Digital Annual Report 2023
Overview
Letter from the Chairman,
Iñaki Alzaga
“We continue to transform challenges into opportunities to lead the transition to a more sustainable and efficient energy system.”
“Gas infrastructures are not only fundamental for the energy present, but also essential building blocks for a sustainable future.”
“Our distribution network not only ensures continuity of supply today, it also paves the way for a renewable energy future.”
“Our strategic pillars are guiding us towards a comprehensive and sustained transformation of the energy sector.”
“At Nortegas, we integrate sustainability into all our decisions, thus ensuring the creation of a positive and lasting legacy.”
Letter from the CEO,
Javier Contreras
“2023 has been a year marked by volatile gas prices and extreme weather conditions, but also by significant progress on realistic solutions and regulation.&rdquo
“The impact on our environment of the high volatility in energy prices resulting from the recent geopolitical conflicts has had a direct effect on industrial demand for natural gas, with significant reductions in distributed volumes that began to occur in 2022 and have continued this year.”
“Despite this, natural gas has maintained its position as an essential energy source for families in Spain, offering an affordable and comfortable alternative that continues to decarbonise. This context has highlighted the strategic importance of natural gas and the country’s gas system as a reliable, resilient and sustainable energy resource.”
“In the face of these challenges, the regulatory development towards the recognition of renewable gases as essential vectors in the energy transition has supported the direction that Nortegas has been leading in the sector.
“Thanks to the continued confidence of our shareholders and the clear focus of our corporate strategy, we are confident that the coming years will be fundamental to strengthening our sustainable project and continuing to provide value to our customers and society in general.”
Key figures
Economic figures 2023
(Distribution Business)
(Distribution Business)
market share
(Biomethane and hydrogen)
(S&P)
Technical figures 2023
(0-10)
Social figures 2023
(own employees and contractors)
Environmental figures 2023
SCOPE 1
SCOPE 2
(scopes 1, 2 and 3)
Market environment
Nortegas’ environment during 2023 has been characterised by four trends that have influenced the company’s evolution and strategy.
Gas prices
Although 2023 has seen a decline from the natural gas price levels seen in 2022, triggered by the war in Ukraine and its effect on global energy markets, high price volatility in Europe has persisted throughout the year, and remains a cause of economic, political and social instability on the continent.
As a consequence of the continued uncertainty in the energy markets, the Spanish government has decided to extend twice during 2023 the different energy protection measures for the war in Ukraine, mainly aimed at households.
Temperatures
The year 2023 has been the hottest year on record, with temperatures even higher than the record set in 2022 globally.
In Spain this has also translated into abnormally high temperatures. The average temperature in peninsular Spain has been +1.3°C above the 1991-2020 historical average throughout 2023 and has even recorded an anomaly of +1.9°C in the winter of 2023-2024.
This situation has led to weaker household energy demand than historical averages, even though the number of natural gas supply points has increased as of December 2023.
Technology – developments in the renewable gases market
2023 has been the year of consolidation of biomethane and hydrogen as key alternative sources for the decarbonisation of the energy system thanks to their production potential capable of responding to processes currently supported by natural gas, such as industry or heavy transport.
Given the need to limit global warming to 1.5°C above the pre-industrial period, biomethane arguably has a ready-to-use technology that can accelerate decarbonisation in the short term.
In Europe, the ambition of the Fit for 55 biomethane production target was doubled in 2022 to 35 million cubic metres by 2030.
In Spain, Sedigas has estimated a biomethane production capacity in the country of 163 TWh/year, which would allow 45% of the national demand for natural gas to be covered.
This places Spain as the third European country with the greatest potential for biomethane production.
On the other hand, the cost of producing green hydrogen depends primarily on two factors: the cost of production using renewable electricity and the cost of developing electrolysers.
In the last year, there has been a growth of more than 30% in the announcement of new low-emission hydrogen production projects for 2030, although many of them are still at very early stages (45% of them are reported to be at the feasibility study stage).
