Integrated ESG
Report 2021

Financial situation

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Financial highlights of the PGNiG Group for 2020 and 2021

Key data from the consolidated financial statements PLNM EURM
12 months ended December 31st 2021 12 months ended December 31th 2020 12 months ended December 31st 2021 12 months ended December 31th 2020
Revenue 69,964 39,197 15,284 8,761
Operating profit before interest, taxes, depreciation and amortisation (EBITDA) 15,593  13,009 3,406 2,908
Operating profit (EBIT) 11,562 9,585 2,526  2,142
Profit before tax 10,982 9,025 2,399 2,017
Net profit attributable to owners of the parent 6,014 7,340 1,314 1,641
Net profit   6,014   7,340   1 314   1,641
Total comprehensive income attributable to owners of the parent   3,240   6,285   708   1,405
Total comprehensive income   3,240   6,285   708   1,405
Net cash from operating activities   3,470   14,118   758   3,155
Net cash from investing activities   (8,092)   (6,254)   (1,768)   (1,398)
Net cash from financing activities   8,628   (3,653)   1,885   (816)
Net cash flows   4,006   4,211   875   941
Basic and diluted earnings per share (in PLN and EUR, respectively)  1.04  1.27  0.23  0.28
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Key data from the consolidated financial statements PLNm EURm
As at December 31st 2021 As at December 31st 2020 As at December 31st 2021 As at December 31st 2020
Total assets 101,576   62,871   22,085   13,624
Total liabilities 57,197   18,746   12,436   4,062
Non-current liabilities 20,107   11,666   4,372   2,528
Current liabilities 37,090   7,080   8,064   1,534
Total equity 44,379   44,125   9,649   9,562
Share capital 5,778   5,778   1,256   1,252
Weighted average number of ordinary shares (million) 5,778   5,778   5,778   5,778
Book value per share and diluted book value per share (PLN/EUR) 7.68   7.64   1.68   1.65
Dividend per share declared or paid (PLN and EUR) 0.21   0.09   0.05   0.02

Consolidated statement of profit or loss of the PGNiG Group

Revenue

Revenue in 2020–2021 by business segment

 

Exploration and Production: revenue from sales of E and Ls/Lw gas up PLN 9,904m (+398%) year on year, revenue from sales of crude oil and condensate up PLN 1,074m (+76%) year on year.

Trade and Storage:: revenue from sales of E and Ls/Lw gas (taking into account the adjustment to gas sales due to hedging transactions) up PLN 27,698m (103%) year on year.

Distribution: revenue from distribution services in Poland up PLN 699m (16%) year on year, with a 3.6% increase in the distribution tariff.

Generation: revenue from sales of heat up PLN 284m (10%) year on year, with the average air temperature lower year on year and a 6% increase in volumes of heat sales; revenue from sales of electricity generated by the segment’s own sources up PLN 186m (18%) year on year on lower sales volumes (down 4%).

Operating expenses

Operating expenses in 2020–2021

Cost of gas up PLN 23,950m (121%) year on year. The increase in the cost of gas does not include the effect of the annex executed with PAO Gazprom/OOO Gazprom Export on the cost of gas in 2014–2019, in the amount of PLN 4,915m.

The cost of other raw materials and consumables up PLN 944m (+29%) year on year, including a PLN 898m (50%) year-on-year increase in electricity for trading.

Employee benefits expense up PLN 99m (3%) year on year, including salaries and wages up PLN 142m (6%) year on year. The cost of 13 dry wells and seismic surveys totalled PLN 625m in 2021 vs PLN 198m (8 dry wells) in 2020.

 

Reversal of impairment loss on non-current assets in 2021: PLN +1,017m, vs impairment loss on non-current assets recognised in 2020: PLN -1,588m.

Effect of gas inventory write-down of PLN -89m, vs gas inventory write-down of PLN +358m reversed in 2020.

Depreciation of PLN -4,031m in 2021, PLN -751m in Norway.

