|Proposed actions 2018||Planned actions 2019|
|Follow-up of new items in issues of corporate governance and the company’s proposal to adapt to these.||Finalise the implementation of the Continuous Audit Indicators Model.|
|Launch of the Compliance Communication Plan (“Compliance Café” campaign).|
Governance at Naturgy is based on the principles of efficacy and transparency established in accordance with the main existing recommendations and standards on the world stage.
Good governance actions are instrumented through the Board of Directors, mainly through the annual analysis and approval of the company’s risk profile, including ethical, social and environmental issues in the planning of activities. To this end, the company frequently reviews its internal audit and compliance procedures and uses its internal regulations to set out those practices that should lead to greater knowledge of the company’s way of working.
In 2018, the Board Regulations were amended to simplify them and adapt them to the changes that occurred during the year, in compliance with the recommendations of the CNMV Code of Good Governance.
Risk prevention management and
consideration of aspects tied to
corporate social responsibility are part
of the Board of Directors’ activities,
and the Board is responsible for
approving the corporate governance
and corporate responsibility policies.
Every year, through the compilation of
the respective reports, it reviews and
approves the information on risks and
opportunities in these areas.
The Board of Directors exercises the powers attributed to it through the Law, the Articles of Association and its Board Regulations. Specifically, the following general powers correspond exclusively to the Board of Directors, according to Article 3 of the Regulations.
Matters ordinarily non-delegable, but which may be adopted by the delegated bodies or persons, for reasons of urgency duly justified and which must be ratified at the first Board of Directors session held after the take-up of the resolutions, of which the following stand out:
(1) The sum of cash remuneration for members who ceased to be directors in 2018 is: Euros 917,862
Pursuant to the recommendations laid down in the Good Governance Code of Listed Companies and the Board Regulations, the quality and efficiency of the Board and of its committees is assessed every year.
According to these assessments, the Board of Directors and its committees operated as expected during 2018, fully exercising their powers without interference and in full observance of both current legislation and the standards for the organisation and performance of the Board's own regulations.
Following the recommendations of the evaluation carried out in 2017 by an external auditor, this year there have been significant changes in the internal organisation and in the applicable procedures:
All this has allowed the improvement in compliance with the Good Governance recommendations of the CNMV.
The Board of Directors comprises
12 members, of which one is a
woman. Among Board Members there
is a broad diversity of professional experience and academic knowledge
(engineers, lawyers, economists,
The company, in its Board Member selection policy, expressly specifies that the Appointments and Remuneration Committee shall ensure that the screening procedures do not include any implicit bias that could involve any discrimination whatsoever.
Regarding the selection of candidates for the post of director, the process is based on an evaluation by the Appointments and Remuneration Committee, which may seek external advice. The analysis is based on the company’s needs and on the skills, knowledge and experience needed on the Board, as well as the alignment of the candidate with the principles, values and vision of Naturgy.
|Under 55 years.|
|Between the ages of 55 and 60 years.|
|Over 60 years.|
|Industrial and energy engineering.|
|Finance, accounting and auditing.|
|Legal and administration.|
|IT and business.|
Remuneration of Directors represents an issue of major importance in the company’s good governance. In accordance with the current legal framework, Naturgy regularly reports on remuneration of members of the Board of Directors through its Integrated Annual Report, the Annual Accounts and the Annual Report on Remuneration of Directors, all publicly available.
Remuneration of Directors for sitting on the collegiate decision-taking bodies is considered as fixed remuneration. Only the Chairman of the Board of Directors receives remuneration based on the executive functions he performs outside of sitting on the Board.
The determination of each Director’s remuneration corresponds to the Board of Directors, which shall take into consideration the duties and responsibilities attributed to each Director, the Board committees on which they sit and other objective circumstances that are relevant. In this regard, the remuneration of directors must maintain a reasonable proportion with the importance and economic situation of the company, and the market standards of comparable companies.
The established remuneration system must be targeted at promoting profitability and long-term sustainability of the company and incorporate the precautions required to avoid the assumption of excessive risks and rewarding unfavourable results.
No outsourced consultants have been used to determine the remuneration of Directors.