Thirty percent of the announced projects are in Europe, 55% of which are concentrated in Spain, Denmark, Germany and the Netherlands.
In a scenario compatible with limiting global warming to 1.5°C green hydrogen is a key complement to biomethane for the decarbonisation of heavy industry, aviation, shipping, or seasonal energy storage.
Regulation
The progress made in the framework of the objectives set by the Fit for 55 and RePowerEU through:
- – The internal market rules for natural gas, renewable gases and hydrogen, which are part of the Gas Package.
- – The approval and entry into force of the Renewable Energy Directive (RED III): establishes a target for renewable energy in the EU of 42.5% by 2030, but with the intention of being able to reach 45%. Targets are also set by sector:
- • Transport: Member States may choose between 14.5% GHG intensity reduction by renewable energy or at least a 29% share of renewable energy in final consumption.
- • Industry: increase the use of renewable energy by 1.6% per year. Specifically, 42% of hydrogen should come from RFNBO (renewable fuels of non-biological origin) by 2030 and 60% by 2035.
- • Building, heating and cooling: at least 49% renewable energy in buildings by 2030.
- – The adoption of the Delegated Acts to define standards for renewable liquid or gaseous fuels of non-biological origin (RFNBO)
- – The provisional agreement on the EU’s first piece of legislation to reduce methane emissions on the continent and globally
- – The Net-Zero Industry Act
- – The publication of the Energy Efficiency Directive
- – The provisional agreement on the Energy Performance of Buildings Directive of the European Parliament and Council
- – The Ministerial Order for the deployment of smart meters
- – PERTE for industrial decarbonisation
Nortegas strategy
“Nortegas aims to achieve the efficient decarbonisation of the economy by harnessing its infrastructure for the energy transition.”
Materiality
Nortegas has identified a series of critical factors in the context of its activities and markets in which it operates that are key to generating shared value in the territories in which it is present.
Thus, the materiality analysis performed by Nortegas provides an overview of the most relevant issues for Nortegas in terms of sustainability and business management. This materiality study incorporates the dual materiality approach, which considers both issues that are financially relevant to Nortegas – from the outside in, assessing their impact on the decision-making process due to the influence of stakeholders or reporting standards – and those that have an impact on the environment, society and stakeholders – from the inside out, through an assessment of the impacts generated in the communities and those identified by ESG analysts.
“Natural gas distribution networks are a key social and industrial resource , but also for the long-term energy transition”
Contribution to the SDGs
“Sustainability, which is key to Nortegas’ activity, together with the economic, social and environmental impact of its solutions, position ESG issues as critical business factors.”
Towards decarbonisation
“Nortegas aims to play an active role in helping to decarbonise efficiently and competitively using its infrastructure, experience and track record as well as its investment capacity.”
The year 2023 has been a turning point for Nortegas, in which the maturity achieved by the company has allowed the materialisation of the corporate strategy. Nortegas’ strategic approach focuses on the decarbonisation of gas distribution networks by leveraging existing infrastructures for the distribution of renewable gases such as hydrogen or biomethane, the creation of new energy infrastructures for 100% hydrogen and the promotion of innovation throughout the value chain.
Prepare its networks so that all the gases transported through them are of renewable origin:
- – Biomethane
- – Green hydrogen
- – Green synthetic gas (e-methane)
Traditional business
“Nortegas’ regulated activities, focused on the regulated distribution of natural gas and the supply of LPG, guarantee households and businesses access to quality energy”
Nortegas is the second largest gas operator in the domestic market. It operates mainly in Asturias, Cantabria and the Basque Country, where its distri – bution networks extend over 8,509 kilometres and where it has more than one million supply points.
“Faced with the current challenges in the energy sector, the company prioritises service excellence and guaranteed access to supply as fundamental pillars of its activity.”
Nortegas’ policy and commitment are fully integrated in the company’s Quality Management System. This system is based on the implementation of defined processes and procedures to guarantee business continuity and safeguard the corporate reputation.
New business
The new biomethane and hydrogen businesses are now a reality for Nortegas.
