PGNIG Awaits Gazprom Arbitration, Eyes EDF Power Assets
Polish state-run gas and oil group PGNIG’s gas sales were 0.3bn m3 lower year-on-year in Q4 2015, its latest financial results released March 4 show. The average regulated gas price was down by 10% as a result of market liberalisation and regulation respectively, with a warm winter not helping either.
Discussing Russian imports and PGNIG’s referral of Gazprom to international arbitration last month over gas contractual pricing, the Polish group's CEO Piotr Wozniak told reporters at the results briefing that that the arbitration process “takes its own pace” with a ruling due in mid-2017, but that PGNIG is open to a negotiated solution if Gazprom offered fresh terms.
Gas imports to Poland by PGNIG were 23% lower in Q4 2015 year on year at 1.9bn m3, with imports from the east unchanged at 1.8bn m3 whereas imports from other sources were 0.6bn m3 lower.
On the plus side, Wozniak said that PGNIG expanded in Poland's power generation sector and would like to grow further: “It’s no secret that EDF will sell its assets in the country. We are interested but under certain conditions – they should bring in good Ebitda [earnings].” In January Reuters, citing Polish daily Puls Biznesu, reported that EDF might raise $500mn from the sale, and that France's Engie might also divest a coal-fired plant. Czech EPH and Polish Enea, both generation firms, are also seen as potential bidders.
PGNIG finance chief Boguslaw Marzec said he expected import prices under PGNIG’s Yamal gas contract [from Gazprom], which remains indexed to crude oil prices with a time-lag, to decline over time – with some benefits also expected from the exchange rate. He also looked forward to the start of commercial LNG imports from Qatargas “which will start during the summer holidays” at the country's new import terminal.
French equity analyst Societe Generale pointed to negative margins on high-methane gas sales, but said that earnings from generation were up 144% in Q4 on a 9% decline in coal purchase costs.
Wozniak said shale gas exploration for PGNIG was entering a “serious phase” with two or three wells to be hydraulically fractured in Pomerania, in northern Poland, during March and April. Results from these wells would determine whether PGNIG retained those particular licences. However he also spoke of promising research into new fracking techniques with the Polish Geological Institute.
Full-year net profits last year of 2.14bn zloty (€495mn) were down 24% on 2014, while fourth quarter profits were 21% lower at 686mn zloty (€159mn). Full-year pre-tax earnings (Ebitda) were 4% lower at 6.08bn zloty (€1.4bn), chiefly due to the impact of lower oil prices on the company’s upstream.
Mark Smedley