In the Ordinary General Shareholders’ Meeting of 2018, the Annual Report on Remuneration of Board Members for 2017 was approved by a majority vote, as follows:
|Number of shares that have cast valid votes||838.788.724|
|Total number of valid votes cast||838.788.724|
|Proportion of the share capital that the valid votes represented||83,82|
|Votes in favour||754.225.985|
|Quorum of attending at the Shareholders' Meeting||83,82|
The quorum of attendance at the meeting represented 83.82% of all shares in Naturgy.
|Issue||Nature of the issue (economic, social or environmental)||Conclusions drawn|
|Approval of the Annual Accounts and the Management Report of Gas Natural SDG, S.A.; the Consolidated Annual Accounts and the Management Report of the Consolidated Group for the financial year that closed on 31 December 2017.||Economic||Approved by a majority|
|Approval of the allocation of profits for the year that closed on 31 December 2017.||Economic||Approved by a majority|
|Transfer to the “Voluntary Reserve” account.||Economic||Approved by a majority|
|Approval of management performed by the Board of Directors in 2017.||Economic/social||Approved by a majority|
|Amendment to the Articles of Association.||Economic/social||Approved by a majority|
|Amendment of certain articles of the General Meeting Regulat||Economic/social||Approved by a majority|
|Report on remuneration of members of the Board of Directors.||Economic/social||Approved by a majority|
|Re-election, ratification and, where applicable, appointment of members of the Board of Directors.||Economic/social||Approved by a majority|
|Remuneration Policy for Directors for 2018, 2019 and 2020.||Economic||Approved by a majority|
|Consultative vote concerning the Annual Report on remuneration of members of the Board of Directors.||Economic||Approved by a majority|
|Amendments of the Regulations for the Organisation and Functioning of the Board of Directors of Gas Natural SDG, S.A. and its Committees.||Economic/social||Approved by a majority|
Naturgy identifies and quantifies the impact of the main risk factors for the company, ensuring uniformity in the criteria used in
measuring these risks and proposing control and corrective measures together with the businesses affected.
Supreme body in charge of the efficacy of internal control and of the company’s risk management systems. It checks that these systems identify the different kinds of risks and the measures introduced to mitigate said risks, and to tackle them in the event that effective damages materialise.
Responsible for determining and reviewing the objective risk profile of the company. It also guarantees that the entire organisation understands and accepts its responsibility in identifying, assessing and managing the most significant risks.
Risk Control Units
Responsible for monitoring, controlling and reporting the risk assumed, and ensuring this is within the limits defined by the objective risk profile. We can highlight the following units: Risks and Insurance, Gas & Power Risks and Internal Audit.
Business Units, Corporate and Project Areas
Responsible for application of the general principles of the Risk Control and Management Policy and risk management in their areas of responsibility: observing, reporting, managing and mitigating the different risks.
The risk management model of Naturgy seeks to ensure predictability of the company's performance in all relevant aspects for its stakeholders. This means establishing risk tolerance by setting limits for the most relevant risk categories. By doing this, the company can anticipate the consequences of certain risks materialising, and is perceived in the market as a solid and stable company.
Naturgy has a framework that integrates the corporate vision of governance, risks and compliance, enabling an integrated overview of the group’s processes, the existing controls over these and the associated risk.
Naturgy analyses its global risk profile
through its potential impact on the
company’s financial statements. This
allows the company to determine
the maximum accepted level of risk
exposure, as well as the admissible limit
for risk management.
The tools that enable the continuous improvement of the process for identifying, characterising and determining Naturgy's risk profile are the following:
With regard to management of environmental risks, Naturgy has identified these risks at its facilities in accordance with the benchmark regulations (UNE 150008, in Spain). To prevent these risks, the company has introduced an integrated system of management that is certified and audited every year by AENOR as well as internally, which sets out the operational control and environmental management procedures. In addition, emergency plans have been introduced at facilities and storage premises at risk of an environmental accident, including an action plan, containment measures and regular drills.
Approved in February 2018 by the Board of Directors, its aim is to lay down the general principles and behaviour guidelines to guarantee the appropriate identification, information, assessment and management of Naturgy’s exposure to risk.
The identification and characterisation of the risks take into account the characteristics of the position at risk, the impact variables, the potential quantitative and qualitative severity, the probability of occurrence and the degree of management and control. It is updated and submitted every year to the company’s supervisory body, the Audit Committee.