Thanks to the efforts made in recent years, Nortegas has consolidated its position as a pioneer in the development of innovative projects that contribute to the promotion and development of renewable gases and the digitisation of distribution networks, promoting the change towards a sustainable and lasting energy system in the long term.
By investing in innovative renewable gas solutions, Nortegas is laying the foundation for the energy transition to a decarbonised gas sector.
Biomethane:
Nortegas is at the forefront of advancing projects to produce and integrate biomethane into the natural gas grid from various organic sources. Within its strategic framework, the company has several objectives in this field:
“Biomethane is an energy vector within renewable gases that represents an integral solution for decarbonisation, sustainability and circular economy, without forgetting its contribution to independence and security of supply.”
– Biolvegas, a pioneer in Spain:
“Biolvegas has started injecting biomethane into the grid through its Ólvega plant, the first one designed for this purpose in Spain from the outset.”
In 2022 the company initiated an important milestone, with the construction of the first biogas plant specifically designed to inject biomethane into the distribution network in Spain, located in Ólvega (Soria).
Became operational in the second quarter of 2023 and is estimated that through its activity it will achieve a reduction equivalent to 14,200 tonnes of CO2 per year.
– Other biomethane projects:
- • Valencia de Don Juan (Leon): with a supply around 30 GWh of biomethane to the natural gas network annually, is expected to achieve a reduction of around 6,000 tonnes of CO2 per year and the generation of 9 direct jobs and 31 indirect jobs.
- • Gálvez (Toledo): one of the largest biomethane projects at national and international level which is being carried out by the Ibenergi Group through its subsidiary Nortiben Green Energy I S.L. The plant will have the capacity to produce 100 GWh per year of biomethane to the natural gas network.
- • Granja Conchita (Valladolid): will have the capacity to produce 20 GWh per year of biomethane to the natural gas network, with 85% CO2 emissions’ reduction and the creation of up to 20 new jobs, 5 direct and 15 indirect.
Hydrogen:
“Nortegas is committed to green hydrogen as an integral part of its sustainability and transformation strategy.”
To contribute to the development of the green hydrogen ecosystem in its community, Nortegas is has set a series of objectives that are shown in the graph on the right.
“Nortegas stands out for its active and strategic participation in the advancement and integration of green hydrogen, with more than 4 projects under development.”
- – Leadership from the Basque Hydrogen Corridor: Nortegas, has been the main driver of the hydrogen distribution infrastructure vertical in the BH2C.
- – H2SAREA, a Nortegas initiative that is a benchmark in Spain: H2SAREA, led by Nortegas, places the company at the forefront of European R&D projects for blending hydrogen with natural gas in distribution networks. Has successfully completed three years of research, confirming the feasibility of natural gas networks for blending up to 20%.
- – First hydroduct in Spain: At the end of 2022, Nortegas completed construction and received approval from the Basque Government for the commissioning of Spain’s first fully dedicated hydrogen product.
- – H2INTEGRA: Nortegas’ commitment to innovation and adaptation to its customers’ needs is reflected in projects such as H2 INTEGRA, which seeks to provide natural gas and green hydrogen mixtures suitable for their specific requirements.
- – H2BIDEA and H2EAT, the Nortegas commitment to innovation: In addition to H2SAREA, the company has devised the H2BIDEA project, the aim of which is to evaluate the operation of a newly built 100% hydrogen distribution network.
- – The BenortH2 green hydrogen plant: Nortegas, in collaboration with White Summit Capital, Castleton Commodities International (CCI), SENER and Bizkaia Energía, is participating in the development of a project for the construction of one of the first green hydrogen plants at national level, with a capacity of 20 MW for the production of more than 2,000 tonnes per year with electricity supply which will prevent the emission of 12,000 tonnes of CO2 into the atmosphere.
- – H2UDF, generation of green H2 in Asturias: This initiative is based on the rehabilitation of a former coal mine for the generation of green hydrogen with the objective of injecting the hydrogen generated into the gas network for distribution avoiding the emission of 8,000 tonnes of CO2 per year.
