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Poland’s PGNiG stung by low gas prices in 2019
PERFORMANCE
POLISH national gas firm PGNiG posted weaker profits in 2019 following a fall in gas prices.
The company’s net income stood at PLN1.37bn ($357mn), down 57% year on year, while its earnings before tax, deprecia- tion and amortisation (Ebitda) sank 22.5% to PLN5.5bn.
PGNiG sold 30.7bn cubic metres of gas in 2019, marking a 6% increase y/y. But revenues nevertheless fell 2% to PLN42bn owing to lower prices.
CEO Jerzy Kwiecinski noted that the average price of gas on the Polish Power Exchange was 35% lower last year. Prices across Europe were weighed down by warm weather and a surge in the continent’s LNG imports.
“Allparticipantsoftheglobalgasmarketare currently facing the challenge of low prices,” Kwiecinski said in a statement. “We should bear in mind, though, that demand for gas has been growing at a significant rate, as confirmed by forecasts from all around the world.”
Revenues from PGNiG’s trade and storage business were up 5% at PLN33.25bn, but this was offset by a 32% slump in exploration and production turnover to PLN3.18bn. Revenues from distribution services fell 5% to PLN4.21bn, while revenues from heat sales grew by 1% to PLN1.33bn.
PGNiG also suffered various impairment losses in the final quarter of 2019, including a PLN212mn charge on its upstream business, a PLN339mn charge on its trade and storage division and a PLN272mn charge relating to its shares in Polish coal-mining company Polska Grupa Gornicza.
PGNiG imports most of the gas it sells, and the price it paid for these supplies was more or less unchanged despite the fall in European
prices, squeezing the company’s margins. It spent PLN26.7bn on imported gas last year, up 7.2% y/y, with the growth largely the result of highervolumes.
Against the backdrop of bearish market con- ditions, Kwiecinski pointed to PGNiG’s success- ful efforts in diversifying Poland’s gas import mix. The company, which holds a near-monop- oly over the country’s gas imports, took 60.2% of its gas from Russia last year, down from 66.8% in 2018. It increased LNG imports by three per- centage points to 23.1%, while remaining sup- plies came from Poland’s neighbours.
Polish gas grid operator Gaz-System recently awarded a contract to expand the country’s sole LNG import terminal in Swinoujscie. Poland also wants to build a second terminal in Gdansk andisconstructinganewpipelinetoreceivegas from PGNiG’s fields off Norway via Denmark. Work is also underway on a new gas link with Lithuania.
While gas demand will be bullish, Kwiecinski has warned of tougher times ahead as a result of the coronavirus (COVID-19) pandemic’s impact on markets.
“Last year was difficult for us. 2020 will be very difficult due to what is going on on the inter- national markets. Due to the coronavirus, oil and gas prices have fallen significantly,” he was quoted as saying by state-run news agency PAP on March 12. “On top of that, we are tied into long-term agreements on gas supplies, which are unfavourable for us.”
PGNiG expects a favourable ruling this month by a Stockholm court on its long-term contract with Gazprom for Russian gas. A ver- dict in PGNiG’s favour could result in a change in the way prices under the contract are calculated. The Polish firm currently pays higher than mar- ket rates for its gas.™
PGNiG increased the share of its LNG imports to 23.1% in 2019.
Prices across Europe were weighed down by warm weather and a surge in the continent’s LNG imports.
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