EBITDA

Net finance costs and net profit or loss

Net finance costs in 2021 amounted to PLN -587m, of which the key item was a PLN -394m impairment loss on loans advanced (mainly to Elektrociepłownia Stalowa Wola S.A.).

After accounting for profit on equity-accounted investees of PLN +7m and the higher year on year tax expense (due largely to taxes on PGNiG UN’s operations) of PLN 4,795m, the Group’s net profit for 2021 came in at PLN 6,187m, down PLN 1,153m year on year (a significant effect of the annex executed with PAO Gazprom/OOO Gazprom Export in 2020).

For detailed notes on finance income and costs (Note 3.4) equity-accounted investees (Note 2.4) and income tax (Note 4.1), see the consolidated financial statements of the PGNiG Group for 2021.

Overview of segment results

Segment's results

Fluctuations in financial performance

The sale, distribution and storage of gas fuels, as well as cogeneration of heat and electricity, which, in addition to hydrocarbon exploration and production, constitute the principal business of the Group, are subject to significant seasonal fluctuations.

Revenue from sales of natural gas and heat in the winter season (Q1 and Q4) is substantially higher than in summer (Q2 and Q3). This is due to the seasonal changes in weather conditions in Poland, and the extent of the fluctuations is determined by temperatures – low in winter and higher in summer. Revenue from gas and heat sales is subject to much greater seasonal changes in the case of households, where gas and heat are used for heating, than in the case of industrial customers.

To ensure uninterrupted gas supplies in periods of peak demand and for reasons of security of the supplies, the underground gas storage facilities must be restocked in summer, and higher transmission and distribution capacities must be reserved for the winter season.

The performance of individual segments is also subject to significant fluctuations driven by changes in product prices. Moreover, the performance of the Exploration and Production segment reflects changes in hydrocarbon production profiles.

 

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Quarterly EBITDA and adjusted EBITDA by operating segment in 2021

2021
PLNm PGNiG Group Exploration and Production Trade and Storage Distribution Generation
Q1 EBITDA 3,393 1,348 493 1,011 463
Adjusted Q1 EBITDA 3,117 1,079 493 1,010 463
Q2 EBITDA 1,801 1,406 -221 542 171
Adjusted Q2 EBITDA 1,536 1,110 -222 541 171
Q3 EBITDA 2,197 2,670 -915 545 -22
Adjusted Q3 EBITDA 2,159 2,633 -915 544 -22
Q4 EBITDA 8,202 8,106 -1,058 796 522
Adjusted Q4 EBITDA 7,764 7,659 -1,056 803 522
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Quarterly EBITDA and adjusted EBITDA by operating segment in 2021

2021
PLNm PGNiG Group Exploration and Production Trade and Storage Distribution Generation
Q1 EBITDA 3,393 1,348 493 1,011 463
Adjusted Q1 EBITDA 3,117 1,079 493 1,010 463
Q2 EBITDA 1,801 1,406 -221 542 171
Adjusted Q2 EBITDA 1,536 1,110 -222 541 171
Q3 EBITDA 2,197 2,670 -915 545 -22
Adjusted Q3 EBITDA 2,159 2,633 -915 544 -22
Q4 EBITDA 8,202 8,106 -1,058 796 522
Adjusted Q4 EBITDA 7,764 7,659 -1,056 803 522
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Quarterly EBITDA and adjusted EBITDA by operating segment in 2020

2020
PLNm PGNiG Group Exploration and Production Trade and Storage Distribution Generation
Q1 EBITDA 2,078 71 909 771 416
Adjusted Q1 EBITDA 2,835 829 909 769 416
Q2 EBITDA 7,274 173 6,646 405 117
Adjusted Q2 EBITDA 7,371 267 6,647 408 117
Q3 EBITDA 1,333 478 632 362 35
Adjusted Q3 EBITDA 1,288 433 632 362 35
Q4 EBITDA 2,324 207 1,392 618 362
Adjusted Q4 EBITDA 3,104 883 1397 623 369

Consolidated statement of financial position

As at December 31st 2021, total assets recognised in the consolidated statement of financial position were PLN 101,576m, having increased by PLN 38,705m (approximately 62%) on the end of 2020.