Within the framework of the new Strategic Plan 2018–2022, methodologies have been developed to quantify and control the impact on value of Naturgy’s most relevant risks during the plan’s time horizon.
At their discretion, the Naturgy Business Units promote risk maps that are specific, consistent and aligned with a common methodology, which serve as the basis for the Corporate Risk Map.
This is designed to provide the recurrent and probabilistic quantification of the risk position assumed on a global scale for the different risk categories. Naturgy undertakes an analysis of corrective risks, a sensitivity analysis and stress tests for the main risks identified.
The Risk Area seeks to guarantee the
recurrence and sustainability of the
performance indicators. One of its key
tasks is the modelling of the financial
statements, targeted at identifying
their main sensitivities and anticipating
possible incidents. Quantitative
modelling is organised in accordance
with the areas of credit risk, market risk
and operational risk.
Range of values that the annual Ebitda of Naturgy can reach due to the evolution of market factors: price of gas, price of electricity and exchange rates.
|Distribución de probabilidad.|
|Ebitda en risk.|
|5%, 50%, 95 percentiles.|
Logic of the risk profile and anticipated loss. Poor levels of credit quality mean the company's exposure has to be limited. It also shows the distribution of the anticipated loss, which increases with the deterioration of customer credit quality.
Fundamental magnitudes with regard to management: efficient level of retention and breakdown of overall costs associated to the risk (premium, unexpected loss, expected loss). The insurable operational risk profile is characterised by the level of potential exposure whereby the materialisation of unforeseen events that can be mitigated through insurance policies have an impact on the equity of Naturgy. The quantification of such exposure is likely to be objectified by estimating the total cost of risk.
Subsequent to the approval of the new Strategic Plan, Naturgy has registered asset impairment or write-offs of Euros 4.851 billion, caused by the reassessment of future cash flow estimates based on the aforementioned plan, as well as other factors that have occurred during the period.
Looking ahead, the company values emerging risks that may have a significant long-term impact on the business. In this regard, faced with uncertainty in the domestic and worldwide economic outlook, the company seeks to position itself in countries that promote legal security, economic developments in stable macroeconomic environments that ensure steady growth that contributes to the generation of value and profitability of business and enterprise. In this way, Naturgy seeks to balance the weight of its businesses in its mix of activities, placing greater ambition on increasing the contribution of regulated activities and enhancing its more electric profile.
Through the new Strategic Plan
2018–2022, Naturgy will reinforce
its commitment to create value
through simplicity and accountability,
optimisation, financial discipline and
shareholder retribution. These factors
fulfill the parameters of profitability,
quality of service and security. The
following opportunities should be noted
Auditing methodically reviews the internal control system of the group’s processes in all areas, and also assesses the operational risks and controls associated to these processes, through definition and introduction of the Annual Internal Audit Plan. It also provides support to the departments in achieving their objectives.
The methodology for the assessment of operational risks is in accordance with best corporate governance practices, based on the conceptual framework of the COSO Report (Committee of Sponsoring Organisations of the Treadway Commission) and on the basis of the types of risks defined in the company's Corporate Risk Map.
In 2018, 87 internal audit projects were carried out, 58 of which corresponded to the review of processes associated with the main operational risks (corruption, fraud and legal) of the business and services departments of Naturgy. The analysis carried out extended to 100% of the departments and placed special emphasis on those with greater probabilities of these risks materialising. In the projects performed in 2018, no significant incidents related to corruption were detected.
Responsible for supporting the Ethics and Compliance Committee with ongoing assurance of compliance with the external regulations and the policies and procedures introduced into the group to mitigate the main legal, corruption and fraud risks. In this regard, the Compliance unit is responsible for managing the Crime Prevention Model and, in collaboration with the Legal Services, assesses the legal risks in the models that are developed, the criminal and regulatory prevention ones in particular.
Also, the Compliance Unit takes charge of managing the Code of Ethics of Naturgy, through dissemination of the code and by overseeing compliance with the same and the Anti-Corruption Policy. The Unit, through the Ethics and Compliance Committee, regularly informs the Audit Committee of the activity carried out in the exercise of its functions.
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