08.03.2017 PGNiG Group posts very good results: PLN 2.35bn in net profit for 2016

Year on year, the net profit figure represents a 10% improvement. EBITDA amounted to PLN 5.97bn, with contribution of the Trade and Storage segment having more than doubled on the year before. Higher number of gas system connections and larger sales of heat contributed to solid results in Distribution and Generation segments.

In 2016, the PGNiG Group earned net profit of PLN 2.35bn. The Group's EBITDA was PLN 5.97bn, having slightly decreased by 2% on the previous year. However, adjusted for impairment of non-current assets, EBITDA was 2% higher than in 2015.  EBIT was PLN 3.4bn, compared with PLN 3.3bn a year earlier. The Group’s performance was primarily the combined effect of a year-on-year increase in gas sales volumes and the slump in gas and oil prices, pushing down both the Exploration and Production segment’s revenue and gas procurement costs in Trade and Storage segments. The Distribution segment continued to account for the largest share in the Group’s EBIT. The lower contribution from Exploration and Production was offset by a twofold increase in contribution of Trade and Storage segment.

High number of gas system connections

In the Distribution segment, a 60% year-on-year increase in new connections translated into an 11% growth in gas distribution volumes, from 9.8 bcm to 10.9 bcm. Sales revenue rose by 7% to PLN 4.92bn. Revenue from distribution services went up by 7%, to almost PLN 4.4bn.

New trade contracts with the biggest recipients

Gas sales by the Trade and Storage segment totalled 24.3 bcm. Year on year, its sales volume rose 5.7% (nearly 1.3 bcm), as a combined result of higher sales to the largest industrial customers and higher gas consumption by households, as winter temperatures fell below their usual levels. Efforts to increase sales brought a number of new contracts with wholesale and SME customers. Net new gas sales to business customers averaged 11 mcm per month, offsetting a drop in selling prices related to tariff reductions and an active pricing policy with respect to the largest customers.
In 2016, the company won 74 thousand new retail customers, with almost 13 thousand attracted by the dual fuel (electricity and gas) sale campaign launched in September 2016. PGNiG exported 0.37 bcm of gas mainly to customers in Ukraine.

More heat sold

The Generation segment’s heat sales went up by 10% year on year, translating into
a 12% year-on-year growth in revenue from heat sales, to PLN 1.26bn. With electricity sales volumes higher by 3%, revenue from electricity sales grew by 3.6%, to PLN 0.6 bn. The result was attributable to weather conditions and acquisition of companies from the sector in 2016. The segment was bolstered following the purchase of Przedsiębiorstwo Energetyki Cieplnej SA (PEC) of Jastrzębie Zdrój and Spółka Energetyczna Jastrzębie SA (SEJ).

Difficult market conditions

Performance of the Exploration and Production segment was mainly affected by eroded revenue from oil and condensate sales in the wake of falling crude prices. Due to the prevailing market conditions, we reduced our oil and gas output relative to 2015, and the segment’s revenue dropped 12% year on year, to PLN 4.29bn.

Plans for 2017

In 2017, the Group plans to further expand the distribution network and gas distribution volumes, using also the LNG regasification plants in north-eastern Poland. Capex on expanding the network will be PLN 1.7bn. The Group will continue to develop its changed sales policy, improving communication with recipients, developing dual fuel offer and expanding product offer for individual as well as SME customers. The Group also expects growth in exports to Ukraine and growth in sales in Germany.  

The Group expects further growth in heat and electricity volumes after acquiring PEC and SEJ in Generation segment.

PGNiG expects the arbitration proceedings against Gazprom to be finally resolved in the second half of 2017. Preparations are underway to participate in reservation of capacity of Norway-Denmark-Poland pipeline. First transactions on the LNG market by trading office in London are also expected.