Assets

Property, plant and equipment represent the largest item of the PGNiG Group’s assets. As at December 31st 2021, property, plant and equipment amounted to PLN 57,480m, having increased by PLN 11,237m (24%) year on year relative to December 31st 2020. Intangible assets grew from PLN 693m to PLN 1,826m as at the end of 2021, while deferred tax assets totalled PLN 1,494m, driven mainly by a higher value of derivative instruments. Equity-accounted investees rose by PLN +18m (ca. 2%) relatove to the end of 2020.

As at the end of 2021, the PGNiG Group’s current assets were PLN 44,096m, having increased by PLN 27,468m (ca. 169%) year on year. The increase was mainly attributable to receivables of PLN 16,462m, up by PLN 11,174m (approximately 211% year on year), derivative financial instruments of PLN 7,572m, up by PLN 6,262m (approximately 478%) year on year, and cash and cash equivalents of PLN 11,410m, up by PLN 4,312m (approximately 61%) year on year.

Equity and liabilities

The main source of financing for the PGNiG Group's assets is equity, whose value at the end of 2021 was PLN 44,379m, which represents an increase of PLN 254m (1% year on year) relative to 2020. The change in equity was mainly attributable to retained earnings, which increased by PLN 4,801m (ca. 13% year on year), and to hedging reserve, which fell by PLN -4,582m (ca -285x year on year).

As at the end of 2021, non-current liabilities were PLN 20,107m, having increased by PLN 8,441m (approximately 72% year on year) on December 31st 2020. The change in non-current liabilities was attributable, among other things, to an increase in total value of derivative financial instruments of PLN 4,582m (16x year on year) and an increase in deferred tax liabilities of PLN 3,344m (ca. 150% year on year).

The largest increase was recorded in current liabilities. As at December 31st 2021, they amounted to PLN 37,090m, up by PLN 30,010m on the end of 2020 (approximately 424%). The significant increase of this item resulted mainly from PLN 9,823m growth in short-term debt (ca. PLN 29x year on year), trade payables by PLN 9,627m (292% year on year) and liabilities under derivative financial instruments by PLN 9,051m (ca. 813% year on year).

For the full version of the consolidated statement of financial position, see the consolidated financial statements of the PGNiG Group for 2021.

Consolidated statement of cash flows

GK PGNiG

With respect to operating activities, in 2021 the PGNiG Group’s statement of cash flows was affected by: higher negative cash flows, led by a change in working capital, of PLN -10.0bn (2020: PLN +1.0bn), despite higher operating results, resulting in increased working capital requirements for gas purchases at prices significantly higher compared with previous quarters and years.

With respect to investing activities, in 2021 the PGNiG Group’s statement of cash flows was affected by: higher payments for property, plant and equipment and intangible assets, of PLN 8.3bn, including: PLN 3.4bn in the Exploration and Production segment (including the acquisition of INEOS assets), PLN 3.2bn in the Distribution segment, and PLN 1.2bn in the Generation segment (excluding cash used on account of CO2 emissions).

With respect to financing activities, the statement of cash flows was affected by:

  • increase in the PGNiG Group’s debt driven by higher working capital requirements and the need to replenish margin accounts used as collateral for stock market and financial transactions involving derivatives;
  • bank borrowings, other debt instruments and lease liabilities of PLN 14.6bn at the end of 2021 (up PLN 10.5bn year on year);
  • net debt (total bank borrowings, other debt instruments and lease liabilities less cash and cash equivalents) of PLN 3.2bn (end of 2020: PLN -2.9bn).
  • Dividends paid of PLN 1,213m (PLN 0.21 per share).

For the full version of the consolidated statement of cash flows, see the consolidated financial statements of the PGNiG Group for 2021.

Profitability ratios

ROE net profit to equity at end of period

The year-on-year decline of the ROE and ROA ratios in 2021 was due to the decrease in net profit for the year.

