>>Dr. Achim Westebbe, Head of Corporate Communications VNG
 I wish you a wonderful morning, and would like to welcome you to our annual press conference on the financial statement for the financial year  2001  of  VNG. We are here a little earlier than usually, because the fair is also conducting its annual press conference today, and we would like to offer you the opportunity to attend both events.
I am extremely glad to see that so many persons have come, which means that the knots in the handkerchiefs has brought us good luck.
May I introduce out Board of Managers: On my right-hand side, Mr.  Eschment, Sales and Technology Board Manager, by his side Dr. Holst, CEO, is seated, and at his side, Prof. Wolff, our Commercial and Personell Board Manager.
We have just time until about 10:30 a.m, because of the press conference concerning the fair. For those who intend to visit the fair, I would like to note that there will be a bus leaving outside at 11:00 a.m.
Before I pass on to Dr. Holst, allow me one more remark: Like during the past few years, we are going to carry out this conference together with the agency "Mann beißt Hund" (man bites dog) and will also transmit the conference online.

>> Dr. Klaus Ewald Holst, VNG, Board of Managers
Ladies and Gentlemen, now my survey of the financial year 2001. Competition has become stiffer, and VNG has             successfully stood its own in the process. This success could only be achieved based on the reorganisation of our company to an extent, which can only be compared with the drastic changes during the time of German reunification.
Our situation as to  competition has become more sophisticated, just in the international sphere.
This shows the different opening up of the gas and electricity markets. And we have managed to keep our market share despite these hard times of fierce struggle.
You can see that number of our staff has changed, and this goes to show that this change has been a factual necessity.
We are still 743 employees today, and I would like to stress that most of those who  left have found now jobs. All in all, it must be noted that the reduction of jobs has been a high price that VNG had to pay in view of the market conditions.
Now the most essential parameters of the last year: The sales volume is again at 154 billion kWh and has slightly been increased.
Turnover and annual net income: The sales revenues grew by 20 per cent to € 3.1 billion.

The supply sources of VNG show that nothing has changed at all. We have three big procurement lines coming from Russia, Norway and from German sources. It is evident that the diversification, which was one of our main tasks in the mid-90-ies, has been the right strategy. Today, those will stand their own on the market who have long-term suppy contracts.
Also in the future, we consider it as one of our main assets to provide crude gas on one of the most important procurement markets in order to be able to sell it on the market with it hard competition that our customers are fully satisfied. At the end of last year, when the Enron problem had occurred, we also emphasized that it is essential for an enterprise to be able to ensure stable supply to customers, even if  procurement sources fail. Since June last year, both the access conditions and the storage facilities are know to everbody thanks to the Internet.

We have transported at total of more than 330 billion kWh for third parties. This amount also includes those quantities, which we have transferred fot the Czech and the Polish colleagues through out grid. However, we are positive, that the large-scale opening of the transfer business area for third parties will be further developed.
Now, we say here that in future it will not matter  at all how many customers will choose different suppliers. VNG has to ask two questions in this context: First, how can we ensure that everybody who wishes to be connected to our supply grid can do so without any discrimination and will be able, without any discrimination, to use all resources that he is legally entitled to. Our approach to this is a very practical and simple one. The second question is, of course, how will we manage in this competition to maintain the service system for our customers and how can we additionally realise the expenses that are required to ensure supply security. Here, I have to point at two examples: California - a whole landscape had suddenly been without heat supply and without light, because the supply security hat not been sufficiently taken into account there.
If we look around in Europe, whre we have often been referred to the British example, where one single enterprise has started to implement deregulation, I would like to refer your attention to the picture enclosed in  your press folder. Investment activities in the British North Sea area has dwindled down, as there were no longer any stimuli, due to which Great Britain as a producer  will become an importer.
In case I will be able to present the  balance sheet for the year 2005 as well, we will see what the situation will be like in the international procurement markets. This development in Great Britain will have its repercussion on the price structure.

>> Dr. Klaus Ewald Holst, VNG Board of Managers:
This isn´t any knew to us. With an import dependency of, in all, 80 per cent in Germany, we will always have to care about the long-term character of the procured quantities in the future. Also in 2001, VNG has invested into its facilities. We have built long-distance pipelines and our underground gas reservoir.With special attention, we have installed a node in Bobbau. I recommend you to study this example in order to see how industrial settlements and environment can positively be integrated. I myself was very impressed when I saw it for the first time. It is a landscape, where ducks and geese have their nests. We have spent € 35 million. This node, of course, serves us for extending the gas transportation business in the future, especially to the south and eacst, and if another one pays for this, he can do so, of course.
The underground storage facility at Ketzin near Berlin has been closed down. Such a geological project cannot be handled as simply as an lighting switch. There are still boreholes left  in the earth.

