) | (79) | |
| 3,166 | 2,670 |
According to the company's statute and the Commercial Companies Code, the company has to transfer to the caption "Legal Reserves", included in other reserves, in share capital, a minimum of 5% of the net profit for each year up to a limit of 20% of the share capital. Legal reserves can't be distributed to shareholders, whichever, under certain circumstances, it may be used to increase share capital or absorb losses after all other reserves are exhausted. In 2016 the caption "Legal Reserves" fluctuated positively amounting €448 k.
In the year ended 31 December 2016, the negative amount of € 259 k is related to the fair value of financial derivatives - cash flow hedges related to associated companies and € 65 k related to its fiscal effect.
In March 2015, the Group acquired 10.59122% of the capital of the subsidiary Lusitaniagás - Companhia de Gás do Centro, S.A., which was previously controlled by the Group and consolidated using the full consolidation method. Accordingly, the difference of €370 k between the amount paid and the book value of the equity at acquisition date, was recognised in equity under "Reserves".
In December 2015, the Group acquired 3.67276% of the capital of the subsidiary Lusitaniagás - Companhia de Gás do Centro, S.A., which was previously controlled by the Group and consolidated using the full consolidation method. Accordingly, the difference of €43 k between the amount paid and the book value of the equity at acquisition date, was recognised in equity under "Reserves":
| (€ k) | ||||
|---|---|---|---|---|
| Equity at acquisition date |
% acquired |
Book Value |
Other reserves (Note 20) |
|
| Reserves - Increase of 10.59122% at 30 March 2015 in the participation in the share capital of the subsidiary Lusitaniagás - Companhia de Gas do Centro, S.A. |
59,085 | 10.59122% | 5,888 | 370 |
| Reserves - Increase of 3.67276% at 22 December 2014 in the participation in the share capital of the subsidiary Lusitaniagás - Companhia de Gas do Centro, S.A. |
55,360 | 3.67276% | 1,990 | 43 |
| 413 |
At 21 December 2016, the Group acquired 33.05427% of the capital of the subsidiary Setgás - Sociedade de Produção e Distribuição de Gás, S.A. from Enagás – S.G.P.S., S.A., which was already previously controlled by the Group and consolidated using the full consolidation method. Accordingly, the negative difference of €492 k between the amount paid and the book value of the equity at acquisition date, was recognised in equity under "Reserves".
| (€ k) | ||||
|---|---|---|---|---|
| Equity at acquisition date |
% acquired |
Book Value |
Other reserves (Note 20) |
|
| Reserves - Increase of 33.05427% at 21 December 2015 in the participation in the share capital of the subsidiary Setgás - Sociedade de Produção e Distribuição de Gás, S.A. (Note 3) |
87,995 | 33.05427% | 29,578 | (492) |
During the year ended 31 December 2016, the Group acquired 0.08842% of the capital of the subsidiary Beiragás - Companhia de Gás das Beiras, S.A., which was already previously controlled by the Group and consolidated using the full consolidation method. Accordingly, the difference of €5 k between the amount paid and the book value of the equity at acquisition date, was recognised in equity under "Reserves" (Note 3.1. a)):
| (€ k) | ||||
|---|---|---|---|---|
| Equity at acquisition date |
% acquired |
Book Value |
Other reserves (Note 20) |
|
| Reserves - Increase of 0.08842% during the year ended 31 December 2016 in the participation in the share capital of the subsidiary Beiragás - Companhia de Gás das Beiras, S.A. (Note 3.1 a)) |
40,334 | 0.08842% | 31 | 5 |
As of 31 December 2016 and 31 December 2015, the caption "Non-controlling interests" included in equity refers to the following subsidiaries:
| 2016: | (€ k) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| % of non-controlling interests December 2015 |
December 2015 |
Share capital and reserves |
Assigned dividends (a) |
Prior year results |
Retained earnings - actuarial gains and losses |
Result for the year |
December 2016 |
% of non-controlling interests December 2016 |
||
| Beiragás - Companhia de Gás das Beiras, S.A. |
(b) | 40.50% | 17,145 | (12) | (810) | (24) | (2) | 1,346 | 17,643 | 40.41% |
| Lusitaniagás - Companhia de Gás do Centro, S.A. Setgás - Sociedade de Produção e |
3.16% | 2,039 | - | (226) | - | - | 161 | 1,974 | 3.16% | |
| Distribuição de Gás, S.A. | 0.07% | 61 | - | (32) | - | - | 1 | 30 | 0.07% | |
| 19,245 | (12) | (1,068) | (24) | (2) | 1,508 | 19,647 |
2015: (€ k)
| % of non controlling interests December 2014 |
December 2014 |
Share capital and reserves |
Assigned dividends (a) |
Prior year results |
Retained earnings - actuarial gains and losses |
Result for the year |
December 2015 |
% of non controlling interests December 2015 |
||
|---|---|---|---|---|---|---|---|---|---|---|
| Beiragás - Companhia de Gás das Beiras, S.A. |
40.50% | 15,705 | - | - | - | - | 1,440 | 17,145 | 40.50% | |
| Lusitaniagás - Companhia de Gás do Centro, S.A. Setgás - Sociedade de Produção e |
(d) | 13.75% | 7,888 | (2,729) | - | (3,518) | (2) | 400 | 2,039 | 3.16% |
| Distribuição de Gás, S.A. | (c) | 33.12% | 27,457 51,050 |
(7,903) (10,632) |
- - |
(21,122) (24,640) |
1 (1) |
1,628 3,468 |
61 19,245 |
0.07% |
The negative amount of € 12k relates to the variation of non-controlling interests under "Share capital", "Other Reserves" and "Supplementary income" and the negative amount of € 24 k refers to the variation of non-controlling interests under "Retained earnings" up to the date of the participation increase.
g) The subsidiary Setgás - Sociedade de Produção e Distribuição de Gás, S.A., which was previously owned at 66.87906%, is now held 99.93333% by the Group. Due to the increase of 33.05427%, a negative amount of €29,025 k, relating the variation in the percentage held by the Group, was recorded in Non-controlling interests.
The negative amount of €7,903 k corresponds to the variation of non-controlling interests in the captions "Share capital", "Other reserves" and "Share premium" and the negative amount of €21.122 k corresponds to the variation of non-controlling interests in the caption "Retained earnings" until the date of the participation increase.
h) The subsidiary Lusitaniagás - Companhia de Gás do Centro, S.A., which was previously owned at 86.25058% is now held 96.8418% by the Group. Due to the increase of 10.5912%, a negative amount of €6,247 k relating to the variation in the percentage held by the Group, was recorded in Non-controlling interests.
The negative amount of €2,729 k corresponds to the variation of non-controlling interests in the captions "Share capital", "Other reserves" and "Share premium" and the negative amount of €3,518 k corresponds to the variation of non-controlling interests in the caption "Retained earnings" until the date of the participation increase.
Individual statements of financial position, income and cash flow of the companies with noncontrolling interests as of 31 December 2016 and 2015 are as follows:
2016:
| ASSETS | Setgás - Sociedade de Produção e Distribuição de Gás, S.A. (a) |
Beiragás - Companhia de Gás das Beiras, S.A. |
Lusitaniagás - Companhia de Gás do Centro, S.A. |
|
|---|---|---|---|---|
| Non-current assets: | ||||
| Tangible assets Intangible assets |
544 173,223 |
- 70,574 |
- 279,130 |
|
| Financial assets held for sale | 3 | - | - | |
| Other receivables | 3,399 | 1,963 | 9,304 | |
| Deferred tax assets | 183 | 579 | 94 | |
| Total non-current assets: | 177,352 | 73,116 | 288,528 | |
| Current assets: | ||||
| Inventories | 76 | 180 | 194 | |
| Trade receivables | 824 | 821 | 2,316 | |
| Other receivables | 9,529 | 2,562 | 18,883 | |
| Receivable income tax | 290 | - | - | |
| Cash and cash equivalents | 553 | 5,231 | 1,034 | |
| Total current assets: | 11,272 | 8,794 | 22,427 | |
| Total assets: | 188,624 | 81,910 | 310,955 | |
| EQUITY AND LIABILITIES | Setgás - Sociedade de Produção e Distribuição |
Beiragás - Companhia de Gás |
Lusitaniagás - Companhia de Gás |
|
| de Gás, S.A. (a) | das Beiras, S.A. | do Centro, S.A. | ||
| Equity: | ||||
| Share capital | 9,000 | 11,580 | 20,500 | |
| Share premium and other capital instruments | 7,482 | - | - | |
| Reserves | 7,426 | 2,273 | 5,266 | |
| Retained earnings | 19,696 | 26,485 | 31,649 | |
| Net result of the year | 1,732 | 3,326 | 5,086 | |
| Total equity attributable to shareholders: | 45,336 | 43,664 | 62,501 | |
| Liabilities: | ||||
| Non-current liabilities: | ||||
| Bank loans | - | 9,473 | 4,604 | |
| Other payables | 123,798 | 18,510 | 207,231 | |
| Post-employment and other employee benefits liabilities | 660 | 320 | 276 | |
| Deferred tax liabilities | 3,673 | 155 | 2,971 | |
| Provisions | 4,199 | 1,967 | 7,548 | |
| Total non-current liabilities: | 132,330 | 30,425 | 222,630 | |
| Current liabilities: | ||||
| Bank loans and overdrafts | 2,043 | 2,770 | 2,302 | |
| Trade payables | 1,765 | 1,305 | 5,732 | |
| Other payables | 7,150 | 3,691 | 14,694 | |
| Current payable income tax | - | 55 | 3,096 | |
| Total current liabilities: | 10,958 | 7,821 | 25,824 | |
| Total liabilities: % of non-controlling interests |
143,288 0.07% |
38,246 40.41% |
248,454 3.16% |
|
| Non-Controlling interests | 30 | 17,643 | 1,974 | |
(a) Includes Fair Value amounts resulting from the acquisition in 2012.