ROA: net profit to assets at end of period

The year-on-year decline of the ROE and ROA ratios in 2021 was due to the decrease in net profit for the year.

Net margin: net profit to revenue.

The year-on-year decline of the ROS ratio in 2021 was due to the increase in sales for the year.

Anticipated financial condition and trends on key product markets

In the coming periods, the financial standing of the PGNiG Group  will be materially affected by changes in the prices of hydrocarbons on global commodity markets and fluctuations in foreign exchange rates. These factors will be a material driver of the PGNiG Group’s performance in the Exploration and Production and Trade and Storage segments. Any changes in hydrocarbon prices affect revenues of the Group entities engaged in production, and determine the demand for seismic and exploration services offered by the Group companies. Rising gas and crude oil prices have a positive effect on the performance of the Exploration and Production segment. Long-term forecasts of hydrocarbon prices strongly influence projected cash flows from production assets, and as a consequence entail the necessity of revaluation of property, plant and equipment.

On the other hand, since the prices of gas purchased by PGNiG Group under the Yamal and Qatar contracts are linked to prices of crude oil, the effect of rising oil prices on the performance of the Trade and Storage segment is opposite to the effect that rising oil prices have on the performance of the Exploration and Production segment. Any increase in crude oil prices translates into higher cost of gas purchased by PGNiG Group . This relationship was significantly limited in the case of the Yamal contract thanks to the ruling of the Arbitration Court in Stockholm in favour of PGNiG Group  concerning the pricing formula used in the Yamal contract. The PGNiG Group  financial results will also be influenced by the situation on the domestic currency market. Any strengthening of the złoty against foreign currencies (primarily the US dollar) will have a positive effect on the performance of the Trade and Storage segment by driving down PGNiG’s gas procurement costs, although it must be noted that the effect of exchange rate fluctuations is mitigated by the PGNiG Group’s hedging policy.

Another factor with a bearing on the PGNiG Group  financial condition is the President of URE’s decisions on gas fuel sale and distribution tariffs and heat sale tariffs. In addition, the progressing deregulation of the gas market in Poland will continue to put pressure on the performance of the PGNiG Group  Trade and Storage companies selling gas. In view of the competition for customers, the Group offers discount schemes to customers and adjusts pricing terms to reflect market prices. These factors may have an adverse effect on the profitability of the Trade and Storage segment by eroding its margins.

In the Generation segment, financial results will be considerably influenced by the support programmes for electricity produced from high-efficiency cogeneration sources and renewable sources. Changes in the market prices of CO2 emission allowances will have an increasing effect on the PGNiG Group  financial condition in the segment. Another key driver of the segment’s performance is prices of the fuels used to produce heat and electricity, including natural gas.

The expected financial situation and operating activities of the PGNiG Group  will be influenced by the developments in Ukraine and the ongoing military invasion of the Russian Federation. The successively introduced economic and personal sanctions against Russian entities and citizens, as well as the threat to infrastructure and thus the security of natural gas flow from the eastern direction, may adversely affect the international gas market and cause further increases in gas prices and weakening of the Polish currency. For more information on the changes that occured in the environment of the PGNiG’s Group at the beginning of 2022, see HERE.

In the coming months, oil prices will be influenced by developments in the global economy and numerous unknowns related to the Russian aggression in Ukraine and, to a lesser extent, the pandemic. Since the beginning of Russia’s invasion of Ukraine, no restrictions on oil imports have been identified, but buyers fear that these supplies will be limited or cut off altogether with the escalation of the conflict. Due to the uncertain supply situation, further sharp changes in prices on the stock exchanges should be expected in the coming weeks, among other as a result of decisions made to limit or suspend purchases of Russian oil. Discussion arises over sanctions for energy products, however due to the lack of a coherent position of the member states, the imposition of such sanctions by the European Union probably shouldn’t be expected.