 >> Dr. Klaus Ewald Holst, VNG Board of Managers:
We will further be committe to our tasks in Eastern and Central Europe too. As a matter of fact, we have also used our chances at home and created more added value. Looking at the result of VNG in 2001, you can see that as much as 20 percent of our profits stems from participations. This is the result of a very long-term strategy that we will have to continue in future, too.
We think that, just as in the practice in Germany today between the antitrust authorities and enterprises that want to merge, this resemble the practice of many little states during the 19th century. Just consider, how Poland and the Czech Republic are positioned, where the whole Polish gas economy is being sold to one owner in Poland. And just consider that VNG wants to slightly step up its share from 20 percent to 42.3 percent, then these facts  have to be reckoned with.
The implementation of the directive concerning the crude gas home market is a task which the federal government is just doing. VNG has also participated in this task. Our goals are clear for the current year. We want to achieve competitive results and a customer-oriented service offer in Eastern Germany in order to achieve, and  keep, our position.

>> Dr. Klaus Ewald Holst, VNG Board of Managers:
We want to open up new markets in Eastern and Central Europe and increase the creation of  added value. We wish to generate, in the long run, growth based on our shares in power enterprises at home and abroad.
VNG is an Eastern German enterprise, it is deeply rooted in the new federal states, and it is here where we sell our product, get our profit, and where we pay our taxes. We should be in this year - tentatively said - the largest taxpayer at least in Leipzig. This could no longer be prevented. But we are proud, too, because this is inevitable for a state.
Our corporate decisions are directed, of course, to save taxes, this effort is imposed on us by  the state, and this is wrong.
I am in favour of the principle of simplification, that everybody gets want he wishes and that everbody has something in his pocket to go shopping. We are committed to sports, culture and science.Just try to collect money in the "Stifterverband" of the new German federal states. All you will hear is: Sorry, you must first refer to Düsseldorf, Cologne or Hamburg.
We are not that complicated, we buy here and employ our local  personnel.
I thank you for your attention.

>> Stefan Schroeter, Energie & Management
You have said that the structural change was as drastic as during the time of German reunification. Could you, please, be a little more specific about which tasks you have outsourced and which tasks are planned to be removed from the core sphere of tasks in the future. The second question: You presently transfer 30 billion kWh for third parties. Now, what quantities are intended for the transit abroad, and what quantities will reach the German peers?

Wolfgang F. Eschment, VNG, Vorstand:
 
I would like to shortly answer the first question: Looking at the personnel characteristic of VNG since 1991, you can see this sudded change in 1994, where we had to get out of our inefficiency trouble. Afterwards, there has not been any such change, but now there is this drastic change again.

[Answer by Wolfgang F. Eschment]: We have met with the regional utilities for discussion, and we have thus found out that the technicians there are as competent as ours, and we have then pooled the maintenance and upkeep of the grids. The grids will be jointly  maintained and serviced, i.e. based on the "silent service", the common service. And we then evaluated the tasks remaining for us to do. We need, of course, technical capacities in our enterprise, but we do not need each tube cleaner of every owner of networks. Those employees of the technical staff  involved could be assigned to purely servicing tasks, which was half of the number of staff we had to dismiss. In addition, more retrofit tasks are still to be solved, which will keep us busy for some more years. As a result, the operating expenses of our grids could be reduced by about 20 per cent.

[Remark by Dr. Klaus-Ewald Holst]: According to my estimation, international gas transport totals 90 per cent.

>> Nicola Dieckmann, Frankfurter Allgemeine Zeitung
How do you judge the Association Agreement on Gas? Do you fear that your scope of owners could be changed due to a ministerial permission?

