Integrated ESG
Report 2021

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 EBITDA 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 the advancement of the gas market and expanding the gas network in Poland.

Key figures:

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PLNm 2021 2020 2019
market cap 36,401 32,023 25,019
equity 44,379 44,125 38,107
total assets 101,576 62,871 59,185
debt ratio (liabilities to assets ratio) (%) 56.3 29.8 35.6
debt to equity ratio (financial leverage) (%) 128.8 42.8 55.3
available funding sources: lines of credit and bond programmes 7,700 15,236 10,150
net cash from operating activities 3,470 14,118 4,938
net cash from investing activities -8,092 -6,254 -6,152
net cash from financing activities 8,628 -3,653

Results:

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PLNm 2021 2020 2019
revenue 69,964 39,197 42,023
consolidated operating profit (EBIT) 11,562 9,585 2,448
EBITDA (operating profit before depreciation and amortisation) 15,593 13,009 5,504
net profit 6,014 7,340 1,371
earnings per share (PLN) 1.04 1.27 0.24
ROE (%) 13.6 16.6 3.6
net debt/ EBITDA 0.2 -0.2 0.7
current ratio 1.3 3.0 1.6
quick ratio 1.0 2.6 1.2
dividend per share (PLN) 0.21 0.09 0.18

Our approach to performance management

  • We implement an ambitious capex programme that provides a foundation for long-term value growth, while ensuring Poland’s energy security
  • We pursue the ambitious capex programme while maintaining a healthy balance sheet structure. The current strategy aims to keep the net debt to EBITDA ratio below 2.0
  • The strategy provides for distribution of up to 50% of consolidated net profit as dividends, which is facilitated by active cash 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 2021, their value reached PLN 50,192m. 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 Strategy ratified in March 2017, the capital expenditure guidance for 2017−2022 has been set at over PLN 34bn. 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% will fund further development of 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.

Renewable energy sources are a new strategic area for the PGNiG Group, with around PLN 4bn allocated to building the renewable energy segment.

In 2021, the PGNiG Group’s capital expenditure on property, plant and equipment was approximately PLN 7.6bn, having gone up by 12% year on year.

In addition to expenditure on new production assets, the maintenance and upgrades of existing plant and equipment is also a major component of CAPEX. In 2021, Polska Spółka Gazownictwa alone spent some PLN 2.18bn to roll out the gas network and connect new customers, and around PLN 0.84bn to alter and upgrade the gas network. 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 stated strategy of the PGNiG Group for 2017–2022 with an outlook until 2026, the CAPEX programme is expected to deliver cumulative 2017–2022 EBITDA of approximately PLN 33.7bn, driving long-term growth of the Group’s EBITDA 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 31st 2021, the PGNiG Group employed 24,531 employees.

The key internal document governing the remuneration policy at PGNiG is the 2009 Collective Bargaining Agreement. In line with the adopted remuneration policy, base pay rates are based on job grading and 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 employee retirement programmes.

The oil and gas extraction operations carried out by the Group involve the risk of workplace accidents. The PGNiG Group operates an effective Quality, Environmental and Occupational Health and Safety Management System compliant with the international ISO standards, taking into account good industry practices. The number of accidents across the Group increased by less than 6% relative to 2020, with the increase reflecting reduced amount of remote work and a longer period of relaxed pandemic restrictions. Compared with 2019, the number of workplace accidents fell 0.6% year on year. The number of persons who were injured in accidents at work decreased by 6.2%. No fatalities were reported at the Group in 2021, with the accident rate at 0.89.

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.

The core business of the Group is hydrocarbon exploration and production. 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,
  • hard coal purchased 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 and market priced supply of natural gas.

Environmental costs are an inherent part of the Group’s operations. Seeking to minimise its adverse environmental impacts, in 2020 the Group purchased emission allowances for 5,905.0 thousand Mg CO2 (representing the additional volume of allowances the PGNiG Group had to purchase given its 2021 allocation of 571.8 thousand Mg).

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

The development 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.

A total of 106 innovation projects worth approximately PLN 333m were underway at the PGNiG Group in 2021 (2020: 150 innovation projects worth approximately PLN 515m).

The PGNiG Group is firmly committed to building strong partnership-based relations with local communities, public authorities, suppliers and contractors in the pursuit of common goals. 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 2021, the PGNiG Group companies and the PGNiG Foundation provided support to almost 500 initiatives and events, compared with over 550 in 2020.

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