In 2014, the PGNiG Group earned over PLN 2.8bn in net profit, up 47% year on year, driven by lower gas procurement costs and strong operating performance in the Distribution segment.



The Group posted a 7% year-on-year revenue growth, from PLN 32bn to over PLN 34bn, led mainly by higher gas sales revenue, up PLN 2.16bn (9%). The Group's EBITDA grew by 13%, to PLN 6.3bn, compared with PLN 5.6bn in 2013.

Annual crude oil and condensate output was 1.21 million tonnes, almost 30 thousand tonnes above the forecast. In 2014, the Group met its annual natural gas production target of 4.5 bcm, with production expected to be maintained at this level in 2015.

Exploration and Production - sound operating results

Revenue from the Exploration and Production segment in 2014 came in at PLN 6.1bn, a year-on-year decrease of 2%. EBITDA was down 7%, to PLN 3.14bn. These results were driven by one-off items, including impairment losses of PLN 707m and dry wells and seismic surveys written off of PLN 330m, and by crude oil prices, which started to fall in September 2014.

Lower gas purchase costs attributable to flexible pricing formulas in import contracts

The key factors behind the financial performance of Trade and Storage in 2014 were lower gas procurement costs and shifts in the gas sales structure (exchange sale requirement), which drove up revenue from sales of the Group's main product by PLN 2.2bn year on year, to PLN 26.7bn. The segment's total revenue was up 12%, to PLN 28.8bn.

In Q4 2014 and 2014, gas sales margin was 4% and 3%, respectively, compared with -2% recorded in 2013.

In 2014, gas sales went up 13.5% year on year, to 18.5 bcm (2013: PLN 16.3 bcm). By customer groups, larger gas volumes were sold on the Polish Power Exchange and to the customers of PGNiG Sales & Trading. On the other hand, sales to other customer groups were markedly lower, with the largest declines recorded for refineries and nitrogen plants (down 0.25 bcm and 0.4 bcm on 2013). The possible reason of this shift were the attractive prices offered on the Polish Power Exchange and Western European markets.

Since August 1st 2014, supplies of natural gas to approximately 6.7m PGNiG SA's customers have been handled by PGNiG Obrót Detaliczny, which was bound by PGNiG SA's gas tariff until the end of 2014. In January−December 2014, PGNiG OD sold PLN 3.2 bcm of gas.

PGNiG Group's performance in 2014 (PLNbn)

2013 2014 Zmiana
Revenue 32,0 34,3 7%
Operating expenses (excl. D&A) (26,4) (28,0) 6%
EBITDA 5,6 6,3 13%
EBIT 3,1 3,8 22%
Net profit 1,9 2,8 47%

PGNiG Group performance in Q4 2014 (PLNbn)

IV kwartał
2013 		IV kwartał
2014 		Zmiana
Revenue 9,1 11,5 26%
Operating expenses (excl. D&A) (8,3) (10,1) 22%
EBITDA 0,8 1,4 69%
EBIT 0,1 0,8 x8
Net profit (0,2) 0,7 -

Solid operating performance in the Distribution segment

The Distribution segments' revenue of approximately PLN 4.3bn in 2014 remained relatively flat year on year, despite a 5% decrease in volumes of distributed gas, caused by 1°C higher average air temperatures in 2014.

In 2014, EBITDA was up 25% to PLN 2bn, compared with PLN 1.6bn a year earlier. In 2013, the segment's earnings were affected by material one-off items, including higher actuarial provisions (PLN -141m) and growing costs of system balancing.

Weaker performance of the Generation segment driven by weather conditions

In 2014, the Generation segment's revenue was down 6% year on year, to PLN 1.9bn, chiefly due to lower revenue from sales of electricity, which dropped 13% to PLN 800m. At the same time, revenue from sales of heat remained stable at PLN 1.1bn, reflecting higher heat tariff prices and a 9% decline in sales volumes due to mild winter.

Heat sales totalled 36.6 PJ in 2014, whereas electricity sales were down 6%, to 3.56 TWh.

Record high utilisation of gas storage capacity

As at the end of 2014, the Group held 2.1 bcm stocks of high-methane gas in its underground storage facilities, close to the level reported in December 2013.

Important events in the PGNiG Group in 2014

In 2014, PGNiG signed an agreement with Qatargas and reopened negotiations of the Yamal Contract, whose results may be important to the Company's market standing in the future.

After several months of negotiations, PGNiG acquired new hydrocarbon fields in Norway, which strengthened the Company's position on the international upstream market and permitted tax optimisation within PGNiG Upstream International.

In late 2014, the Strategy of the PGNiG Group for 2014-2022 was adopted, presenting the Group companies with new ambitious objectives to drive further growth. The Strategy is centred around four key areas: maintaining stable trading volumes in retail and wholesale, maximising cash flows from the infrastructure and generation areas, strengthening and transforming the upstream business, and laying foundations for growth along the PGNiG Group's value chain.

Also, another step towards further integration of the PGNiG Group was made. PGNiG SA entered into cooperation agreements with its Group companies, and management regulations for each of the PGNiG Group's operating areas were implemented. Our companies joined a tax group and underwent integration under a common treasury management policy.

Dorota Gajewska

Press Officer

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