<< Dr. Klaus-Ewald Holst, VNG, Vorstand:
 The Association Agreement on Gas 2 is a process which I myself could have imaged in this form some 3, 4 years ago. Of course, the will be complaints from many different sides saying: this is not sufficient for us. This will be excessively much content in such a document. The Association Agreement on Gas ensures third parties´ access to our grids without discrimination. This principle is laid down there and means such an extensive reform, as cannot be found anywhere in Europe. Because we have, in additon to the gas directive, included out underground gas reservoirs in this process of opening markets.
Now as before, this is no process which can be used by every houswife to enale  her to choose a new provider. Gas economy is quite a sophisticated process.  We will have to work further on this gas directive, in order to reach simpler solutions in the end, and make it thus easier to handle for everybody. Because we produce electricity at all four corners of Germany, but have to procure crude gas from far distant Siberia and from the North Sea, this process is a very specific one, which requires specific insight knowledge. As a result, we have found that a joint solution can be found with regard to enterpreunarial decisions.
Somebody has once calculated that there are seven networks in the UK, which have to be co-ordinated. The people involved number  900. In Germany, there are 700 separate networks, and 10,000 persons are required in order to bring about regulation. If this matter would be as easy as this, a minister should have been able to set up a government regulation authority long ago. It has to be taken into account that gas has to be transported from one point to another through facilities of different ownership.

>> Cerstin Gammelin, Energie & Management
New gas suppliers severely warn of the legal implications of the Association Agreement on Gas. What is VNG´s position with regard to the Association Agreement on Gas?

<< Dr. Klaus-Ewald Holst, VNG, Vorstand:
 Regarding the legal implications of the Association Agreement on Gas, the amended energy law has to be mentioned which is designed to prevent abuse.
It ensures more legal security, and also the European Union is glad that Germany refers to the Association Agreement on Gas based on its legal terms, because thus everybody simply knows what its all about.

[Operator´s note: Dear Visitors, please don´t forget to update your screen at regular intervals, as new information may have occurred in the meantime. Thank you.]

>> Hans Jörg MAGER, Fachzeitschrift (ERDÖL ERDGAS KOHLE)
What repercussions to you see concerning the possible E.ON/Ruhrgas Deal for your enterprise?

<< Dr. Klaus-Ewald Holst, VNG, Vorstand:
 This question is a puzzler. On the one hand, I would have said some weeks ago that these are questions of ownership which do not interest us.
I have no fear whatsoever, because there are no indication that anybody hold this view. If you can read it, anyway, in the newspaper, the reason is that those involved in competition have to ponder how they can change, or improve, something in their favour. In this case, I would also look at VNG complacently and with interest if I were one of those peers. We will only be able to voice our opinion in this regard after the results will be known.
As a matter of principle, you are right as to this aspect: Looking a VNG´s history, you see as it is now as a result of the Treuhand authority and the federal government after 1990, with its sophisticated but balanced ownership structure constisting of producers, competitors and different enterprises, including East German communities.
I don´t see any reason why one decision in the Federal Republic would exclusively connected with one of the few large East German enterprises. This is just a fundamental opinion, which is not directed against anybody.

>> Stefan Schroeter, Energie & Management
You said that it would be more advantageous to set up larger structures. Wouldn´t it be sensible to have a strong company holding the majority stake?

<< Dr. Klaus-Ewald Holst, VNG, Vorstand:
 I do not favour any absolute largeness. I have only said that this will make sense only if seen on the entire European context, i.e. that German corporations have to ensure corporate set-up of a certain scope.
They need to have an organisation ensuring considerable revenues, because this is how they can survive based on a structure of any order. Just have a look at the discusssion about the utilities. The live superbly and are our best customers.
We at VNG see our strength exaclty in the ownership structure. So I would answer your question clearly with "no".

>> Zdenka Rabayova, Hospodarsky Dennik
The German gas market has been liberalised for some years. In the Slovak Republic, this situation will occur on 1st  July. Our specialists say that thus gas prices will drop. I want to ask if you have gained this experience in Germany, too. The second question:  VNG is now acting on the Slovak heat supply market, and also wants to get involved in the water supply sector. My question is: Do you also participate in any waterworks in Germany or Poland. And the third question: The process of developing from a state-owned enterprise into a stock corporation started eleven years ago. What were the most critical issues of this process and when where the first successes achieved? I am asking now as a journalist of the SPp journal, becaus this development will in occur our country within a short time.

 If you see changes in a market, with new players arriving on the scene, this will always have repercussions on prices. These repercussions, however, are often not in a way as you may have expected and assumed them. The reason is the special dependency on the crude gas price in Germany and in the Slovak Republic, on the conditions of the international  markets. You can also expect price reductions, because, for  the companies wanting to keep their markets, there will be opportunities due to their own changes,  to give the customer what the customer needs in a changed situation. I will answer the third question: This is, of course, one of our great advantages, i.e. the experience how to develop from a planned economic system to a free-market economic system. The most difficult task ist to bring about changes in our heads.

[Operator´s note: Dear Visitors, please don´t forget to update your screen at regular intervals, as new information may have occurred in the meantime. Thank you.]