Natural Gas for Vehicles (NGV):
“NGV is an example of the opportunities of gas for the energy transition.”
NGV offers economic and environmental benefits in terms of emissions, air quality and noise pollution.
Throughout 2023 the company has maintained its commitment to promote the use of natural gas as a solid and efficient energy alternative for sustainable mobility.
“With 11 gas stations in total, currently 9 operational and 2 under development Nortegas has achieved its strategic goal of having at least one gas plant in all its provinces of operation by 2023.”
Other services:
The company has been carrying out other services related to decarbonisation, such as the replacement of oil and other fuel boilers with natural gas boilers.
The year 2023 has been very positive for the centralised boiler business, with more than 30 leasing transactions completed and approximately more than 4,000 tonnes of CO2 avoided.
The digital transformation of Nortegas
“Nortegas is immersed in the digital transformation of its operations and gas networks to improve service quality and achieve efficiencies.”
Nortegas’ investments have not only focused on new business expansion and infrastructure maintenance operations, but also on driving the company’s digital transformation. In 2023 Nortegas has focused on reviewing its technological procedures from a process engineering point of view and identifying potential associated improvements.
With a view to the future, the company is working on strengthening its data warehouse and data analytics, which is proving successful in terms of data optimisation and is a key tool in the exploitation of the information obtained through its digital solutions.
“E” – Environmental dimension
Climate change
In the fight against climate change, Nortegas is positioned as a key player in contributing to the energy transition. Its commitment to the circular economy and the decarbonisation of the industrial and domestic sector reflects its efforts to minimise its environmental footprint, an aspect that the organisation continues to reinforce year after year.
Fugitive methane emissions from the gas distribution network are one of the company’s main sources of greenhouse gas emissions and are therefore conditioned by the technical limitations of the facilities. Considering both Scope 1 fugitive emissions (at own facilities) and Scope 3 fugitive emissions (at customer facilities), these emissions account for 92% of Nortegas’ total carbon footprint.
Nortegas has implemented a set of strategies in recent years aimed at minimizing its environmental impact, especially with regard to its carbon footprint.
“Thanks to the control and efficiency of its own processes and design standards, the company has reduced its scope 1 and 2 footprint by 48% since 2019.”
Considering 2019 as the base year, Nortegas has managed to reduce its Scope 1 and 2 footprint considerably, with the reduction achieved exceeding the targets set by the decarbonisation pathways established by organisations such as the Science Based Targets initiative (SBTi) or the One Earth Climate Model (OECM).
Nortegas has specific decarbonisation targets that go further and are aligned with its sustainable financing. Thus, the company aims to reduce its Scope 1 and 2 emissions annually with respect to the average emissions in the period 2018-2020.
“Nortegas’ energy infrastructure, prepared to incorporate renewable gases, together with its new business activities, will reduce Scope 3 emissions.”
Nortegas has registered its carbon footprint in 2023 for the second consecutive year with the Spanish Office for Climate Change, part of the Ministry for Ecological Transition and the Demographic Challenge.
Nortegas’ Air pollutant emissions
TCFD Framework
Sustainability is a key pillar for the Board of Directors. In the area of climate change, the Board of Directors has driven a strategy to maximise the opportunities linked to the energy transition and minimise the physical and transitional climate risks.
Nortegas has integrated climate change into its risk management processes, implementing the TCFD recommendations by 2021.
Nortegas has carried out an identification of the main risks and opportunities associated with climate change based on a physical risk scenario focusing on the long-term impact of climate change, IPCC SSP5-8.5, as well as two transition risk scenarios, IPCC SSP1-2.6 and IPCC SSP2-4.5, which consider the impact of climate change through policy, regulation, technology and markets.
In terms of identifying opportunities, Nortegas has relied on transition scenarios, focusing on regulatory developments at both European and national level, such as the Green Pact, the PNIEC, the Climate Change and Energy Transition Act, the EU Emissions Trading Scheme, the Hydrogen and Biomethane Roadmaps and the RePowerEU.
