Expert Corporate Governance Service (ECGS)
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Etude de l'AG du 03/05/2017

In September 2016, the major shareholders "la Caixa" and Repsol sold 20% of Gas Natural shares to the infrastructure fund manager Global Infrastructure Partners (GIP). Following the transaction, Gas Natural's major shareholders are "la Caixa" (24.4%), Repsol (20.1%) and GIP (20%).

On 21 September 2016, the Board decided several changes to its composition and regulations, to reflect the new shareholder structure. In items 8.1 to 8.8, it is proposed to appoint 8 non-executive Directors, all representing the major shareholders. As we have concerns over the lack of independent representation on the Board (35%), we recommend that shareholders oppose all appointments.

In item 11, shareholders are called to a binding vote on the remuneration policy for the 3- year period 2018-2020. No significant changes are proposed to the remuneration policy that was approved last year. The CEO's base salary was increased by 32% in 2015, by 5% in 2016 and by 5% in 2017, to € 1'537'987. No justifications have been made for the increases other than benchmarking performed by external consultants. We note that the CEO's fixed remuneration exceeds by 48% the median at Spanish large companies (€ 1.04 million in 2015) and is 56% higher than the median of the European "Utilities" sector (€ 0.99 million in 2015). The Company has improved the quality of disclosure, including the short-term performance criteria and the ex-post disclosure of the level of achievement of annual targets. The overall variable remuneration is reasonable, as on aggregate capped at 185% of the CEO's base salary. However, we regret that it depends more on short-term results (representing 62% of total variable remuneration) rather than on long-term performance. Furthermore, there are no equity-based variable remuneration components, and in our opinion the executive remuneration is not adequately structured to align the interests of executives and shareholders in the long term. Also taking into account that severance payments (3 years of total remuneration) exceed the ECGS' voting policy limit of 2 years of remuneration, and that the policy specifically allows the payment of discretionary bonuses, we recommend opposition.

Naturgy Energy Group SA

Gas Natural SDG is a gas company based in Spain. Co. and its subsidiaries are primarily engaged in the supply, transportation, distribution and commercialization of piped natural gas, as well as the activities involving exploration and developing, supply, regasification, liquefaction and storage of natural gas, and the generation and commercialization of electricity. Co. operates mainly in Spain and also outside of Spain, especially in Latin America, Puerto Rico, Italy, France and Africa (through Maghreb-Europe gas pipeline and integrated LNG projects in Algeria).


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