2015:
| ASSETS | Setgás - Sociedade de Produção e Distribuição de Gás, S.A. (a) |
Beiragás - Companhia de Gás das Beiras, S.A. |
Lusitaniagás - Companhia de Gás do Centro, S.A. |
|---|---|---|---|
| Non-current assets: | |||
| Tangible assets | 563 | - | - |
| Intangible assets | 173,655 | 71,239 | 281,207 |
| Financial assets held for sale | 3 | - | - |
| Other receivables | 5,924 | 2,886 | 10,684 |
| Deferred tax assets | 501 | 88 | 482 |
| Total non-current assets: | 180,646 | 74,213 | 292,373 |
| Current assets: | |||
| Inventories | 61 | 246 | 189 |
| Trade receivables | 1,520 | 1,826 | 1,937 |
| Other receivables | 55,751 | 5,007 | 21,681 |
| Cash and cash equivalents | 14 | 5,249 | 6,069 |
| Total current assets: | 57,346 | 12,328 | 29,876 |
| Total assets: | 237,992 | 86,541 | 322,249 |
| EQUITY AND LIABILITIES | Setgás - Sociedade de Produção e Distribuição de Gás, S.A. (a) |
Beiragás - Companhia de Gás das Beiras, S.A. |
Lusitaniagás - Companhia de Gás do Centro, S.A. |
| Equity: | |||
| Share capital | 9,000 | 11,580 | 20,500 |
| Share premium and other capital instruments | 7,482 | - | - |
| Reserves | 7,426 | 2,084 | 5,266 |
| Retained earnings | 58,923 | 24,873 | 30,359 |
| Net result of the year | 5,497 | 3,678 | 7,177 |
| Total equity attributable to shareholders: | 88,328 | 42,215 | 63,302 |
| Liabilities: | |||
| Non-current liabilities: | |||
| Bank loans | 2,041 | 12,225 | 6,906 |
| Other payables | 125,262 | 20,370 | 209,517 |
| Post-employment and other employee benefits liabilities | 631 | 291 | 179 |
| Deferred tax liabilities | 4,527 | 463 | 3,288 |
| Provisions | 2,760 | 1,421 | 4,970 |
| Total non-current liabilities: | 135,221 | 34,770 | 224,860 |
| Current liabilities: | |||
| Bank loans and overdrafts | 6,205 | 2,630 | 2,302 |
| Trade payables Other payables |
1,141 5,931 |
1,256 4,520 |
4,195 21,315 |
| Current payable income tax | 1,166 | 1,150 | 6,275 |
| Total current liabilities: | 14,443 | 9,556 | 34,087 |
| Total liabilities: | 149,664 | 44,326 | 258,947 |
| % of non-controlling interests | 0.07% | 40.50% | 3.16% |
| Non-Controlling interests | 61 | 17,145 | 2,039 |
(a) Includes Fair Value amounts resulting from the acquisition in 2012.
2016:
| Setgás - Sociedade de Produção e Distribuição de Gás, S.A. |
Beiragás - Companhia de Gás das Beiras, S.A. |
Lusitaniagás - Companhia de Gás do Centro, S.A. |
|
|---|---|---|---|
| Operating income: | |||
| Sales | - | 2,528 | - |
| Services rendered | 25,125 | 11,985 | 54,964 |
| Other operating income | 6,543 | 2,418 | 8,537 |
| Total operating income: | 31,668 | 16,931 | 63,501 |
| Operating costs: | |||
| Cost of sales | - | 1,566 | - |
| External supplies and services | 9,955 | 5,764 | 27,473 |
| Employee costs | 1,908 | 983 | 2,407 |
| Amortisation, depreciation and impairment loss on fixed assets |
5,786 | 2,507 | 9,605 |
| Provisions and impairment losses on receivables | 6 | 83 | (13) |
| Other operating costs | 5,089 | 1,707 | 6,121 |
| Total operating costs: | 22,744 | 12,610 | 45,593 |
| Operating result: | 8,924 | 4,321 | 17,908 |
| Financial income | 73 | 58 | 50 |
| Financial costs | (4,665) | (170) | (7,512) |
| Result before taxes: | 4,332 | 4,209 | 10,446 |
| Income tax | (1,161) | (336) | (2,762) |
| Energy sector extraordinary contribution | (1,439) | (547) | (2,598) |
| Net result for the year | 1,732 | 3,326 | 5,086 |
| % of non-controlling interests | 0.07% | 40.41% | 3.16% |
| Non-Controlling interests | 1 | 1,346 | 161 |
2015:
| Setgás - Sociedade de Produção e Distribuição de Gás, S.A. |
Beiragás - Companhia de Gás das Beiras, S.A. |
Lusitaniagás - Companhia de Gás do Centro, S.A. |
|
|---|---|---|---|
| Operating income: | |||
| Sales | - | 3,586 | - |
| Services rendered | 27,216 | 12,898 | 57,989 |
| Other operating income | 5,519 | 2,052 | 8,149 |
| Total operating income: | 32,735 | 18,536 | 66,138 |
| Operating costs: | |||
| Cost of sales | - | 2,368 | - |
| External supplies and services | 9,850 | 5,298 | 27,110 |
| Employee costs | 2,031 | 1,266 | 2,697 |
| Amortisation, depreciation and impairment loss on fixed | 5,670 | 2,457 | 9,460 |
| assets | |||
| Provisions and impairment losses on receivables Other operating costs |
(3) 4,262 |
96 1,320 |
42 5,683 |
| Total operating costs: | 21,810 | 12,805 | 44,992 |
| Operating result: | 10,925 | 5,731 | 21,146 |
| Financial income | 95 | 72 | 75 |
| Financial costs | (2,187) | (348) | (7,938) |
| Result before taxes: | 8,833 | 5,455 | 13,283 |
| Income tax | (1,961) | (1,237) | (3,592) |
| Energy sector extraordinary contribution | (1,375) | (540) | (2,514) |
| Net result for the year | 5,497 | 3,678 | 7,177 |
| % of non-controlling interests | 0.07% | 40.50% | 3.16% |
| Non-Controlling interests | 1,628 | 1,440 | 400 |
| Setgás - Sociedade de Produção e Distribuição de Gás, S.A. |
Beiragás - Companhia de Gás das Beiras, S.A. |
Lusitaniagás - Companhia de Gás do Centro, S.A. |
|
|---|---|---|---|
| Operating activities: | |||
| Cash received from customers | 39,240 | 23,524 | 95,689 |
| Cash (payments) to suppliers | (12,736) | (8,738) | (56,944) |
| Payments relating to employees | (1,723) | (754) | (2,260) |
| (Payments) relating to Tax on oil products ("ISP") | - | (196) | - |
| (Payments)/receipts of income taxes | (3,237) | (2,268) | (6,287) |
| Contributions to the pension fund | (58) | (27) | (78) |
| Payments to early retirements and pre-retirements | (124) | (12) | - |
| Other receipts/(payments) relating to the operational activity | (6,749) | (3,625) | (16,704) |
| Cash flows from operating activities (1) | 14,613 | 7,904 | 13,416 |
| Investing activities: | |||
| Receipts from: | |||
| Investment grants | - | - | (18) |
| Interests and similar income | - | 11 | 4 |
| Loans obtained | 44,000 | - | - |
| 44,000 | 11 | (14) | |
| Payments relating: | |||
| Intangible assets | (4,507) | (1,495) | (5,364) |
| (4,507) | (1,495) | (5,364) | |
| Cash flows from investing activities (2) | 39,493 | (1,484) | (5,378) |
| Financing activities: | |||
| Receipts from: | |||
| Loans obtained | 2,241 | - | 3,857 |
| 2,241 | - | 3,857 | |
| Payments relating: | |||
| Loans obtained | (4,081) | (4,275) | (2,302) |
| Interests from loans obtained | (4,452) | (77) | (7,404) |
| Interests and similar expenses | (153) | (86) | (110) |
| Dividends distributed / Interim dividends | (45,000) | (2,000) | (7,114) |
| (53,686) | (6,438) | (16,930) | |
| Cash flows from financing activities (3) | (51,445) | (6,438) | (13,073) |
| Net change in cash and cash equivalents (4) = (1) + (2) + (3) | 2,661 | (18) | (5,035) |
| Cash and cash equivalents at the beginning of the year | (2,110) | 5,249 | 6,069 |
| Cash and cash equivalents at the end of the year | 551 | 5,231 | 1,034 |
| 2015: | (€ k) | ||
|---|---|---|---|
| Setgás - Sociedade de Produção e Distribuição de Gás, S.A. |
Beiragás - Companhia de Gás das Beiras, S.A. |
Lusitaniagás - Companhia de Gás do Centro, S.A. |
|
| Operating activities: | |||
| Cash received from customers | 41,489 | 26,467 | 109,845 |
| Cash (payments) to suppliers | (17,849) | (10,697) | (75,677) |
| Payments relating to employees | (1,531) | (212) | (2,131) |
| (Payments) relating to Tax on oil products ("ISP") | - | (174) | - |
| (Payments)/receipts of income taxes | (2,663) | (2,270) | (8) |
| Payments to early retirements and pre-retirements | (145) | - | - |
| Other receipts/(payments) relating to the operational activity | (8,478) | (4,510) | (2,415) |
| Cash flows from operating activities (1) | 10,823 | 8,604 | 29,614 |
| Investing activities: | |||
| Receipts from: | |||
| Investment grants | - | - | 201 |
| Interests and similar income | - | 21 | 30 |
| - | 21 | 231 | |
| Payments relating: | |||
| Intangible assets | (4,285) | (1,400) | (5,582) |
| Loans granted | (44,000) | - | - |
| (48,285) | (1,400) | (5,582) | |
| Cash flows from investing activities (2) | (48,285) | (1,379) | (5,351) |
| Financing activities: | |||
| Receipts from: | |||
| Loans obtained | 61,000 | - | 71,990 |
| Interests and similar income | (955) | - | - |
| 60,045 | - | 71,990 | |
| Payments relating: | |||
| Loans obtained | (7,051) | (9,148) | (74,292) |
| Interests from loans obtained | (25) | (271) | (7,657) |
| Interests and similar expenses | (605) | (46) | (167) |
| (7,681) | (9,465) | (82,116) | |
| Cash flows from financing activities (3) | 52,364 | (9,465) | (10,126) |
| Net change in cash and cash equivalents (4) = (1) + (2) + (3) | 14,902 | (2,240) | 14,137 |
| Cash and cash equivalents at the beginning of the year | (17,012) | 7,489 | (8,068) |
| Cash and cash equivalents at the end of the year | (2,110) | 5,249 | 6,069 |
Loans obtained as of 31 December 2016 and 31 December 2015 were as follows:
| (€ k) | ||||
|---|---|---|---|---|
| December 2016 | December 2015 | |||
| Current | Non-current | Current | Non-current | |
| Bank loans: | ||||
| Loans | 13,267 | 29,542 | 15,167 | 42,808 |
| Bank overdrafts (Note 18) | 34 | - | 2,350 | - |
| 13,301 | 29,542 | 17,517 | 42,808 | |
| Origination Fees | - | (80) | - | (98) |
| 13,301 | 29,462 | 17,517 | 42,710 | |
| Bonds and Notes: | ||||
| Notes | - | 600,000 | - | - |
| - | 600,000 | - | - | |
| Origination Fees | - | (4,510) | - | - |
| - | 595,490 | - | - | |
| 13,301 | 624,952 | 17,517 | 42,710 | |
Current and non-current loans, excluding origination fees, bank overdrafts and discounted notes, have the following reimbursement plan as of 31 December 2016:
| (€ k) | ||
|---|---|---|
| Loans | ||
| Total | Current | Non-current |
| 13,267 | 13,267 | - |
| 11,361 | - | 11,361 |
| 10,491 | - | 10,491 |
| 7,690 | - | 7,690 |
| 600,000 | - | 600,000 |
| 642,809 | 13,267 | 629,542 |
As of 31 December 2016 and 31 December 2015, loans obtained are expressed in the following currencies:
| (€k) | |||||
|---|---|---|---|---|---|
| December 2016 | December 2015 | ||||
| Currency | Total initial amount | Due amount | Total initial amount | Due amount | |
| Euros | EUR | 759,374 | 642,809 | 181,820 | 57,975 |
| 642,809 | 57,975 |
The Group has a financing contract with the European Investment Bank amounting to €30,486 k, and split into €10,497 k short-term and €19,989 k medium and long-term. These instruments bear interest at a variable rate pointed by EIB, assured by a banking institution.