Energy efficiency and climate change adaptation
Nortegas’ plan to reduce emissions and combat climate change, with initiatives focused on improving energy efficiency, achieving stability in its energy consumption in recent years.
Nortegas participated in a study promoted by the Basque Government, the result of which was a “non-significant” assessment of the impact of adverse climate change phenomena on the company’s assets in the event of different scenarios of a global increase in the average temperature.
Nortegas’ energy infrastructures are prepared to face the consequences of global warming, maintaining operability even in the face of extreme climatic phenomena.
In addition, a proprietary analysis carried out by Nortegas based on the mapping of the Ministry of Ecological Transition and the Basque Government reveals that more than 80% of the network is not located in areas at risk of flooding, and that those that are have a high capacity to adapt to climate change.
“S” – Social dimension
Talent
Nortegas’ most valuable asset is its professionals, who through their work, experience, knowledge, effort and dedication turn new challenges into opportunities.
Nortegas has strengthened its talent attraction and recruitment strategy in 2023 significantly improving its presence as an employer brand.
The new Human Resources Policy approved in 2023 applies to all employees belonging to any of the Nortegas Group companies. The Policy aims to attract, develop and retain talent while promoting diversity, facilitating the professional development, well-being and participation of all employees, aligning their interests with the strategic objectives of Nortegas.
Diversity, Equity and Inclusion
Diversity, equity and inclusion (DEI) are the social driver in the company’s ESG framework.
Through this strategy, the organisation promotes safe and equal working environments, ensuring equal treatment regardless of gender, race, age or social status.
Nortegas has consolidated its commitment to diversity, equity and inclusion by implementing an extensive training programme, various awareness-raising initiatives and the setting of defined objectives for team managers.
Efr (Family-friendly company)
Nortegas prioritises the wellbeing at work of its employees, focusing on internal value development and active listening to guide their decisions.
Nortegas promotes a responsible and respectful working environment, balance in personal, family and professional life, and the promotion of the human and social development of its professionals, with more than 50 work-life balance measures.
Nortegas promotes the well-being of its team by offering a wide range of incentives and benefits such as the flexible compensation plan, which ranges from nursery and food vouchers to the purchase of computer equipment or private health.
Health and safety
Health and safety of professionals
“Nortegas operates within a preventive culture that ensures regulatory compliance and makes safety and prevention an integrated part of the decision-making process.”
Nortegas is a company recognised for its achievements in the safety and health of its employees, maintaining yet another year of zero accidents in its operations.
Along these lines, the company has developed a wide range of procedures to ensure safety in its operations.
Another fundamental pillar of Nortegas’ commitment to the safety of all people is the identification of work-related hazards.
Professionals have safe channels of communication to express their concerns related to safety and health at work.
Health and safety in the supply chain
The relationship between Nortegas and its suppliers is governed by the General Terms and Conditions, which include technical and ESG aspects.
The GCC cover technical and ESG criteria, including labour, OHS, social, tax, environmental, confidentiality and insurance obligations, among others.
“Nortegas extends its Code of Ethics to suppliers to promote good practices throughout its supply chain.”
Security of users and local communities
Nortegas extends its commitment to safety beyond its own employees to consumers and local communities in the areas where it operates. This commitment is reflected in the guarantee of protection at supply points and on public roads, where the company carries out various tasks.
Social action
Nortegas actively promotes the participation of its team in social action initiatives to contribute to social welfare, foster pride in belonging among its workforce and improve the corporate image at a reputational level.
Awareness raising and training
This year, more than 800 hours of training have been registered in 2023 on aspects such as disability, generational diversity and inclusive leadership for the entire workforce.
ImplicAcción
NORTEGAS, corporate volunteering programme, “ImplicAcción, currently has more than 470 direct beneficiaries.
In 2023, Nortegas has organised 14 volunteering actions, extending participation to the value chain, including family members of the workforce, involving a total of 121 volunteers (with 80 unique volunteers, of which 72.5% are employees and 27.5% family and friends who joined the initiatives).