Gas prices in Europe will remain high both at the end of the ongoing winter season and, with higher probabilty, also in the summer. From February 24th, 2022, very fast growth and high volatility of the prices is recorded. By March 7, 2022, prices had increased to EUR 227/MWh, i.e. by 284%, reaching the local peak of EUR 354/MWh on March 7, 2022. Therefore in the long term, it should be expected that the ongoing conflict will accelerate Europe’s energy transformation and the process of limiting dependence from Russian energy resources. The European market will probably look for sources of gas other than Russian gas, therefore an increased demand for LNG and intensive injection of gas storage facilities may occur.

In Poland, the planned increases in import capacity and, the diversification of gas sources in general will alleviate the difficult supply situation on the global market. The question of a potential increase in production from the Dutch Groningen field remains unresolved. Despite numerous protests from the local community, the government is considering an increase in production of 7.6 bcm per year, compared to the previously expected level of 3.9 bcm. The reason is the Germany’s demand, which increased by 1.1 bcm.

The price of CO2 EUAs will mainly depend on the share of conventional sources in the staple of electricity generation, which is an effect of the efficiency of renewable energy sources and margins delivered by generation sources based on hard coal, lignite and natural gas. At present, when the price of natural gas is relatively higher than that of coal, generation of electricity from high emission fuels is on the rise. This, coupled with low generation from renewables in the previous year, led to sharp rises in EUA prices, to more than EUR 90 per tonne of CO2. The European Union employs a mechanism to limit the supply of certificates each year. The smaller amount of EUAs available to EU Member States is intended to discourage them from producing electricity from conventional sources. Member States’ efforts to dynamically increase the share of RES in the national energy mix may halt the increase in certificate prices over the next few years, but analysts expect a stable, strong increase after 2025. On the other hand, in the face of the Russian aggression against Ukraine and the increase in gas prices, the prices of CO2 emission allowances at the beginning of 2022 dropped significantly. This may be related to the expected slowdown in the growth rate of European economies and thus lower emission needs.
The price of electricity in Poland in 2022 will depend on the price levels of CO2 emission allowances. Commissioning new RES generation capacities (especially large PV projects) and lower EUA certificate prices (with profit-taking potential by financial institutions) may lead to a decline in electricity prices in current year. However, possible restrictions on coal imports may adversely affect the cost of electricity generation in the country.

Publication of financial and operating forecasts

The Company does not publish performance forecasts. In the strategy released in 2017, the Company announced its plans to generate cumulative Group EBITDA of approximately PLN 33.7bn in 2017–2022 thanks to an investment programme. As at the end of 2020, cumulative EBITDA reached PLN 47.8bn, representing approximately 142% of the target to be achieved by 2022.

On December 1st 2021, the Company published its oil and gas production forecasts for 2022–2024.

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Natural gas production forecast for 2022–2024*

bcm 2022 2023 2024
Poland 3.7 3.7 3.9
Other countries, including: 2.9 2.8 2.9
Norway 2.6 2.4 2.6
Pakistan 0.3 0.4 0.3
Total 6.6 6.5 6.8

 

* Converted to gas with a calorific value of 39.5 MJ/m3 .
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Crude oil production forecast, including condensate and NGL, for 2022–2024

thousand tonnes 2022 2023 2024
Poland 603 569 534
Other countries, including: 920 791 894
Norway 920 791 904
Total 1,523 1,360 1,428

The pandemic situation in 2020–2021 has delayed investment project work by several months or more, resulting in a downward revision of the projected volumes of oil and gas production in Poland in the following years. The projection of crude oil and natural gas output has also been affected by a decision to reduce gas purchases by the Gorzów CHP Plant in 2022, and in 2023–2024 by certain investment projects that will require prolonged downtime of process units at the Dębno and Lubiatów Oil and Gas Production Facilities.

The expected growth of natural gas production in Norway in 2021–2024 will be driven by the acquisition of the Ormen Lange, Marulk and Alve fields, and by the launch of production from the Ærfugl Nord, Duva and other wells drilled on the Ærfugl structure. In 2024, production is also to be launched from the Tommeliten Alpha field.