Additionally, the Group has recorded in loans an amount of €12,323 k, obtained by the company Beiragás – Companhia de Gás das Beiras, S.A., which split into €2,770 k shot-term and €9,553 k medium and long-term.
At August 25th 2016, Galp Gás Natural Distribuição, S.A. established an EMTN Programme ("EUR 1,000,000,000 Euro Medium Term Note Programme").
Under the EMTN Programme, at September 19th 2016, Galp Gás Natural Distribuição, S.A., issued notes amounting €600,000 k, which overdue at September 19th 2023, with coupons of 1.375%, admitted to negotiation on the regulated market of London Stock Exchange.
JP Morgan, BofA Merrill Lynch and Banco Santander Totta acted as Joint-Bookrunners in this transaction.
The Group provides its employees with 3 defined benefit plans, which are non-contributory for the participants, and one defined contribution plan, which is contributory. In addition, it provides benefits for health insurance, life insurance and a complimentary defined contribution plan in the event of death or disability.
The GGND Group Pension Plan provides the following benefits:
The closed GGND Group Pension Fund aims for the payment of pension supplements for retirement and disability and survival pensions under the GGND Group Pension Plan.
Two scenarios have been used for the calculation of the liabilities of these defined benefit plans:
The liabilities presented in this report have been calculated based on the Projected Unit Credit method. The principle behind this method is to cover the benefits of each of the participants of the plan as they accrue, taking into account the future growth of costs associated with the benefit under analysis. Thus, the total cost for each participant is divided into units, each of which is associated with a past or future year of service.
For the purpose of the assessment, the cumulative liability of an individual is the present value of the accumulated benefits, at the reference date.
Responsibilities for Past Services (RPS) result from the sum of the accumulated liabilities for all participants of the plan.
The GGND Group Pension Plan is a Final Pay type.
The benefits provided under the Plan are paid directly by the Pension Fund. For the early retirement pension, the benefit is paid by the Fund to 2 early retirees whose early retirement started before 30/09/2009, with the liabilities corresponding to the remaining early retirees and pre-retirees, as well as to future cases, recognised through an accounting provision created for that purpose.
The Group also offers its employees a defined contribution plan, to which the following companies are currently associated: Lisboagás GDL, Beiragás - Companhia de Gás das Beiras, S.A., Dianagás - Soc. Distrib. de Gás Natural de Évora, S.A., Duriensegás - Soc. Distrib. de Gás Natural do Douro, S.A., Lusitaniagás - Companhia de Gás do Centro, S.A., Medigás - Soc. Distrib. de Gás Natural do Algarve, S.A., Paxgás - Soc. Distrib. de Gás Natural de Beja, S.A., and Setgás - Sociedade de Produção e Distribuição de Gás, S.A..
In the Defined Contribution Plan, the benefits to be attributed to employees are the result of the contributions made up to the time of retirement of both the company and their employees.
The Companies make contributions of 3% of the pensionable salary and a "matching" contribution of an amount equal to the employee's contribution up to a limit of 1% of pensionable salary.
The annual cost is fixed as a percentage and has no risk to changes in life expectancy, fund performance, Social Security contributions, and does not require actuarial valuations.
This defined contribution plan also includes a minimum benefit in case of death or disability of active participants, by attributing a minimum total pension to be added to that from Social Security, which guarantees a minimum total pension equal to 50% of the pensionable salary of the employee to date of occurrence.
All GGND Group pension plans are governed by Portuguese law applied to pension funds and supervised by the Supervisory Authority for Insurance and Pensions ("Autoridade de Supervisão de Seguros e Pensões - ASF").
It is the Fund Management Company that is responsible for executing all necessary or convenient acts and operations to ensure the good administration and management of the Fund, in accordance with what has established in the Constitution Agreement and in the Fund Management Contract.
BPI Vida e Pensões manages the GGND Fund.
The Health Insurance benefit aims to cover medical/hospital expenses in accordance with existing policies.
The Life Insurance benefit aims to ensure financial protection of employees and/or spouses and children in the event of death or disability and in accordance with the existing policies.
As of 31 December 2016 and 2015, the net assets of GGND Pension Fund, valued at fair value, were as follows according to the reports submitted by the respective fund management companies:
| (€ k) | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2016 | 2015 | |||||||
| Fair Value – Levels of valorisation | Fair Value – Levels of valorisation | |||||||
| Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | |||
| Market Value |
Observable market inputs |
Other valorisation technics |
Total | Market Value |
Observable market inputs |
Other valorisation technics |
Total | |
| Shares | 7,036 | - | - | 7,036 | 7,014 | - | - | 7,014 |
| Bonds | 15,252 | - | - | 15,252 | 14,826 | - | - | 14,826 |
| Real Estate | 316 | - | - | 316 | 324 | - | - | 324 |
| Liquidity | 733 | - | - | 733 | 2,177 | - | - | 2,177 |
| 23,337 | - | - | 23,337 | 24,341 | - | - | 24,341 |
During the year ended 31 December 2016, no endowment to the Fund were made.
As of 31 December 2016 and 2015 the Group had the following amounts related to liabilities for retirement benefits and other benefits:
| (€ k) | ||||
|---|---|---|---|---|
| December 2016 | December 2015 | |||
| Captions | Liability | Equity | Liability | Equity |
| Post-employment benefits: | ||||
| Relating to the Pension Fund | (2,826) | 6,665 | (1,281) | 5,493 |
| Retired Employees | (2,536) | 1,837 | (3,068) | 1,906 |
| Pre-retirement | (6,506) | 1,114 | (7,201) | 955 |
| Early retirement | (20,861) | 7,122 | (18,431) | 4,129 |
| Other benefits: | ||||
| Healthcare | (26,161) | 13,914 | (19,587) | 7,462 |
| Life insurance | (413) | 16 | (387) | (7) |
| Defined contribution plan minimum | ||||
| benefit | (819) | (110) | (539) | (168) |
| (60,122) | 30,558 | (50,494) | 19,770 |
The "Pre-retirement" caption amounting to €6,506 k includes €1,882 k and €173 k respectively for the subsidiaries Lisboagás, S.A. and SETGÁS – Sociedade de Distribuição de Gás Natural, S.A., to cope with already agreed pre-retirements that will only be effective in 2017.
The caption "Employee costs - retirement benefits" amounting to €3,293 k (Note 6) includes mainly: (i) €373 k relating to benefits related to the Fund; (ii) €1,499 k from the remaining retirement benefits; (iii) a loss of €1,159 k of other benefits; (iv) €351 k for the defined contribution plan and (v) a gain of €100 k regarding pre-retirements and early retirements not included in the other benefits.
The difference of €5,978 k between the amount recorded in the Equity detail above and the amount in the caption "Retained earnings – actuarial gains and losses - pension fund", of the consolidated statement of changes in equity, is due to the amount relating to deferred tax.
| December 2016 | December 2015 | |
|---|---|---|
| Active | 188 | 176 |
| Pre-Retired | 39 | 41 |
| Early Retirements | 32 | 28 |
| Disability Retirements | 5 | 5 |
| Elderly Retirements | 199 | 207 |
| Pensioners – Widowhood / Orphan hood | 162 | 178 |
| 625 | 635 |
The average maturity of liabilities for the defined benefit plans, is 13.6 years.
Payment distribution associated with the GGND Group Pension Funds:
The assumptions used for the calculation of post-employment benefits are considered by the Group and an entity specialised in actuarial studies as those that best meet the commitments set out in the pension plan and their respective liabilities with the retirement benefits and are set out as follows:
| (€ k) | ||
|---|---|---|
| 2016 | 2015 | |
| Assumptions | ||
| Rate of return on assets | 2.25% | 2.50% |
| Technical interest rate | 2.25% | 2.50% |
| Rate of increase in salaries | 1.00% | 1.00% |
| Rate of increase in pensions | [0.00% - 2.00%] | [0.00% - 2.00%] |
| Current personnel and pre-retirees mortality table | INE 2009-2011 | INE 2009-2011 |
| Retired personnel mortality table Disability table |
INE 2009-2011 50% EVK 80 |
INE 2009-2011 50% EVK 80 |
| 66 years or 65 years |
66 years or 65 years |
|
| Common age for retirement | if at least with 43 years of discounts to S.S. at 65 |
if at least with 43 years of discounts to S.S. at 65 |
| Method | Projected credit unit |
Projected credit unit |
| Changes in past service liability (PSL) | ||
| PSL at the end of the previous year | 25,621 | 24,256 |
| Current service cost | 334 | 325 |
| Interest cost | 625 | 650 |
| Actuarial (gain) / loss | 797 | 1,582 |
| Benefits payment made by the Company Cut back - Early retirements |
(1,221) | (1,226) |
| Cut back - Pre-retirement | 17 (10) |
9 25 |
| PSL at the end of the current year | 26,163 | 25,621 |
| Changes in coverage of financial assets (pension fund) | ||
| Assets at the end of the previous year | 24,340 | 23,375 |
| Net interest | 593 | 626 |
| Associates contribution | - | 1,650 |
| Benefit payments | (1,221) | (1,226) |
| Financial gains / (losses) | (375) | (85) |
| Assets at the end of the current year | 23,337 | 24,340 |
| Reconciliation of gains and loss recognised - through Comprehensive Income | ||
| Actuarial (Gains) and Losses from experience | 43 | (762) |
| (Gains) / losses from change in assumptions | (840) | (820) |
| Financial (Gains) / Losses | (375) | (85) |
| Other impacts | 1,172 | 1,667 |
| Cumulative (Gains) / losses recognised at the end of the year Reconciliation to the Statement of Financial Position |
- | - |
| (Gains) / losses recognised at the beginning of the year - Asset/(Liability) | (1,281) | (881) |
| Net cost of the year | (373) | (383) |
| Benefits paid directly by the employee | - | 1,650 |
| Gains / (losses) recognised - through Comprehensive Income | (1,172) | (1,667) |
| Total recognised at year end - Assets / (Liabilities) | (2,826) | (1,281) |
| Net cost of the year | ||
| Current service cost | 334 | 325 |
| Interest cost | 32 | 24 |
| Net cost of the year before special events | 366 | 349 |
| Cut back impact - Early Retirement | 17 | 9 |
| Cut back impact - Pre-retirement | (10) | 25 |
| Net cost of the year | 373 | 383 |
| Reconciliation of gains and loss recognised - through Comprehensive Income | ||
| Cumulative (Gains) / losses recognised at the beginning of the year | 5,493 | 3,826 |
| Actuarial (Gains) and Losses from experience (Gains) / losses from change in assumptions |
(43) | 762 |
| Financial (Gains) / Losses | 840 375 |
820 85 |
| Cumulative (Gains) / losses recognised at the end of the year | ||
| 6,665 | 5,493 |
The actuarial losses related to past service liabilities which occurred in 2016 amounting €797 k can be segregated as follows:
by changes in assumptions: losses amounting €840 k. This amount is related only to the change in the discount rate. As the change in the regular retirement age was driven by the change in legislation, the impact was considered as a gain/loss by experience;
by experience: losses amounting to €43 k.