Itaka Foundation
Nortegas focuses on supporting groups at risk of exclusion, with a special focus on children, and on fostering social awareness among its professionals.
During 2023 has carried out, with the Itaka Escolapios Foundation, the second edition of the programme for the labour insertion of young migrants in situation of extreme vulnerability.
Thanks to this programme, 13 young migrants have gained access to the labour market.
External acknowledgements
At the annual conference on “Corporate volunteering: an opportunity for companies to connect their commitment to sustainability”, organised by CEBEK (Business Confederation of Bizkaia), Nortegas was recognised for its good practice in corporate commitment to volunteering in 2023.
The award recognises the work of all Nortegas volunteers and the high level of participation by the team in these initiatives.
Stakeholder relations
Nortegas, a key player in the energy transition, aligns themexpectations of its stakeholders to generate a positive impact on the communities in which it operates.
The company establishes open communication channels for communities, through which it obtains the social license to operate.
Cybersecurity and information protection
The culture of cybersecurity is a key aspect for Nortegas, which is why it is committed to training and raising the awareness of its professionals in this area.
Nortegas is highly aware of the need to develop a lasting, stable and solid cybersecurity culture. In this regard, the implementation of teleworking thanks to the new work-life balance measures has been accompanied by new training sessions for the maintenance of the organisation’s digital security and for the prevention of serious incidents. During 2023, 22 different training actions were carried out and 59 cybersecurity-specific online best practice pills and tips were issued to each employee.
Tax contribution
Nortegas’ activity has a significant impact on the Spanish tax system. Thus, Nortegas has contributed directly to the tax system with more than 9.7 million euros in revenue in 2023.
Nortegas’ tax management model follows the principles of strict compliance with tax regulations, proactive collaboration with the tax administration, transparency in its operations and recurrent analysis of both positive and negative impacts in tax matters. In this sense, it is a solid and responsible model.
This tax strategy not only underlines Nortegas’ direct and indirect contribution to the public purse, but also highlights the activity and investment the company makes through its taxation in almost 400 municipalities.
“G” – Governance dimension
Nortegas has governance structures in place to ensure and preserve the company’s high standards of excellence, integrating sustainability at all levels of the business. Its corporate structure is adapted to its different business lines, its strategic vision and its corporate values.
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Ethics and Compliance
- – Nortegas strives to comply with the highest standards in matters of corporate governance. In this regard, the company has a Code of Ethics which states the commitment of Nortegas to act in accordance with the highest ethical standards and the commitment to comply with the applicable legislation and with the Internal Regulations System.
- – Nortegas is firmly committed to legal and regulatory compliance, both internally and externally, governing its activity. Within this framework, the company has implemented a Legal Compliance and Crime Prevention Management Model that is subject to periodic review to ensure its effectiveness.
- – During 2023, the “Compliance Policy and Internal Reporting System” was updated to provide a reference framework for the Internal Reporting System as a channel for reporting possible irregular conduct and potential unlawful acts or acts contrary to the law or the Code of Ethics. Anyone can access the ethics channel via the form available on the Nortegas website to report conduct contrary to the company’s ethical values or to the law.
Nortegas has a Compliance Officer which is responsible for managing the Internal Information System.
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Risk Management
- – Nortegas has a Risk Management System which aims to provide senior management with a mechanism to control and mitigate risks that create uncertainty about the achievement of the company’s objectives or that could cause business disruption. This system facilitates the assessment of the probability and impact of each risk and supports the design and implementation of mitigating measures.
- – Every six months, or whenever a relevant event occurs that changes the probability or impact of a given risk event, an analysis and subsequent report on the situation at Nortegas is carried out and discussed by the Executive Committee. The results are periodically presented to the Audit Committee and the most relevant information is reported to the Board of Directors
Financial results
The company has integrated sustainability into its financial strategy. This is reflected in the commitments established within its sustainable financing framework, which includes strategic ESG objectives.
During 2023, Nortegas has continued to demonstrate its ability to adapt to a challenging market and regulatory environment.