Poland’s PGNiG Blames Russian Contract For 1Q Struggles
Polish gas utility PGNiG blamed rising costs of Russian gas as it reported a sharp drop in first quarter net profit May 17.
While the group’s revenue rose by 8% year on year to PLN 14.34bn ($??bn) in the first three months of 2019, net income fell by 32% to PLN 1.06bn. The company stressed that the results justify Poland’s ongoing strategy to wean itself off Russian supplies.
“The high cost of gas fuel purchased from sources east of Poland weighed on the group’s performance, but imports from other sources – especially LNG – helped us mitigate the adverse impacts of the Yamal contract,” said group president Piotr Wozniak. “These are tangible effects of our pursuit of a strategy seeking to reduce our reliance on a single monopolistic supplier and build a diversified portfolio of reliable partners.”
PGNiG is at the forefront of a state-led strategy to diversify supplies. LNG imports, largely from the US, are rising rapidly, and Poland hopes to have the Baltic Pipe project carrying Norwegian gas to the country by 2022, when its long-term contract with Gazprom expires. Officials insist the country could dispense with Russian gas altogether at that point.
EBITDA fell by 19% to PLN 2.16bn, with a PLN -0.7bn loss in trade and storage - compared with PLN 0.18bn a year earlier - the biggest drag.
“The decrease was primarily attributable to the higher costs of imported gas fuel procurement, up 17% year on year,” the PGNoG said in a statement. “Price rises were particularly felt in the case of gas imports from across Poland’s eastern border. The nine-month average Brent crude price in USD per barrel, affecting the Yamal contract delivery price, was a third higher than in the previous year.”
The company claims the effect was partially mitigated by imports of LNG and “from suppliers based west and south of Poland”. LNG imports via the Swinoujscie terminal rose 44% year on year to total 727mn m3. Alternative pipeline imports more than tripled to 1.15bn m3. That allowed PGNiG to reduce Russian imports by 40% to 1.79bn m3.
Gas sales were flat at 9.9bn m3 in Q1, as economic growth helped boost demand but warn weather stifled household consumption.