The financial losses of the fund, amounting €375 k, arise from the difference between the estimated value for the found evolution and its real value present in the previous section, as detailed below:
| (€ k) | ||||
|---|---|---|---|---|
| Estimated | Real | Deviation | Data Value | |
| Initial balance | 24,340 | 24,340 | - | 31-12-2015 |
| Pensions | (1,259) | (1,221) | 38 | |
| Acquired rights Associates contributions |
- 1,647 |
- - |
- (1,647) |
|
| Participant contributions | - | - | - | 2016 |
| Total Movements | 388 | (1,221) | (1,609) | |
| Fund return | 593 | 218 | (375) | |
| Ending balance | 25,321 | 23,337 | (1,984) | 31-12-2016 |
(€ k)
| Group in 2016 | ||||
|---|---|---|---|---|
| Retired | Pre-retirement | Early retirement |
Total | |
| Assumptions | ||||
| Technical interest rate | 2.25% | 2.25% | 2.25% | |
| Rate of increase in salaries | 1.00% | 1.00% | 1.00% | |
| Rate of increase in pensions | [0.00% - | |||
| [0.00% - 2.00%] | [0.00% - 2.00%] | 2.00%] | ||
| Current personnel and pre-retirees mortality table | INE 2009-2011 | INE 2009-2011 | INE 2009-2011 | |
| Retired personnel mortality table | INE 2009-2011 | INE 2009-2011 | INE 2009-2011 | |
| Disability table | EVK 80 - 50% | EVK 80 - 50% | EVK 80 - 50% | |
| 66 years or 65 years if at least |
66 years or 65 years if at least |
66 years or 65 years if at least |
||
| Common age for retirement | with 43 years of | with 43 years of | with 43 years | |
| discounts to S.S. | discounts to S.S. | of discounts to | ||
| at 65 | at 65 | S.S. at 65 | ||
| Projected credit | Projected credit | Projected credit | ||
| Method | unit | unit | unit | |
| Changes in past service liability (PSL) | ||||
| PSL at the end of the previous year | 3,068 | 5,225 | 18,252 | 26,545 |
| Current service cost | - | 3 | 547 | 550 |
| Interest cost | 70 | 115 | 439 | 624 |
| Actuarial (gain) / loss | (69) | 159 | 2,992 | 3,082 |
| Benefit payments made by the Company | (533) | (1,467) | (1,278) | (3,278) |
| Cut back - Early retirements Cut back – Current personnel |
- - |
- 415 |
109 (199) |
109 216 |
| Other adjustments | - | 1 | (1) | - |
| PSL at the end of the current year | 2,536 | 4,451 | 20,861 | 27,848 |
| Reconciliation to the Statement of Financial Position |
||||
| (Gains) / losses recognised at the beginning of the | ||||
| year - Asset/(Liability) | (3,068) | (5,225) | (18,252) | (26,545) |
| Net cost of the year | (70) | (533) | (896) | (1,499) |
| Benefits paid directly by the Company | 533 | 1,467 | 1,278 | 3,278 |
| Gains / (losses) recognised – through | ||||
| Comprehensive Income | 69 | (159) | (2,992) | (3,082) |
| Effect of other adjustments | - | (1) | 1 | - |
| Total recognised at year end - Assets / (Liabilities) | (2,536) | (4,451) | (20,861) | (27,848) |
| Net cost of the year | ||||
| Current service cost | - | 3 | 547 | 550 |
| Interest cost | 70 | 115 | 439 | 624 |
| Net cost of the year before special events | 70 | 118 | 986 | 1,174 |
| Cut back impact - Early Retirement | - | - | 109 | 109 |
| Cut back impact - Pre-retirement | - | 415 | (199) | 216 |
| Net cost of the year | 70 | 533 | 896 | 1,499 |
| Reconciliation of gains and loss recognised | ||||
| through Comprehensive Income | ||||
| Cumulative (Gains) / losses recognised at the beginning of the year |
1,906 | 955 | 4,129 | 6,990 |
| Actuarial (Gains) and Losses from experience | (95) | 132 | 2,526 | 2,563 |
| (Gains) / losses from change in assumptions | 26 | 27 | 466 | 519 |
| Other impacts | - | - | 1 | 1 |
| Cumulative (Gains) / losses recognised at the end | ||||
| of the year | 1,837 | 1,114 | 7,122 | 10,073 |
| Non-controlling interests | - | - | - | - |
| Cumulative (Gains) / losses recognised at the end | ||||
| of the year | 1,837 | 1,114 | 7,122 | 10,073 |
The current service cost, interest cost, cut back impact – Early retirement and cut back impact – Preretirement, amounting to €550 k, €624 k, €109 k e €216 k, respectively, were recorded by the Group in the caption "Employee costs" in the consolidated income statement (Note 6).
As mentioned in Note 2.10, the ISP authorised the establishment of the Galp Energia Defined Contribution Pension Fund in 31 December 2002, giving the possibility for the employees to choose between this new defined contribution pension plan and the existing defined benefit plan. During 2016, a cost of € 351 k was recognised in the "Employee cost" caption in respect to the contributions of the year, paid to the Fund management company of the associated companies of the Galp Energia Defined Contribution Pension Fund, in favour of their employees.
| Group in 2015 | ||||
|---|---|---|---|---|
| Early | ||||
| Retired | Pre-retirement | retirement | Total | |
| Assumptions | ||||
| Technical interest rate | 2.50% | 2.50% | 2.50% | |
| Rate of increase in salaries | 1.00% | 1.00% | 1.00% | |
| Rate of increase in pensions | [0.00% - 2.00%] |
[0.00% - 2.00%] | [0.00% - 2.00%] | |
| Current personnel and pre-retirees mortality table | INE 2009-2011 | INE 2009-2011 | INE 2009-2011 | |
| Retired personnel mortality table | INE 2009-2011 | INE 2009-2011 | INE 2009-2011 | |
| Disability table | 50% EVK 80 | 50% EVK 80 | 50% EVK 80 | |
| 66 years or 65 years if at least |
66 years or 65 years if at least |
66 years or 65 years if at least |
||
| Common age for retirement | with 43 years of discounts to S.S. at 65 |
with 43 years of discounts to S.S. at 65 |
with 43 years of discounts to S.S. at 65 |
|
| Method | Projected credit unit |
Projected credit unit |
Projected credit unit |
|
| Changes in past service liability (PSL) | ||||
| PSL at the end of the previous year | 3,195 | 5,589 | 16,491 | 25,275 |
| Current service cost | - | 3 | 472 | 475 |
| Interest cost | 80 | 133 | 437 | 650 |
| Actuarial (gain) / loss | 348 | (28) | 1,955 | 2,275 |
| Benefit payments made by the Company | (555) | (1,474) | (1,089) | (3,118) |
| Cut back - Early retirements | - | - | 193 | 193 |
| Cut back – Current personnel | - | 1,002 | (207) | 795 |
| PSL at the end of the current year | 3,068 | 5,225 | 18,252 | 26,545 |
| Reconciliation to the Statement of Financial Position | ||||
| (Gains) / losses recognised at the beginning of the year - Asset/(Liability) |
(3,195) | (5,589) | (16,491) | (25,275) |
| Net cost of the year | (80) | (1,138) | (895) | (2,113) |
| Benefits paid directly by the Company | 555 | 1,474 | 1,089 | 3,118 |
| Gains / (losses) recognised – through Comprehensive Income | (348) | 28 | (1,955) | (2,275) |
| Total recognised at year end - Assets / (Liabilities) | (3,068) | (5,225) | (18,252) | (26,545) |
| Net cost of the year | ||||
| Current service cost | - | 3 | 472 | 475 |
| Interest cost | 80 | 133 | 437 | 650 |
| Net cost of the year before special events | 80 | 136 | 909 | 1,125 |
| Cut back impact - Early Retirement | - | - | 193 | 193 |
| Cut back impact - Pre-retirement | - | 1,002 | (207) | 795 |
| Net cost of the year | 80 | 1,138 | 895 | 2,113 |
| Reconciliation of gains and loss recognised- through Comprehensive Income |
||||
| Cumulative (Gains) / losses recognised at the beginning of the year | 1,557 | 983 | 2,174 | 4,714 |
| Actuarial (Gains) and Losses from experience | 317 | (66) | 1,555 | 1,806 |
| (Gains) / losses from change in assumptions | 32 | 38 | 400 | 470 |
| Cumulative (Gains) / losses recognised at the end of the year | 1,906 | 955 | 4,129 | 6,990 |
| Non-controlling interests Cumulative (Gains) / losses recognised at the end of the year |
- | - | - | - |
| 1,906 | 955 | 4,129 | 6,990 |
As mentioned in Note 2.11, the Group has accounted for at 31 December 2016, a provision to cover its liability for healthcare, life insurance for past services of active population and total liabilities for the remaining population and the liability for the minimum benefit defined contribution plan. The current value of liabilities for past services and actuarial assumptions used in their calculation is as follows:
| ( € k) | ||||
|---|---|---|---|---|
| Group in 2016 | ||||
| Healthcare | Life insurance |
Defined contribution plan minimum benefit |
Total | |
| Assumptions | ||||
| Technical interest rate | 2.25% | 2.25% | 2.25% | |
| Rate of increase in Costs | 4.00% | 1.00% | 1.00% | |
| Current personnel and pre-retirees mortality | ||||
| table | INE 2009-2011 | INE 2009-2011 | INE 2009-2011 | |
| Retired personnel mortality table | INE 2009-2011 | INE 2009-2011 | GKF95 | |
| Disability table | 50% EVK 80 | 50% EVK 80 | 50% EVK 80 | |
| Common age for retirement | 66 * | 66 * | 66 years or 65 years if at least with 43 years of discounts to S.S. at 65 |
|
| Method | Projected credit unit |
Projected credit unit |
Projected credit unit | |
| Changes in past service liability (PSL) | ||||
| PSL at the end of the previous year | 19,595 | 387 | 539 | 20,521 |
| Current service cost | 434 | 12 | 209 | 655 |
| Interest cost | 482 | 9 | 13 | 504 |
| Actuarial (gain) / loss | 6,452 | 23 | 58 | 6,533 |
| Benefits payment made by the Company | (802) | (18) | - | (820) |
| PSL at the end of the current year | 26,161 | 413 | 819 | 27,393 |
| Reconciliation to the Statement of Financial Position |
||||
| (Gains) / losses recognised at the beginning | ||||
| of the year - Asset/(Liability) Net cost of the year |
(19,595) | (387) | (539) | (20,521) |
| Benefits paid directly by the Company | (916) | (21) | (222) | (822) |
| Gains / (losses) recognised - through | 802 | 18 | - | 1,036 |
| Comprehensive Income | (6,452) | (23) | (58) | (6,533) |
| Total recognised at year end - Assets / (Liabilities) |
(26,161) | (413) | (819) | (26,840) |
| Net cost of the year | ||||
| Current service cost | 434 | 12 | 209 | 655 |
| Interest cost | 482 | 9 | 13 | 504 |
| Net cost of the year | 916 | 23 | 222 | 1,159 |
| Reconciliation of gains and loss recognised- through Comprehensive Income |
||||
| Cumulative (Gains) / losses recognised at the beginning of the year |
7,462 | (7) | (168) | 7,287 |
| Actuarial (Gains) and Losses from experience | 5,409 | 12 | (150) | 5,271 |
| (Gains) / losses from change in assumptions | 1,043 | 11 | 208 | 1,262 |
| Cumulative (Gains) / losses recognised at the end of the year |
13,914 | 16 | (110) | 13,820 |
| Non-controlling interests | - | 1 | (3) | (2) |
| Cumulative (Gains) / losses recognised at the end of the year |
13,914 | 15 | (107) | 13,822 |
Current service and interest cost amounting €1,814 k and €482 k, respectively, were recorded by the Group in the caption "Employee costs" in the consolidated income statement (Note 6).