The expected increase in Norway’s oil and NGL production levels between 2022 and 2024 will be driven by the acquisition of the Ormen Lange, Marulk and Alve fields. The decline in production volumes forecast for 2023 will be due to natural depletion. The decline is expected to halt in 2024 with the launch of production from the Tommeliten Alpha field.

Management of financial resources and liquidity of the PGNiG Group

Borrowings and debt securities

Due to high prices environment on natural gas markets, including Polish Power Exchange, TTF in the Netherlands and THE in Germany, PGNiG executed on December 17th 2021 three new agreements for overdraft facilities with: Bank Gospodarstwa Krajowego, PKO Bank Polski S.A. and CaixaBank S.A. Polish Branch, increasing the possibility to source short-term financing for the period of nine months for a total amount of PLN 2.7 billion.

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Key credit facility agreements executed by the PGNiG Group as at December 31st 2021

Bank Maximum debt amount under the agreement (million) Currency Interest rate type Facility type Maturity date
Syndicate of nine banks 500 USD variable long-term facility 30.06.2026
Syndicate of ten banks 10,000 PLN variable working capital 24.06.2024
Bank Gospodarstwa Krajowego 1,200 PLN variable overdraft facility 16.09.2022
PKO Bank Polski S.A. 800 PLN variable overdraft facility 16.09.2022
CaixaBank S.A. Polish Branch 700 PLN variable overdraft facility 16.09.2022
Bank Gospodarstwa Krajowego 271 PLN variable long-term facility 27.08.2027
Agencja Rozwoju Przemysłu S.A. 100 PLN variable long-term loan 31.08.2029
Bank Pekao S.A. 75 PLN variable overdraft facility 16.07.2022
Deutsche Bank Munich 80 EUR variable overdraft facility –
PKO Bank Polski 20 EUR variable overdraft facility 31.03.2022

For detailed information on loans advanced by PGNiG to its subsidiaries and other related entities, see Note 7.4 to the separate financial statements of PGNiG for 2021.

In January and February 2022, the Company concluded further short-term credit agreements with banks: Societe Generale SA Polish Branch, a syndicate of banks Bank of China Limited operating through Bank of China Limited Luxembourg Branch and Bank of China (Europe) S.A. operating through Bank of China (Europe) S.A. Polish Branch, Deutsche Bank Polska S.A. and Credit Agricole Bank Polska S.A. for a total amount of PLN 1.8 billion.

Issues of securities and use of proceeds

On October 28th 2020, PGNiG executed Annex 1 to the PLN 5bn Notes Programme Agreement of December 21st 2017 with the following issue arrangers: ING Bank Śląski S.A., Bank Polska Kasa Opieki S.A., Bank Handlowy w Warszawie S.A. and Bank BNP Paribas Bank Polska SA. Annex 1 aligns the Programme with the current legal framework and extends the Programme until October 28th 2025. Under the Programme, PGNiG may issue fixed- or floating-rate notes with maturities of up to 10 years or zero-coupon notes as part of a public or private offering. The notes may be introduced to trading on the Catalyst multilateral trading facility. Proceeds from the notes will be used to satisfy the PGNiG Group’s day-to-day financial needs related to the implementation of its strategy.

 

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Debt securities programme as at December 31st 2021

Bank Limit Currency Maturity Subject matter of agreement End date
Syndicate of four banks:

Bank Pekao S.A.
ING Bank Śląski S.A.
Bank Handlowy w Warszawie S.A.
BNP Paribas Bank Polska S.A

 5,000m PLN up to 10 years note programme 28.10.2025

As at December 31st 2021, PGNiG S.A. had no outstanding debt under notes issued to other PGNiG Group members.