>> Heiko Lohmann, Erdgashandel
You have not mentioned two large investment projects; how about Baltic interconnector as well as the pipeline construction from Bernau to Stettin? Second question: Have you procured larger quantities of gas at spot markets last year? You describe in your corporate balance report that you have achieved improvements based on long-term agreements. Could you be more specific about this? One subsequent question: As you have very good connections with the Russians, at the moment ,it is said, examinations will not be permitted by the European Union as regards destination  clauses.

 BCI had the idea to get gas from Russia and, for this purpose, to build a pipeline from Rostock to Malmö. The study in the European Union has not yet been finished. Now, contracts have to be concluded and pipelines laid. But at this point, the project has not been continued, because market participants are alledgedly unable to reach agreement.  Swedish and Danish companies have not come to terms with suppliers.
It goes without saying that the prerequisite for such an enterprise is the flowing of gas. We are observers in this process, because if the construction will by carried out, we are interested in this, of course. The second question: there is a consortium of Ruhrgas and VNG. The pertinent prerequisite was alway that gas was  flowing from the north of Berlin to Poland, and that the gas currently imported from Poland through the southern corridor, like the gas of VNG:
As can be seen, there is a complicated process in Poland at present to coordinate the different contracts, so that they will work, too.
It is obvious that more gas is contracted than the market can consume. The quite natural result is that no decisions have not yet been taken as to  planned large investments in facilities extending from Norway through the North Sea to Poland. The question of laying of a pipeline from Bernau to Stettin will be dependent on these decisions.
Concerning your last question: There is an examination by the European Union as to the Russian area. We have been asked and have answered. As we see it, it was a mistake by the European Union to have drafted, implemente and applied the gas directive without having talked enough with the producers supplying gas to Europe. This was simply wrong. They can organise as much as they want to, but gas has to be procured from Russia and Norway. I think it is a mistake if these essential areas are subject to examinations and to a certain pressure, instead of entering into a talk on how to guarantee the supply in Europe in the long run, i.e. up to the years 2030 or 2040, at a time when we will not have sit here for long. We will prepare these decisions now. We have additionally bought the gas, but not at spot markets. This is done by our suppliers, and our flexibility allows us buy from one supplier, and than  from another one. Therefore, we have bought less from the Russian side in 2001, than during prior years. This is simply a question of rebates and of the necessity to have to react faster in the markets we are acting in.

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>> Aasmund Willersrud, Aftenposten
The share of Norwegian crude gas has clearly increases at VNG last year. How about the further prospects. How would the possible non-construction of the planned pipeline from the Norwegian part of the North Sea adversely affect VNG?

<< Prof. Dr. Gerhardt Wolff, VNG,  Board of Managers::
 The Polish representatives have assured us that they will accept a certain quantity; and as I have described, this process does not work smoothly as before. It does not have any adverse effects on our company.

[Operator´s note: Dear Visitors, please don´t forget to update your screen at regular intervals, as new information may have occurred in the meantime. Thank you.]

>> Dr. Achim Westebbe, VNG Head of Corporate Communications
 If there are no further questions, I would like to warmly thank you for the discussion. Just one more remark: these trees there at the side with their nodes should remind you a little of those knots in your hankies, which we have sent you.You can take some more along with you, because they are real ones.

>> Dr. Achim Westebbe, VNG Head of Corporate Communications
 Dear participants on the Internet, please accept my apology that we could not answer all questions, simply because we are pressed for  time. We will present these questions to the speakers during the day and are going to provide you with the answers as far as possible..

>> Dr. Achim Westebbe, VNG Head of Corporate Communications
 Subsequently, you find now those questions from the Internet, which we were unable answer, due to lack of time, during the live conference.

>> Cerstin Gammelin, Energie & Management
Herr Holst, you intend to continue VNG as an independent enterprise.Your guarantee for this has been your organisational structure so far. Now there are rumours about a change of ownership and, in conjunction with this, a race of parties interested in this acquisition. Which compromises could you imagine in this context?

<< Wolfgang F. Eschment, VNG,  Board of Managers::
 Compromises must be agreed to by the owners; the Board of Managers has little influence on this. It can only go on pointing out how well the present organisational structure as work up to now.

>> Cerstin Gammelin, Energie & Management
RWE Gas ist very active in the Czech and Polish gas markets and refers to VNG as an interesting option. If E.on gets the acquisition permission for Ruhrgas, the equivalent version of RWE/VNG seems to be quite near, doesn´t it?