| ( € k) | ||||
|---|---|---|---|---|
| Group in 2015 | Defined | |||
| Healthcare | Life insurance | contribution plan minimum benefit |
Total | |
| Assumptions | ||||
| Technical interest rate | 2.50% | 2.50% | 2.50% | |
| Rate of increase in Costs | 4.00% | 1.00% | 1.00% | |
| Current personnel and pre-retirees mortality table | INE 2009-2011 | INE 2009-2011 | INE 2009-2011 | |
| Retired personnel mortality table | INE 2009-2011 | INE 2009-2011 | GKF95 | |
| Disability table Common age for retirement |
EVK 80 - 50% 66 * |
EVK 80 - 50% 66 * |
EVK 80 - 50% 66 years or 65 years if at least with 43 years of |
|
| discounts to S.S. at 65 |
||||
| Method | Projected credit unit |
Projected credit unit |
Projected credit unit |
|
| Changes in past service liability (PSL) | ||||
| PSL at the end of the previous year Current service cost |
19,020 | 347 | 275 | 19,642 |
| Interest cost | 428 | 12 | 10 | 450 |
| Actuarial (gain) / loss | 514 | 9 | 8 | 531 |
| Benefits payment made by the Company | 223 (590) |
35 (16) |
(59) - |
199 (606) |
| Other adjustments | - | - | 305 | 305 |
| PSL at the end of the current year | 19,595 | 387 | 539 | 20,521 |
| Reconciliation to the Statement of Financial Position (Gains) / losses recognised at the beginning of the |
||||
| year - Asset/(Liability) | (19,020) | (347) | (275) | (19,642) |
| Net cost of the year Benefits paid directly by the Company |
(942) | (21) | (323) | (1,286) |
| Gains / (losses) recognised - through | 590 | 16 | - | 606 |
| Comprehensive Income | (223) | (35) | 59 | (199) |
| Total recognised at year end - Assets / (Liabilities) | (19,595) | (387) | (539) | (20,521) |
| Net cost of the year | ||||
| Current service cost | 428 | 12 | 10 | 450 |
| Interest cost | 514 | 9 | 8 | 531 |
| Net cost of the year before special events | 942 | 21 | 18 | 981 |
| Other adjustments | - | - | 305 | 305 |
| Net cost of the year | 942 | 21 | 323 | 1,286 |
| Reconciliation of gains and loss recognised through Comprehensive Income Cumulative (Gains) / losses recognised at the |
||||
| beginning of the year | 7,240 | (42) | (109) | 7,089 |
| Actuarial (Gains) and Losses from experience | (575) | 25 | (62) | (612) |
| (Gains) / losses from change in assumptions | 797 | 10 | 3 | 810 |
| Cumulative (Gains) / losses recognised at the end of the year |
7,462 | (7) | (168) | 7,287 |
| Non-controlling interests (Note 21) | - | (2) | - | (2) |
| Cumulative (Gains) / losses recognised at the end of the year |
7,462 | (5) | (168) | 7,289 |
* For Lisboagás, S.A. retirement conditions are considered satisfied when fulfilled 40 years of service, 35 years of service and age equals or above 60 years or when reached 66 years or 65 years with at least 43 years of discounts to S.S. at that age (first occurrence between the four).
According to actuarial studies prepared by a specialised entity, the estimated contribution to the various defined benefit plans for 2017 is €4,941 k.
Changing the discount rate from 2.50% to 2.25% from 2015 to 2016 reflects the decrease which has occurred in the reference interest rates of the market.
A sensitivity analysis was performed in order to measure the impact on liabilities caused by a change in the discount rate. For this purpose a negative variation of 25 b.p. in the discount rate was considered.
| (€ k) | |||
|---|---|---|---|
| Liabilities | Discount rate 2.25% |
Discount rate 2.00% |
Variation |
| Retirement benefits: | |||
| Related to the pension fund | 26,163 | 27,049 | 3.39% |
| Non-related to the pension fund | 27,848 | 28,387 | 1.94% |
| 54,011 | 55,436 | ||
| Other benefits: | |||
| Healthcare | 26,161 | 27,270 | 4.24% |
| Life insurance | 413 | 425 | 2.90% |
| Defined contribution plan minimum benefit | 819 | 828 | 1.10% |
| 27,393 | 28,523 | ||
| 81,404 | 83,959 |
GGND Group has considered a growth rate of 4% for medium and long term medical costs, based on historical growth rates of premiums and claims. The sensitivity analysis performed, demonstrates that a 1% increase in the growth rate of premiums implies an 18% increase in liabilities (€ 4,742 k), whereas a decrease of 1% in the growth rate of premiums results in a decrease of 15% of liabilities (€ 3,794 k).
| (€ k) | |||
|---|---|---|---|
| Captions | 3.00% | 4.00% | 5.00% |
| Current services costs Impact on past services liabilities |
22,367 (3,794) |
26,161 - |
30,903 4,742 |
The historical analysis of actuarial gains and losses was carried out with reference to the GGND Group Pension Funds:
| (€ k) | |||
|---|---|---|---|
| discount rate | 2.25% | 2.50% | 2.75% |
| 2016 | 2015 | 2014 | |
| Liabilities amount (a) | 26,163 | 25,621 | 24,256 |
| Value of the Fund (b) | 23,337 | 24,340 | 23,375 |
| Actuarial Gains (+) and Losses (-) | 797 | (1,582) | (1,783) |
| Gains (+) and Losses (-) for changes in assumptions | 840 | (820) | (2,873) |
| Actuarial Gains (+) and Losses (-) from experience ( c ) | (43) | (762) | 1,090 |
| Financial Gains (+) and Losses (-) (d) | 375 | (85) | 709 |
| (c)/(a) | -0.16% | -2.97% | 4.49% |
| (d)/(b) | 1.61% | -0.35% | 3.03% |
| Real Return on Plan Assets (%) | 0.92% | 2.38% | 6.70% |
| Real Return on Plan Assets | 218 | 541 | 1,609 |
i) Longevity Risk
Real longevity higher than projected may be reflected by an increase in liabilities.
j) Bond Interest Rate Risk
A decrease of the reference interest rate used as discount rate leads to increased liabilities, which can be mitigated in cases where there is a fund as a financing vehicle, by the exposure of the assets to the Bond segment.
k) Investment Risk
The main investment risks are the risk of the interest rate, credit risk, equity market risk and currency risk. The implications that the level of risk related to the investment policy may have on compliance with the minimum solvency of the fund, result from interest rate fluctuations, exposure to shareholders and alternative markets, resulting in a lower performance to the discount rate. The risk of interest rate fluctuation is the most relevant. In this particular case, since the portfolios are primarily invested in this asset class. This, together with the impact of risks which cannot be mitigated (e.g. variations of the population), increases the probability of necessary additional contributions (other than the current service cost) to maintain the solvency of the fund.
l) Risk of adverse developments in the real cost with Health Insurance and Life Insurance
As of 31 December 2016 and 31 December 2015 the non-current and current captions "Other payables" were as follows:
| (€ k) | ||||
|---|---|---|---|---|
| December 2016 | December 2015 | |||
| Captions | Current | Non-current | Current | Non-current |
| State and other public entities: | ||||
| Value Added Tax payables | 4,593 | - | 7,545 | - |
| Social Security contributions | 474 | - | 446 | - |
| Personnel and Corporate Income Tax Withheld | 357 | - | 350 | - |
| "ISP" - Tax on oil products | 63 | - | 68 | - |
| Other taxes | 2 | - | 2 | - |
| Tangible and intangible assets suppliers | 5,247 | - | 6,148 | - |
| Guarantee deposits and guarantees received | 240 | - | 79 | - |
| Other payables - Other shareholders | 116 | - | - | - |
| Personnel | 71 | - | 33 | - |
| Trade receivables credit balances | 9 | - | - | - |
| Advances on sales | 4 | - | 4 | - |
| Other payables - Associates, affiliates and related companies (Note 28) | - | - | 15,550 | - |
| Loans - Associates, affiliates and related companies (Note 28) | - | - | - | 587,800 |
| Loans - Other shareholders | - | - | - | 448 |
| Other creditors | 500 | - | 580 | - |
| 11,676 | - | 30,805 | 588,248 | |
| Accrued costs: | ||||
| Adjustment to tariff deviation - other activities - "ERSE" regulation | 5,093 | - | 11,526 | - |
| External supplies and services | 4,064 | - | 2,590 | - |
| Adjustment to tariff deviation - regulated revenue - "ERSE" regulation (Note 14) |
3,331 | 4,976 | 723 | 8,730 |
| Holiday , holiday subsidy and corresponding contributions | 2,486 | - | 2,608 | - |
| Productivity bonuses | 2,351 | - | 3,701 | 225 |
| Accrued interest | 2,317 | - | 1,390 | - |
| Accrued insurance premiums | 859 | - | 599 | - |
| Accrued personnel costs – other | 125 | - | - | - |
| Financial costs | - | - | 33 | - |
| Financial neutrality - "ERSE" regulation | - | - | 161 | - |
| Other accrued costs | 2,278 | - | 1,664 | - |
| 22,904 | 4,976 | 24,995 | 8,955 | |
| Deferred income: | ||||
| Investment government grants (Note 13) | 8,942 | 227,305 | 8,942 | 236,205 |
| Fibre optics | 402 | 589 | 404 | 991 |
| Others | 183 | - | 194 | - |
| 9,527 | 227,894 | 9,540 | 237,196 | |
| 44,107 | 232,870 | 65,340 | 834,399 |
(a) Amounts restated in accordance with Note 2.23.
