INTEGRATED ESG
REPORT 2020

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PL

Financial capital

Financial capital is key to provide funding for the PGNiG Group’s day-to-day operations and deliver ambitious strategic goals in the future. The sources of funding comprise equity, debt and funds generated from business activities.

The over­ri­ding go­al of the cur­rent stra­te­gy is to dri­ve va­lue growth and en­su­re fi­nan­cial sta­bi­li­ty for the PGNiG Gro­up. We aspi­re to achie­ve cu­mu­la­ti­ve of PLN 33.7bn in the 2017–2022 ti­me ho­ri­zon. To de­li­ver on that go­al, the Gro­up will ne­ed to con­ti­nue its ef­forts to so­li­di­fy its com­pe­ti­ti­ve po­si­tion, whi­le pro­mo­ting growth of the gas mar­ket and fur­ther expan­ding the gas ne­twork in Po­land.

Key metrics:

XLS

PLNm 2020 2019 2018
market capitalisation 32,023 25,019 39,928
equity 44,125 38,107 36,632
total assets 62,871 59,185 53,271
debt ratio (liabilities to assets ratio) (%) 30.0 35.6 31.2
debt to equity ratio (financial leverage) (%) 42.8 55.3 45.4
available funding sources: lines of credit and bond programmes 15,236 10,150 10,970
net cash from operating activities 14,118 4,938 5,814
net cash from investing activities -6,254 -6,152 -4,704

Performance:

XLS

PLNm 2020 2019 2018
revenue 39,197 42,023 41,234
consolidated operating profit (EBIT) 9,585 2,448 4,395
EBITDA (operating profit before depreciation and amortisation) 13,009 5,504 7,115
net profit 7,340 1,371 3,209
earnings per share (PLN) 1.27 0.24 0.56
ROE (%) 16.6 3.6 8.8
net debt / EBITDA -0.2 0.7 -0.03
dividend per share (PLN) 0.09 0.18 –

How we manage the results?

  • Implementation of an ambitious investment program, which is to constitute the foundation for long-term value growth while at the same time guaranteeing the country’s energy security
  • We implement an ambitious investment program while maintaining a healthy balance sheet structure. The objective of the currently implemented strategy is to keep the net debt / EBITDA ratio below 2.0
  • The payment of up to 50% of the consolidated net profit in the form of dividends assumed in the strategy, which is possible thanks to active financial management.

How do­es fi­nan­cial ca­pi­tal af­fect other ty­pes of ca­pi­tal?

Pro­per­ty, plant and equ­ip­ment are the lar­gest com­po­nent of the PGNiG Gro­up’s as­sets. As at De­cem­ber 31st 2020, the­ir va­lue re­ached PLN 42,565m. Inve­st­ments in pro­duc­tion as­sets re­qu­ire the use of exter­nal fun­ding ra­ised in the fi­nan­cial mar­ket or in­ter­nal funds held by the Gro­up. In li­ne with the PGNiG Gro­up’s Stra­te­gy ad­op­ted in March 2017, to­tal CAPEX will exce­ed PLN 34bn in 2017-2022, whi­le ave­ra­ge an­nu­al ca­pi­tal expen­di­tu­re in 2017−2022 will amo­unt to ca. PLN 5.7bn:

  • of which almost a half (45%) will be spent on hydrocarbon exploration and production,
  • almost 30% of capital expenditure will be spent on developing the distribution business,
  • ca. 13% − on power and heat generation projects,
  • additionally, ca. 12% of CAPEX will be allocated to other, selected growth projects offering attractive returns, including in distribution, trading, power and heat generation.

One of the new strategic areas of the PGNiG Group is the activity in the segment of renewable energy sources. About PLN 4 billion will be allocated to the construction of the RES segment.

In 2020, the capital expenditure of the PGNiG Group on property, plant and equipment amounted to approximately PLN 6.8bn, which was 2% higher than the expenditure incurred in 2019.