<< Wolfgang F. Eschment, VNG, Board of Managers:
 The activities on the Czech and the Polish gas markets have to be seen independenly of  EON and Ruhrgas. RWE Gas is the owner of the whole Czech gas economy in the Czech Republic. VNG hold a 27 per cent share in the norther Bohemian gasworks, already for many a year. We will try here to reach a constructive cooperation with RWE. First talks have already taken place.

>> Cerstin Gammelin, Energie & Management
At the same time, Gaz de France and Gasag as well as Vattenfall Europe have shown ambitions to get into closer contact with VNG, possibly through cooperation. Would this be a model for VNG?

<< Wolfgang F. Eschment, VNG,  Board of Managers::
 Here, too, the same applies as above: The ownership structures are not within the sphere of responsibility of  the Board of Managers; however, this does not mean that cooperation à la Lufthanse Lines are out of question if the  projects involved are interesting ones in economic terms.

>> Cerstin Gammelin, Energie & Management
Should the ownership structure reamain unchanged, in spite of all indications, how do you want to position VNG in the market in the future?

<< Wolfgang F. Eschment, VNG, Vorstand:
 We  are going to persistenly and purposefully expand our strategy to be present in the market for the customers with interesting products, to offer cost-effective services needed by customers and to master the cost issue, i.e. to cope with competition. Innovative products will be further developed, e.g. fuel cells etc.

>> Cerstin Gammelin, Energie & Management
Are there any changes as far as the Board of Managers or the Supervisory Board of VNG are concerned?

<< Wolfgang F. Eschment, VNG, Vorstand:
 We hope that there will be changes in the Board only when these persons will reach their  the pension age. The Supervisory Board will have its constituent meeting tomorrow, at which the deputies will be elected. The new Supervisory Board Chairman will be Dr. Bergmann, replacing Mr. Späth who has left the Supervisory Board. The city representativs have appointed two new members, and the employees´ representatives have been newly appointed. You can download the complete list from the Internet tomorrow in the afternoon under www.vng.de.

>> Stephan Maul, Fachzeitschrift (DVGW Energie/Wasser-Praxis)
How does VNG judge the new Association Agreement VV II? Will it provide now impetus to the gas-gas competition? Which new impulses well come from VNG due to VV II?

<<> Note: This question has been asked, in essence, already before. - Please find the answer in the record.

>> Cerstin Gammelin, Energie & Management
You intend to expand your activities further to Eastern and Central  Europe. Do you want to go it alone, or together with partners? Have you got any concrete projects?

<< Wolfgang F. Eschment, VNG, Vorstand:
 The saturation of the market in the core area of VNG has happed alread some years ago, i.e. a market expansion can only be in the direction to our Eastern and Central  European neighbours, i.e. Poland, the Czech Republic, the Slovak Republic and Lithuania. If the projects are purely gas projects  and can be shouldered by VNG, we will go it alone. If, however, there are combined heat and power plants involved, we will cooperate with competent partners, e.g. the utilities in Halle or Leipzig. For new projects, we can also imagine other partners, always in cases, where expert knowledge ist required as a supplement.

Operator´s note: Dear Users, please don´t forget to update your screen at regular intervals, as new information may have occurred in the meantime. Thank you.

>> Cerstin Gammelin, Energie & Management
The structural change is as drastic as at the time of German reunification. But you have got the same contracts. ... What exactly do you mean?

<< Wolfgang F. Eschment, VNG, Board of Managers::
 The term "structural change" has not to be considered in terms of gas economy, but rather with regard to costs. You can see this by the number of personnel. After the first Big Step in 1991/92, we had to carry out cost and personnel adjustments last year, which were rather far-reaching ones, e.g. the reduction of staff by 200.

>> Cerstin Gammelin, Energie & Management
You say that you want to fight for VNG as an independent Eastern German company. Against whom? Do you think there will be changes in the ownership structure in the short or medium  run?

<< Wolfgang F. Eschment, VNG, Board of Managers::
 The discussion was initiated by the merger intentions by EON Ruhrgas. At present it cannot be seen if and how VNG will be concerned by this. As already mentioned, this is a decision about the ownership. But the VNG Board of Managers has to point out that the balanced ownership structures of the past have been very positive for VNG, the employees and the region as a whole; and certain ideas about changes should take into account the this balance is to be preserved.

>> Dr. Achim Westebbe, VNG Head of Corporate Communications
 Here, we finish our today´s conference, also on the Internet. I thank you very much for the lively participation and your interest in our company. I would be glad to welcome you again - in Leipzig or online.