Government investment grants are recognised as income over the useful life of the assets. The amount to be recognised in future period's amounts to €236,247 k (Note 13).
Income from the contract of assignment of rights to use telecommunication infrastructures is deferred in the caption "Deferred income – Fiber optics" and is recognised as income during the period of the contract. As of 31 December 2016 the balance of deferred income to be recognised in future periods amounts to €991k.
The changes in provisions in the year ended 31 December 2016 and 2015 were as follows:
| ( € k ) | ||||
|---|---|---|---|---|
| Captions | Initial balance |
Increases | Decreases | Ending balance |
| 2016 | ||||
| Lawsuits | 1,155 | 51 | (776) | 430 |
| Other risks and charges | 21,417 | 10,239 | - | 31,656 |
| 22,572 | 10,290 | (776) | 32,086 | |
| 2015 | ||||
| Lawsuits | 1,121 | 107 | (73) | 1,155 |
| Other risks and charges | 11,458 | 9,959 | - | 21,417 |
| 12,579 | 10,066 | (73) | 22,572 |
The increases in provisions, net of decreases, in the year ended 31 December 2016 were as follows:
| ( € k ) | |
|---|---|
| Energy sector extraordinary contribution ("CESE I") | 10,057 |
| Provisions (Note 6) | (543) |
| 9,514 |
The provision for ongoing lawsuits amounts € 430 k and includes mainly ongoing lawsuits.
The decrease in "Provisions" amounting €776 k results mainly from the end of lawsuits in Labour Court of the associate Lisboagás GDL – Sociedade Distribuidora de Gás Natural de Lisboa, S.A..
As of 31 December 2016 the caption "Provisions – other risks and charges", amounting €31,656 k, mainly comprises:
€2,248 k to cover charges received for the year 2012 made by the Lisbon Port Administration, for the use of the Cabo Ruivo land occupation as claimed by the Company. The increase of provisions by € 182 k concerns charges received during 2016.
€29,408 k relating to the provision to cover the Energy sector extraordinary contribution "CESE I".
For the year ended 31 December 2014, the Group was subject to a special tax (Energy Sector Extraordinary Contribution "CESE I"), pursuant to Article 228 of Law 83C/2013 of 31 December, which states that the energy companies that detain net assets in certain activities as of 1 January 2014 are subject to a tax calculated on the amount of net assets at that date.
As it intends to challenge the Law, the GGND Group decided to record the total value of the liability amounting to €29,408 k under "Provisions" caption. The total value of the liability at 31 December 2016 amounted to €19,350 k. In the year ended 31 December 2016, in order to cover the full responsibility, the provision was reinforced by €10,057 k, and recognised in the income statement under the caption "Energy sector extraordinary contribution".
As of 31 December 2016 and 31 December 2015 the amounts recorded in the caption "Trade payables" were as follows:
| ( € k ) | ||
|---|---|---|
| Captions | December 2016 |
December 2015 |
| Trade payables - current accounts |
9,816 | 3,718 |
| Trade payables - pending invoices |
4,380 | 5,208 |
| 14,196 | 8,926 |
The balance of the caption "Trade payables – pending invoices" mainly corresponds to the purchase of natural gas at those dates.
Not applicable.
Balances and transactions with related parties in 2016 and 2015, respectively, were as follows:
| 2016 | ||||||
|---|---|---|---|---|---|---|
| Non-current | Current | |||||
| Total related parties |
Loans granted |
Trade receivables |
Other receivables |
Accruals and deferrals |
||
| (Note 14) | (Note 14) | |||||
| Group companies (a) | ||||||
| Lisboagás Comercialização, S.A. | 7,301 | - | 1,173 | - | 6,128 | |
| Lusitaniagás Comercialização, S.A. | 6,454 | - | 342 | - | 6,112 | |
| Galp Power, S.A. | 5,209 | - | 1,618 | - | 3,591 | |
| Galp Gás Natural, S.A. | 3,233 | - | 88 | 51 | 3,094 | |
| GDP-Gás de Portugal, S.A. | 1,706 | - | - | 1,432 | 274 | |
| Setgás Comercialização, S.A. | 1,323 | - | 148 | (46) | 1,221 | |
| Galp Energia, S.A. | 271 | - | - | 120 | 151 | |
| Petróleos de Portugal - Petrogal, S.A. | 64 | - | - | 38 | 26 | |
| Galp Marketing International, S.A. | 10 | - | - | 5 | 5 | |
| 25,571 | - | 3,369 | 1,600 | 20,602 | ||
| Other related parties | ||||||
| Tagusgás - Empresa de Gás do Vale do Tejo, S.A. | 5,382 | 5,375 | - | - | 7 | |
| 5,382 | 5,375 | - | - | 7 | ||
| 30,953 | 5,375 | 3,369 | 1,600 | 20,609 |
(a) "Group companies" are companies of the Galp Energia Group
(€ K)
| 2015 | |||||||
|---|---|---|---|---|---|---|---|
| Non-current | Current | ||||||
| Total related parties |
Loans granted |
Trade receivables |
Loans granted |
Other receivables |
Accruals and deferrals |
||
| (Note 14) | (Note 14) | (Note 14) | |||||
| Group companies (a) | |||||||
| Lisboagás Comercialização, S.A. | 9,189 | - | 2,426 | - | - | 6,763 | |
| Lusitaniagás Comercialização, S.A. | 7,449 | - | 582 | - | - | 6,867 | |
| Galp Power, S.A. | 6,150 | - | 2,052 | - | - | 4,098 | |
| Galp Gás Natural, S.A. | 4,444 | - | 72 | - | 24 | 4,348 | |
| GDP-Gás de Portugal, S.A. | 3,083 | - | - | - | 2,580 | 503 | |
| Setgás Comercialização, S.A. | 1,897 | - | 442 | - | - | 1,455 | |
| Galp Energia, S.A. | 368 | - | - | - | 152 | 216 | |
| Galp Energia, S.G.P.S., S.A. | 145 | - | - | 145 | - | - | |
| Petróleos de Portugal - Petrogal, S.A. | 54 | - | - | - | 23 | 31 | |
| Galp Gas & Power,S.G.P.S., S.A. | 34 | - | - | - | 34 | - | |
| Galp Marketing International, S.A. | 15 | - | - | - | 5 | 10 | |
| 32,828 | - | 5,574 | 145 | 2,818 | 24,291 | ||
| Other related parties Tagusgás - Empresa de Gás do Vale do |
|||||||
| Tejo, S.A. | 5,445 | 5,008 | 437 | - | - | - | |
| 5,445 | 5,008 | 437 | - | - | - | ||
| 38,273 | 5,008 | 6,011 | 145 | 2,818 | 24,291 |
(a) "Group companies" are companies of the Galp Energia Group
Current and non-current loans granted to associates, joint ventures and related companies as of 31 December 2016 refer essentially to loans granted to the following entities:
| (€ K) | ||
|---|---|---|
| Non-current Assets - Loans granted (Note 14) |
Interests related to loans granted (Note 8) |
|
| Galp Gás Natural Distribuição, S.A. | 5,375 | 367 |
| to Tagusgás - Empresa de Gás do Vale do Tejo, S.A. | 5,375 | 367 |
| 5,375 | 367 |
These loans bear interest at market rate.
(€ K)
| (€ K) | |||
|---|---|---|---|
| 2016 | |||
| Total related parties |
Trade payable |
Accruals and deferrals |
|
| Group companies (a) | |||
| Galp Energia, S.A. | 1,266 | 1,065 | 201 |
| Lusitaniagás Comercialização, S.A. | 465 | 4 | 461 |
| Transgás, S.A. | 284 | 284 | - |
| Lisboagás Comercialização, S.A. | 174 | 111 | 63 |
| GDP-Gás de Portugal, S.A. | 132 | 25 | 107 |
| Petróleos de Portugal - Petrogal, S.A. | 113 | 94 | 19 |
| Galp Power, S.A. | 85 | 49 | 36 |
| Setgás Comercialização, S.A. | 66 | 4 | 62 |
| Galp Energia, S.G.P.S., S.A. | 60 | 60 | - |
| Galp Gás Natural, S.A. | 27 | 6 | 21 |
| Galp Gas & Power,S.G.P.S., S.A. | 4 | 4 | - |
| 2,676 | 1,706 | 970 | |
| Other related parties | |||
| Tagusgás - Empresa de Gás do Vale do Tejo, S.A. | 13 | - | 13 |
| 13 | - | 13 | |
| 2,689 | 1,706 | 983 | |
(a) "Group companies" are companies of the Galp Energia Group
(€ K) 2015 Total related parties Non-current Current Loans obtained Trade payables Other payables Accruals and deferrals (Note 24) (Note 24) Group companies (a) Galp Gas & Power,S.G.P.S., S.A. 589,154 587,800 8 - 1,346 Galp Gás Natural, S.A. 10,356 - - 10,312 44 Galp Power, S.A. 5,203 - 23 5,112 68 GDP-Gás de Portugal, S.A. 1,143 - 363 - 780 Galp Energia, S.A. 675 - 647 - 28 Transgás, S.A. 461 - 461 - - Lisboagás Comercialização, S.A. 343 - 343 - - Petróleos de Portugal - Petrogal, S.A. 211 - 87 80 44 Setgás Comercialização, S.A. 49 - 3 46 - Galp Energia, S.G.P.S., S.A. 3 - 3 - - 607,598 587,800 1,938 15,550 2,310 Other related parties Visabeira Global, S.G.P.S., S.A. 460 448 - - 12 Tagusgás - Empresa de Gás do Vale do Tejo, S.A. 15 - - - 15 475 448 - - 27 608,073 588,248 1,938 15,550 2,337
(a) "Group companies" are companies of the Galp Energia Group
The caption "Operating Income" includes the values found through the special group of society's tax regime payable to Galp Energia, S.G.P.S., S.A. and is as follows:
| (€ k) | |
|---|---|
| Income tax (Note 9) |
|
| Lisboagás GDL - Sociedade Distribuidora de Gás Natural de Lisboa, | |
| S.A. | (9,925) |
| Lusitaniagás - Companhia de Gás do Centro, S.A. | (3,094) |
| Galp Gás Natural Distribuição, S.A. | (1,349) |
| Duriensegás - Soc. Distrib. de Gás Natural do Douro, S.A. | (545) |
| Dianagás - Soc. Distrib. de Gás Natural de Évora, S.A. | (212) |
| Medigás - Soc. Distrib. de Gás Natural do Algarve, S.A. | (210) |
| Paxgás - Soc. Distrib. de Gás Natural de Beja, S.A. | (62) |
| by Galp Energia, S.G.P.S., S.A. | (15,397) |
Current and non-current loans granted to associates, joint ventures and related companies as of 31 December 2016 refer essentially to loans granted to the following entities:
| (€ K) | ||
|---|---|---|
| Interests related to loans granted (Note 8) |
||
| Beiragás - Companhia de Gás das Beiras, S.A. | 7 | (a) |
| by Visabeira Global, S.G.P.S., S.A. | 7 | |
| 7 |
(a) Interest related to loans reimbursed during the year ended 31 December 2016
These loans bear interest at market rate.