Financial instruments

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Key financial assets by category

2021 2020
Item Item referenced in Note Financial assets at amortised cost Financial assets at fair value through profit or loss Financial instruments designated for hedge accounting Total Loans and receivables at amortised cost Financial assets at fair value through profit or loss Financial instruments designated for hedge accounting Total
Receivables Trade
receivables		 11,437 – – 11,437 4,449 – – 4,449
Derivative financial instruments – 7,077 1,891 8,968 – 1,004 449 1,453
Cash and cash equivalents 11,410 – – 11,410 7,098 – – 7,098
Total 22,847 7,077 1,891 31,815 11,547 1,004 449 13,000
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Key financial liabilities by category

2021 2020
Item Item referenced in Note Financial liabilities at amortised cost Financial liabilities at fair value through profit or loss Financial instruments designated for hedge accounting Total Financial liabilities at amortised cost Financial liabilities at fair value through profit or loss Financial instruments desiganted for hedge accounting Total
Financing liabilities Bank
borrowings		 12,153 – – 12,153 1,995 – – 1,995
Debt
securities		 – – – – – – – –
Trade and tax payables Trade
payables		 4,575 – – 4,575 1,199 – – 1,199
Derivative financial instruments – 9,362 5,669 15,031 – 780 618 1,398
Total 16,728 9,362 5,669 31,759 3,194 780 618 4,592

For detailed information on financial instruments, see Note 7.1 to the consolidated financial statements of the PGNiG Group for 2021.

Debt ratios

Under non-bank borrowings, less cash and cash equivalents and cash classified as non-current assets.

For the purposes of the PGNiG Group’s debt analysis the Management Board uses the net debt/EBITDA ratio. In accordance with the Strategy, this ratio should not exceed 2.0.

In 2021, the ratios increased due to a significant increase in liabilities with a concurrent increase in EBITDA

 

Total debt ratio: total liabilities to total equity and liabilities

Debt to equity ratio: total liabilities to equity

The increase in those ratios in 2021 was attributable to an increase in liabilities, mainly current ones.

Liquidity ratios

 

The PGNiG Group actively manages its financial resources by optimising both its debt structure and financing costs. PGNiG Group companies adapt the form of financing to its purpose (operating or investing activity) and to its term. The forms of financing available to PGNiG Group companies include credit facilities, finance leases and intra-Group loans advanced by PGNiG.

An important tool improving the efficiency of financial resources management is the liquidity management system in which the balances of specified bank accounts of PGNiG and its subsidiaries can be aggregated (cash pooling). Thanks to the cash pooling system within the Group, cash of entities with excess liquidity is used to finance the operations of entities recording cash deficits. The result is improved efficiency of cash management within the PGNiG Group, but also a material reduction in interest expenses incurred by companies financing their cash deficits through the system.

While assessing the efficiency of financial resources management, a noteworthy fact is the optimum diversification of the portfolio of financial institutions. It should also be noted that, thanks to the diversity of available financing sources and liquidity management tools at the PGNiG Group, the Group companies are able to timely fulfil their financial obligations.

The Group has a stable financial position, with cash flows and available sources of financing enabling it to carry out its planned investment projects. The PGNiG Group manages its capital expenditure structure depending on the market situation, and focuses on the most efficient investment projects. For information on key investment projects planned for the coming years, see HERE.

Sureties, guarantees and other contingent assets and liabilities

As at December 31st 2021, guarantees and sureties were the most significant item of the PGNiG Group’s contingent liabilities, with the total value disclosed in the consolidated statements at PLN 6.5bn (PLN 4.8bn as at December 31st 2019).

The largest guarantee was issued by PGNiG to the Norwegian government for PGNiG UN’s work on the Norwegian Continental Shelf, for the total amount of PLN 2.9bn at year-end 2021 (PLN 2.9bn at year-end 2020).

The increase in contingent liabilities under sureties and guarantees issued in the reporting period was principally due to the guarantees of PLN 1.6bn (as translated at the exchange rate quoted by the NBP for December 31st 2021) issued as security for the LNG vessel charter agreements.
Guarantee and surety agreements concluded in the reporting period, for a total amount of PLN 2.0bn, were primarily intended as security for gas supplies.

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