In ad­di­tion to expen­di­tu­re on new pro­duc­tion as­sets, the ma­in­te­nan­ce and upgra­des of exi­sting plant and equ­ip­ment is al­so a si­gni­fi­cant CAPEX item. In 2018, Pol­ska Spół­ka Ga­zow­nic­twa alo­ne spent ap­pro­xi­ma­te­ly PLN 0.81m to upgra­de its ne­twork as­sets. The Ge­ne­ra­tion seg­ment be­ars si­gni­fi­cant co­sts of ad­ap­ting its ge­ne­ra­tion plant and equ­ip­ment to BAT re­qu­ire­ments.

In the mi­d- and lon­g-term per­spec­ti­ve, the go­al of in­ve­st­ments in the as­set ba­se is to en­han­ce the Gro­up’s ef­fi­cien­cy and upsca­le its bu­si­ness. In li­ne with the PGNiG Gro­up’s stra­te­gy in for­ce for 2017-2022 with an outlo­ok until 2026, the ca­pex pro­gram­me is expec­ted to de­li­ver cu­mu­la­ti­ve 2017-2022  of ap­pro­xi­ma­te­ly PLN 33.7bn, dri­ving lon­g-term growth of the Gro­up’s in 2023-2026 to the an­nu­al ave­ra­ge of aro­und PLN 9.2bn.

The PGNiG Gro­up is one of the lar­gest em­ploy­ers in Po­land. Its work­for­ce is com­pri­sed of hi­gh­ly­-qu­ali­fied pro­fes­sio­nals with exten­si­ve expe­rien­ce. As at De­cem­ber 31, 2020, the­re we­re 24,608 em­ploy­ees em­ploy­ed in the PGNiG Gro­up.

The key in­ter­nal do­cu­ment go­ver­ning the re­mu­ne­ra­tion po­li­cy at PGNiG is the 2009 Col­lec­ti­ve Bar­ga­ining Agre­ement. Un­der the ad­op­ted re­mu­ne­ra­tion po­li­cy, ba­se pay ra­tes are ba­sed on job gra­din­gand de­pend on the qu­ali­fi­ca­tions re­qu­ired for a gi­ven job. Other com­po­nents of re­mu­ne­ra­tion in­c­lu­de awards and bo­nu­ses un­der the in­cen­ti­ve sche­me, St Bar­ba­ra­’s Day re­wards, leng­th-o­f-se­rvi­ce awards, an­nu­al bo­nu­ses, and one­-off re­ti­re­ment se­ve­ran­ce pay­ments.

Car­ry­ing out ac­ti­vi­ties re­la­ted to the extrac­tion of na­tu­ral gas and cru­de oil in­vo­lves the risk of ac­ci­dents at work. The PGNiG Gro­up ma­in­ta­ins an ef­fec­ti­ve Qu­ali­ty, Envi­ron­men­tal Pro­tec­tion and Oc­cu­pa­tio­nal He­alth and Sa­fe­ty Ma­na­ge­ment Sy­stem in ac­cor­dan­ce with the best stan­dards set out in in­ter­na­tio­nal ISO stan­dards, ta­king in­to ac­co­unt go­od in­du­stry prac­ti­ces. As a re­sult, the num­ber of ac­ci­dents at work is con­stan­tly de­cre­asing. Compared to last year the number of accidents  and the number of people injured at work decreased (by 6.9%. and 6.2%). In 2020 there were no deaths reported.

PGNiG Gro­up is an in­du­strial and com­mo­di­ty hol­ding com­pa­ny. PGNi­G’s bu­si­ness com­pri­ses explo­ra­tion for and pro­duc­tion of na­tu­ral gas and cru­de oil. Th­ro­ugh its key com­pa­nies, PGNiG is al­so ac­ti­ve in the area of im­port, sto­ra­ge, sa­le and di­stri­bu­tion of gas and li­qu­id fu­els, as well as he­at and elec­tri­ci­ty ge­ne­ra­tion and di­stri­bu­tion. As a re­sult, all are­as of our bu­si­ness re­ly he­avi­ly on ac­cess to na­tu­ral ca­pi­tal which de­ter­mi­nes the Gro­up’s fi­nan­cial per­for­man­ce.