| (€ K) | |||||
|---|---|---|---|---|---|
| 2016 | |||||
| Purchases | Operating costs |
Operating income |
Financial costs (Note 8) |
Financial income (Note 8) |
|
| Group companies (a) | |||||
| Galp Gás Natural, S.A. | - | 12 | 39,304 | - | - |
| Galp Power, S.A. | - | (150) | 37,617 | - | - |
| Lisboagás Comercialização, S.A. | - | - | 25,816 | - | - |
| Lusitaniagás Comercialização, S.A. | - | - | 8,200 | - | - |
| Setgás Comercialização, S.A. | - | - | 5,405 | - | - |
| GDP-Gás de Portugal, S.A. | - | (12,040) | 3,560 | - | - |
| Galp Energia, S.A. | - | (4,022) | 1,699 | - | - |
| Petróleos de Portugal - Petrogal, S.A. | - | (770) | 391 | - | - |
| Galp Marketing International, S.A. | - | - | 62 | - | - |
| Galp Gas & Power,S.G.P.S., S.A. | - | 3 | - | (20,717) | - |
| Galp Energia, S.G.P.S., S.A. | - | (36) | - | - | - |
| Transgás, S.A. | (3,132) | - | - | - | - |
| (3,132) | (17,003) | 122,054 | (20,717) | - | |
| Other related parties | |||||
| Visabeira Global, S.G.P.S., S.A. | - | (115) | - | (7) | - |
| Tagusgás - Empresa de Gás do Vale do Tejo, S.A. | - | (194) | (1,732) | - | 367 |
| - | (309) | (1,732) | (7) | 367 | |
| (3,132) | (17,312) | 120,322 | (20,724) | 367 |
(a) "Group companies" are companies of the Galp Energia Group
| (€ K) | |||||
|---|---|---|---|---|---|
| ok | 2015 | ||||
| Purchases | Operating costs |
Operating income |
Financial costs (Note 8) |
Financial income (Note 8) |
|
| Group companies (a) | |||||
| Galp Gás Natural, S.A. | - | (285) | 55,544 | - | - |
| Lisboagás Comercialização, S.A. | - | - | 34,177 | - | - |
| Galp Power, S.A. | - | (149) | 32,705 | - | - |
| Lusitaniagás Comercialização, S.A. | - | - | 12,709 | - | - |
| Setgás Comercialização, S.A. | - | - | 7,594 | - | - |
| GDP-Gás de Portugal, S.A. | - | (10,940) | 4,401 | - | - |
| Galp Energia, S.A. | - | (3,359) | 1,671 | - | - |
| Petróleos de Portugal - Petrogal, S.A. | - | (853) | 307 | - | - |
| C.L.T. - Companhia Logística de Terminais Marítimos, S.A. | - | - | 9 | - | - |
| Transgás, S.A. | (4,831) | - | - | - | - |
| Galp Gas & Power,S.G.P.S., S.A. | - | (98) | - | (30,281) | - |
| Galp Energia, S.G.P.S., S.A. | - | (7) | - | (87) | - |
| Transgás Armazenagem - Soc. Portuguesa de Armazenagem de | |||||
| Gás Natural, S.A. | - | - | (6) | - | - |
| (4,831) | (15,691) | 149,111 | (30,368) | - | |
| Other related parties | |||||
| Tagusgás - Empresa de Gás do Vale do Tejo, S.A. | - | (188) | (860) | - | 341 |
| Visabeira Global, S.G.P.S., S.A. | - | (14) | - | (45) | - |
| Enagás | - | - | - | (490) | - |
| - | (202) | (860) | (535) | 341 | |
| (4,831) | (15,893) | 148,251 | (30,903) | 341 |
(a) "Group companies" are companies of the Galp Energia Group
The remuneration of the board members of Galp Gás Natural Distribuição, S.A. for the years ended 31 December 2016 and 2015 is detailed as follows:
| ( € k ) | |||||||
|---|---|---|---|---|---|---|---|
| December 2016 | December 2015 | ||||||
| Salary | Allowances for rent, travel expenses and others |
Bonuses | Other charges and adjustments |
Total | Salary | Total | |
| Executive management | 113 | 1 | (45) | 20 | 89 | - | - |
| General Assembly | 62 | - | - | - | 62 | 10 | 10 |
| 175 | 1 | (45) | 20 | 151 | 10 | 10 |
Of the amounts of €62 k and €10 k, recorded in the year ended 31 December 2016 and 2015 respectively, refers to presence tickets of the General Assembly and the negative amount under "Bonuses" as of 31 December 2016 represents the annulment of management bonus of 2013 and 2014.
In accordance with the current policy, remuneration of the GGND Corporate Board members includes all the remuneration due for the positions occupied in Group companies and all accrued amounts related to the current year.
In accordance with IAS 24, key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any directors (whether executive or non-executive) of the entity. According to Galp Energia interpretation of this standard only the members of the Board of Directors meet these characteristics.
In accordance with the deliberation of the General Meeting of Shareholders held on 4 May 2016, dividends amounting to € 8,522 k relating to the distribution of net result for the year 2015 were attributed to the shareholders of Galp Gás Natural Distribuição, S.A. and fully liquidated during the year ended 31 December 2016.
In the year ended 31 December 2015 dividends amounting to € 1,068 k were attributed to the shareholders, of which € 1,058 k were paid by subsidiaries of the Galp Gás Natural Distribuição, S.A. Group to minority shareholders (Note 21. a)).
As a consequence of the previously mentioned, during the year ended 31 December 2016, the Group paid dividends amounting €9,580 k.
Not applicable.
Galp Gás Natural Distribuição is exposed mainly to interest rate.
The total interest rate position is managed centrally. Interest rate exposure relates mainly to bank loans bearing interests. The purpose of managing interest rate risk is to reduce the volatility of financial costs in the income statement. The interest rate risk management policy aims to reduce exposure to variable rates through contracting fixed rate debt.
The analysis prepared by the Group in accordance with IFRS 7 and IFRS 13 is intended to illustrate the sensitivity of profit before taxes and of equity to potential variations in the Brent or natural gas and electricity prices, exchange rates and interest rates of financial instruments, as defined in IAS 32, such as financial assets and liabilities reflected on the statement of financial position as of 31 December 2016 and 2015. The financial instruments affected by the above mentioned market risks include Loans and Cash.
There may be financial instruments with more than one market risk, in which case the sensitivity analysis is performed for each variable at a time, the others remaining constant, therefore ignoring any correlation between them, which is unlikely to occur.
( €k )
Sensitivity analyses do not include the impact of current or deferred taxes, which could reduce the presented variations, depending on the tax law where the Group operates, as well as fiscal conditions for each company.
Therefore, the sensitivity analysis is illustrative and does not represent actual current loss or gain, or other current variations in equity.
The following assumptions were considered in the interest rate sensitivity analysis:
A summary of the sensitivity analysis for financial instruments reflected on the statement of financial position is presented below:
| 2016 | 2015 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Income statement | Equity | Income statement | Equity | ||||||||
| Exposure amount |
Attributable to Shareholders |
Non controlling interests |
Attributable to Shareholders |
Non controlling interests |
Exposure amount |
Attributable to Shareholders |
Non controlling interests |
Attributable to Shareholders |
Non controlling interests |
||
| Loans- parallel shift in interest rate | 0.5% -0.5% |
642,808 | -188 188 |
-26 26 |
- - |
- - |
59,975 | -268 268 |
-32 32 |
- - |
- - |
| Loans - Galp Energia Group | 0.5% -0.5% |
- | - - |
- - |
- - |
- - |
588,248 | -133 133 |
- - |
- - |
- - |
| Applications-parallel shift in interest rate | 0.5% -0.5% |
3,500 | 10 -10 |
7 -7 |
- - |
- - |
27,200 | 127 -127 |
9 -9 |
- - |
- - |
Liquidity risk is defined as the amount by which profit and/or cash flow of the business are affected as a result of the Group's constraint to obtain the financial resources necessary to meet its operating and investment commitments.
GGND Group finances itself through cash flows generated by its operations and maintains a diversified portfolio of loans. The Group has approximately 43 million Euro and 29 million Euro of cash and cash equivalents, as stated in the statement of financial position, as of 31 December 2016 and 31 December 2016, respectively.
Credit risk results from potential non-compliance by third parties of contractual obligation to pay and so the risk level depends on the financial credibility of the counterparty. In addition, counterparty credit risk exists on monetary investments. Credit risk limits are established by GGND. The credit risk limits are defined and documented and credit limits for certain counterparties are based on their credit ratings, period of exposure and monetary amount of the exposure to credit risk.
Impairment of accounts receivable is explained in Notes 14 and 15.
GGND Group has insurance contracts in place to reduce its exposure to various risks resulting from insurance claims that may occur during the pursuit of its activities, as follows:
As of 31 December 2016, the Company and its subsidiaries had the following contingent liabilities:
i) Several municipal councils are demanding payments (liquidations and executions) amounting to €902 k, relating to licenses for sub-soil usage for underground gas pipes by the natural gas distribution and supply concessions. As the Group companies do not agree with the municipal councils, they have contested the settlements demanded by municipal councils at the Fiscal Administrative Court, with the requests for suspension of the execution being agreed, and the execution suspended until a final and non-appealable decision is given. Guarantees have been provided for these processes.
In the course of negotiating the Concession Contract between the General Directorate for Energy and Geology ("Direção Geral de Energia e Geologia") and concessionary companies of the Group, it was agreed, among other matters, that the Concessionaire has the right to charge, on to the entities selling natural gas and to the final consumers, the full amount of the subsoil usage levies assessed by the municipalities in the areas conceded under the previous concession contract but not yet paid or contested legally by the Concessionaire if such payment is considered to be mandatory by the competent authority, after issuance of the sentence, or after express prior consent of the Conceding entity. The subsoil usage levies paid each year will be reflected on the entities supplying gas that use the infrastructures or on the final consumers served by them, during the subsequent years, under the conditions to be defined by ERSE. The subsoil occupation levies will be assessed for each municipality, based on the amount charged by it;
Given the fact that eventual levies to be paid and interest to be paid can be passed on to customers, the Group has decided not to recognise any liabilities concerning this issue.
