The increase in the net profit was achieved due toimprovement of the operating performance and an efficient financialpolicy, which consists in optimisation of the financing and effectiverisk hedging policy.

The continued value improvement of PGNiG isdriven by consistent financial strategy aimed at cost discipline andefficiency improvement across all business areas. In the recent years,the PGNiG Group has drastically reduced its financial expenses, whichonly a few years ago still exceeded PLN 500 million. At the moment, thecompany is consistently reporting financial revenues in excess of itsfinancial expenses. In the 1st quarter of 2007, as a result of anefficient management of the financial resources, the profit generatedby the company on its financial activity was higher by PLN 63 millionthan in the 1st quarter of 2006. Further savings are expected followingthe decision of the Management Board of PGNiG on debt repayment andafter advantageous amendments to the syndicated loan agreement.

The PGNiG Group has been systematicallyexpanding the scope of its activity outside of the gas trade business,an example being the exploration segment, which generated over PLN 100million of incremental revenue for the Group in the first quarter of2007.

A positive impact on the financial result wasalso observed in connection with limited losses on the imported gassales. This improvement is due to the reduction of the gas sales volumein 1Q 2007 by 13%. For several years, the gas sales price of PGNiG hasbeen lower than the price of imported gas and PGNiG has been incurringlosses on its trade activity. The reduction of the gas imports volumein 1Q 2007 attributed to a mild winter led to substantial performanceimprovement of PGNiG. Also helpful were the favourable macroeconomicconditions (strengthening of U.S. dollar versus Polish zloty anddecrease in the average oil price, which determines the gas prices).

The reduced demand for gas from the customers ofdistribution companies was reflected in the lower result on theactivities in the distribution segment.

The financial results achieved by PGNiGdemonstrate that the Group continues to pursue the value creation pathand has improved its performance efficiency at each level of the profitand loss account. The net profitability of PGNiG increased from 12.3%in 1Q 2006 to 15.6% in 1Q 2007. The rating outlook is stable.

The good financial performance of PGNiG is anexcellent starting point for execution of strategic projects that willunderpin further value creation. On 28 February 2007, PGNiG enteredinto an agreement for acquisition of 15 per cent of interests inlicense blocks on the Norwegian Continental Shelf. Thanks to thisinvestment, PGNiG will gain access to petroleum fields abroad, whichfits into the strategy of improving the energy security and open up newbusiness opportunities for PGNiG. This in confirmed by the memorandumof understanding signed on 2 May 2007 with Energinet.dk concerningimplementation of the Baltic Pipe project and the approval of theconsortium developing the Skanled gas pipeline project for PGNiG tojoin its works.