Explo­ra­tion and Pro­duc­tion is the Gro­up’s first and prin­ci­pal ope­ra­ting seg­ment from the per­spec­ti­ve of the PGNiG Gro­up stra­te­gy. To en­su­re unin­ter­rup­ted sup­ply of hy­dro­car­bons to its re­ta­il and bu­si­ness clients, the Gro­up in­ve­sts in:

  • Exploration for new deposits and acquisition of production licences,
  • Field development.

The Gro­up acqu­ires and sells com­mo­di­ties from its own so­ur­ces, but al­so pur­cha­ses com­mo­di­ties on the mar­ket

  • Natural gas (including LNG) purchased from third parties,
  • Coal purchased as fuel for the Generation segment.

Na­tu­ral gas and cru­de oil pri­ces de­ter­mi­ne the per­for­man­ce of in­di­vi­du­al seg­ments to a lar­ge extent. To se­cu­re fa­vo­ura­ble gas pri­ces in in­ter­na­tio­nal trans­ac­tions, the Gro­up en­ters in­to shor­t-, mi­d- and lon­g-term con­tracts as a gu­aran­tee of unin­ter­rup­ted sup­ply of na­tu­ral gas at mar­ket pri­ces.

Envi­ron­men­tal co­sts are an in­he­rent part of the Gro­up’s ope­ra­tions. In an ef­fort to mi­ni­mi­se its envi­ron­men­tal fo­ot­print, in 2019 the Gro­up ear­mar­ked ca­pi­tal in­ve­st­ments for emis­sion al­lo­wan­ces of 4,576.8 tho­usand Mg (the amo­unt to be ad­di­tio­nal­ly pur­cha­sed by the PGNiG Gro­up as the al­lo­ca­ted emis­sion al­lo­wan­ce is 1,358.3 tho­usand Mg).

The Gro­up al­so pays co­sts of cer­ti­fi­ca­tion, envi­ron­men­tal so­ftwa­re and man­da­to­ry envi­ron­men­tal me­asu­re­ments.

The growth ac­ti­vi­ties mo­del which has be­en de­ploy­ed and fol­lo­wed at PGNIG SA is among the most exten­si­ve and up-to­-da­te R&D&I sys­tems cur­ren­tly in pla­ce at lar­ge Po­lish com­pa­nies. The so­lu­tions de­ve­lo­ped un­der the mo­del are de­si­gned to be com­mer­cia­li­sed as so­on as prac­ti­ca­ble, le­ading to tan­gi­ble fi­nan­cial ga­ins over the shor­t-, mi­d- and lon­g-term ho­ri­zon.

In 2020, a total 150 innovation projects worth approximately PLN 515m were underway at the PGNiG Group (2019: 121 innovation projects worth approximately PLN 400m).

The Gro­up is de­eply com­mit­ted to bu­il­ding part­ne­ring re­la­tions with its so­cial envi­ron­ment, lo­cal go­vern­ments, sup­pliers and con­trac­tors, with the ul­ti­ma­te go­al of pur­sing jo­int ob­jec­ti­ves. Ac­cep­tan­ce for our in­ve­st­ment plans in Po­land hin­ges, in­ter alia, on po­si­ti­ve re­la­tions with our sta­ke­hol­ders.

The Gro­up sup­ports CSR and lo­cal in­i­tia­ti­ves thro­ugh:

  • Sponsorship activities,
  • Projects implemented through the PGNiG Foundation.

In 2019, the PGNiG Group companies and the PGNiG Foundation provided support to over 550 initiatives and events, compared with over 500 in 2019.

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