As of 31 December 2016 the amounts paid to Municipal Councils and charged to customers related to subsoil usage levies are as follows, according with the methodology defined by ERSE:
Financial statements and notes to the consolidated financial statements as of 31 december 2016
| Settled amount |
Subsoil levies - current account interests |
Amounts invoiced to customers |
Amount to be received (Note 14) |
|---|---|---|---|
| 124,709 | 4,397 | (83,304) | 45,802 |
The amount to be received bears interests at the 3 month Euribor plus a spread stipulated by ERSE.
As of 31 December 2016, a legal proceeding concerning a contractual breach has been filed by Dourogás Propano, S.A. against the Group, asking for compensation amounting to approximately €1,463 k. The Board of Directors, supported by its legal advisors, believes that the process will not result in any liability for the Group, which is the reason why no provision was recorded. It should be noted that the new conviction stated by Court of Vila Real publically evaluated such action as totally unfounded, which enforces the failure probabilities of the action.
As of 31 December 2016, responsibilities with guarantees granted amounted to €13,837 k and included essentially the following:
The book value and fair value of the financial assets and liabilities are detailed in the table below in €k:
| €k | ||||
|---|---|---|---|---|
| 2016 | 2015 | |||
| Balance sheet captions | Book Value | Fair value | Book Value | Fair value |
| Assets | ||||
| Financial assets held for sale | 3 | a) | 3 | a) |
| Trade receivables | 10,094 | 10,094 | 14,745 | 14,745 |
| Other receivables | 108,501 | 108,501 | 144,733 | 144,733 |
| Cash and cash equivalents | 43,064 | 43,064 | 28,526 | 28,526 |
| Liabilities | ||||
| Bank loans | 42,763 | 42,763 | 60,227 | 60,227 |
| Shareholder loans | 595,490 | 594,816 | 0 | 0 |
| Trade payables | 14,196 | 14,196 | 8,926 | 8,926 |
| Other payables | 276,946 | 276,946 | 899,739 | 899,739 |
a) Due to difficulties in calculating the fair value of the Assets held for sale (that comprise equity instruments not admitted to trading on regulated markets), these are recognised at the acquisition cost, as referred in note 2.2 c) and 2.16 a).
Not applicable
There are no subsequent events for disclosure purposes.
The consolidated financial statements were approved by the Board of Directors on 30 March 2017. However, they are still subject to approval by the General Meeting of Shareholders, in accordance with the commercial law in place in Portugal. The Board of Directors believes that these financial statements reflect in a true and fair manner the Group's operations, financial performance and cash flows.
These financial statements are a free translation of the financial statements originally issued in Portuguese in accordance with International Financial Reporting Standards as adopted by the European Union (Note 2.1) some of which may not conform to generally accepted accounting principles in other countries. In the event of discrepancies, the Portuguese language version prevails.
| Chairman: | |
|---|---|
| Pedro Carmona de Oliveira Ricardo | |
| Vice-Chairman: | |
| Maria Leonor Galo Pedrosa dos Santos Machado de Baptista Branco | |
| Members: | |
| Gabriel Nuno Charrua de Sousa | |
| Naohiro Hayakawa | |
| José Manuel Rodrigues Vieira | |
| Ana Isabel Simões Dias dos Santos Severino | |
| Maria Marta de Figueiredo Geraldes Bastos | |
| Yoichi Noborisaka | |
| THE ACCOUNTANT: | |
Carlos Alberto Nunes Barata
We have audited the consolidated financial statements of Galp Gás Natural Distribuição, S.A. (the Group or GGND Group), which comprise the consolidated statement of financial position as at 31 December 2016 (which shows total assets of thousand Euro 1,311,347 and total shareholders' equity attributable to shareholders of thousand Euro 245,496 including a net profit of thousand Euro 25,044), the consolidated statement of income, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly in all material respects, the consolidated financial position of Galp Gás Natural Distribuição, S.A. as at 31 December 2016, and their consolidated financial performance and their consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union.
We conducted our audit in accordance with International Standards on Auditing (ISAs) and other technical and ethical standards and recommendations issued by the Institute of Statutory Auditors. Our responsibilities under those standards are described in the "Auditor's responsibilities for the audit of the consolidated financial statements" section below. In accordance with the law we are independent of the entities that are included in the Group and we have fulfilled our other ethical responsibilities in accordance with the ethics code of the Institute of Statutory Auditors.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matter described below to be the key audit matter to be communicated in our report.
PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. Sede: Palácio Sottomayor, Rua Sousa Martins, 1 - 3º, 1069-316 Lisboa, Portugal Tel +351 213 599 000, Fax +351 213 599 999, www.pwc.pt Matriculada na CRC sob o NUPC 506 628 752, Capital Social Euros 314.000 Inscrita na lista das Sociedades de Revisores Oficiais de Contas sob o nº 183 e na CMVM sob o nº 20161485
Management is responsible for:
a) the preparation of the consolidated financial statements, which present fairly the financial position, the financial performance and the cash flows of the Group in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union;
b) the preparation of the Directors' Report, including the Corporate governance Report, in accordance with the applicable law and regulations;
c) the creation and maintenance of an appropriate system of internal control to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error;
d) the adoption of appropriate accounting policies and criteria;
e) the assessment of the Group's ability to continue as a going concern, disclosing, as applicable, events or conditions that may cast significant doubt on the Group's ability to continue its activities.
Our responsibility is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
a) identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
b) obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control;
c) evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;
d) conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern;
e) evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation;
f) obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion;
g) communicate with those charged with governance, regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit;
h) of the matters we have communicated to those charged with governance, we determine which one's were the most important in the audit of the consolidated financial statements of the current year, these being the key audit matters. We describe these matters in our report, except when the law or regulation prohibits their public disclosure;
i) confirm that we comply with the relevant ethical requirements regarding independence and communicate all relationships and other matters that may be perceived as threats to our independence and, where applicable, the respective safeguards.
Our responsibility also includes verifying that the information included in the Directors' report is consistent with the consolidated financial statements [and the verification set forth in paragraphs 4 and 5 of article No. 451 of the Portuguese Company Law.
In compliance with paragraph 3 e) of article No. 451 of the Portuguese Company Law, it is our understanding that the Director's report has been prepared in accordance with applicable requirements of the law and regulation, that the information included in the Directors' report is consistent with the audited consolidated financial statements and, taking into account the knowledge and assessment about the Group, no material misstatements were identified.
In compliance with paragraph 4 of article No. 451 of the Portuguese Company Law, it is our understanding that the Corporate governance report, included in the Director's report, includes the information required under article No. 245-A of the Portuguese Securities Market Code, that no material misstatements were identified in the information disclosed in this report and that it complies with paragraphs c), d), f), h), i) and m) of that article.
In accordance with article No. 10 of Regulation (EU) 537/2014 of the European Parliament and of the Council, of April 16, 2014, and in addition to the key audit matters referred to above, we also provide the following information:
a) We were appointed auditors of Galp Gás Natural Distribuição, S.A., for the first time, in the Shareholders' General Meeting of 7 July 2011, for the mandate between 2011 and 2013, having been nominated for 2014 on Shareholders' General Meeting of 21 April 2011 and subsequently we were nominated for the period between 2015 and 2018 on Shareholders' General Meeting of 20 April 2015. b) The management has confirmed to us it has no knowledge of any allegation of fraud or suspicions of fraud with material effect in the financial statements. We have maintained professional scepticism throughout the audit and determined overall responses to address the risk of material misstatement due to fraud in the consolidated financial statements. Based on the work performed, we have not identified any material misstatement in the consolidated financial statements due to fraud.
c) We confirm that our audit opinion is consistent with the additional report that was prepared by us and issued to the Group's supervisory board as of xx April 2017.
d) We declare that we did not provide any prohibited non-audit services referred to in paragraph 8 of article No. 77 of the by-laws of the Institute of Statutory Auditors ("Estatutos da Ordem dos Revisores Oficiais de Contas") and that we remain independent of the Group in conducting our audit.
e) In addition to the services disclosed in the Group's report we inform that, besides the audit services, the following additional services, permitted by law and regulation in force, were provided by us to the Group:
Other reliability assurance services
April 3, 2017
PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. represented by:
António Joaquim Brochado Correia, R.O.C.
(Free translation from the original in Portuguese)
To the Shareholders,
In accordance with the law and our mandate, we herewith present the report on our supervisory activity and our opinion on the Directors' Report and consolidated financial statements as presented by the Board of Directors of Galp Gás Natural Distribuição, S.A with respect to the year ended December 31, 2016.
During the year, we have accompanied the evolution of the Company's activity, as and when deemed necessary. We have verified the timeliness and adequacy of the accounting records and respective supporting documentation, as well as the effectiveness of the internal control system, only to the extent that the controls are of relevance for the control of the Company's activity and the presentation of the consolidated financial statements, of the risk management system and internal audit. We have also ensured that the law and the Company's articles of association have been complied with.
As a consequence of our work, we have issued the attached Statutory Audit Report.
Within the scope of our mandate, we have verified that:
i) the consolidated statement of financial position, the consolidated statement of income by nature, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated statement of cash flows and the corresponding notes to the accounts permit an adequate understanding of the financial position, the results, the changes in equity and cash flows of the Company;
ii) the accounting policies and valuation methods applied are appropriate;
iii) the Directors' Report is sufficiently clear as to the developments of the business and the position of the Company and highlights the more significant aspects;
iv) the proposed appropriation of results is not contrary with the applicable laws and Company's articles of association.
On this basis, and taking into account information obtained from the Board of Directors and the Company's employees, together with the conclusions in the Statutory Audit Report, we are of the opinion that:
PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. pertence à rede de entidades que são membros da PricewaterhouseCoopers International Limited, cada uma das quais é uma entidade legal autónoma e independente.
PricewaterhouseCoopers & Associados - e de Revisores Oficiais de Contas, Lda. Sede: Palácio Sottomayor, Rua Sousa Martins, 1 - 3º, 1069-316 Lisboa, Portugal Tel +351 213 599 000, Fax +351 213 599 999, www.pwc.pt Matriculada na CRC sob o NUPC 506 628 752, Capital Social Euros 314.000 Inscrita na lista das Sociedades de Revisores Oficiais de Contas sob o nº 183 e na CMVM sob o nº 20161485
Finally, we would like to express our gratitude to the Board of Directors and all those whom we contacted, for their valuable contribution.
April 3, 2017
PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. represented by:
António Joaquim Brochado Correia, R.O.C.
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