Polish Tariffs Once More Hit PGNiG Profits

Low tariffs on gas sales have once again hit PGNiG's bottom line as 2011 fourth quarter results are released.

Last week, PGNiG gained approval from the Polish energy regulator to increase tariffs chargeable to customers after submitting an application in October 2011. However, the approval may prove to be little consolation today as gas sales perform under cost due to high import costs.

"The margin decline was caused by a higher unit purchase price of imported gas which gained 24 per cent year on year," a statement for the company said. "It was also an effect of the regulator's refusal to approve a change of the tariff in Q4 2011, which was to factor in market developments and reflect the cost of gas.

"In Q4 2011, net profit was PLN 302m (Polish zlotys--approx. €73 million), down 73 per cent year on year. Revenue came in at PLN 6.97bn, up 5 per cent on Q4 2010. A sharp increase in the purchase price of imported gas (up by 44 per cent), combined with the unchanged gas fuel tariff, drove down the margin on sales of high-methane gas, which fell by 9 pp, to -7 per cent in Q4 2011."

However, the losses incurred on gas sales was offset by increased profitability in the company's Exploration & Production arm which, it emerged today, accounted for two thirds of the company's profit.

A sharp in gas import prices from main supplier Gazprom, which accounts for two thirds of PGNiG's gas imports, has been a major contributor to the company's profit losses on sales.