DIRECTORS' REPORT ON PGNiG SA'S OPERATIONS ... - Notowania

Directors’ Report on PGNiG S.A.’s Operations in 2008
• investment of free cash in instruments with a minimum credit risk (treasury bills and treasury
bonds);
• cooperation with the leading commercial banks;
• conclusion of framework agreements with business partners, which expressly define the rights and
obligations of the parties;
• diversification of business partners;
• cooperation with rating agencies, the outcome of which includes improvement in the Company’s
rating.
The measures undertaken by PGNiG S.A. to mitigate the risk of cash-flow disruptions included:
• diversification of e-banking systems;
• on-going control of credit/debit operations on bank accounts;
• gathering information on cash flows at the Company/the Group;
• consolidation of bank accounts;
• conclusion of current account facility agreements.
To mitigate the risk of losing financial liquidity, the Company undertook measures which included:
• conclusion of current account loan agreements;
• projections of cash flows at the Company/the Group;
• estimation of the condition and the value of assets available for sale;
• maintenance of highly liquid financial assets;
• cooperation with rating agencies.
In 2008, PGNiG S.A. did not apply hedge accounting. However, most of the concluded transactions
were effective in terms of hedge accounting (according to IAS 39).
3. Financial Forecasts
The main factors impacting PGNiG S.A.’s financial performance will include crude oil prices on
international markets, position of the President of URE on gaseous fuel tariffs, as well as the situation
on foreign-exchange markets.
Since August 2008, the fuel market has witnessed a steep fall in crude oil prices, which will contribute
to a reduction in import prices of gas in the coming months.
The tariff approved in October 2008 did not offset the sharp increases in imported gas prices observed
in Q4 2008 and the resulting substantial losses on sales of high-methane natural gas incurred by the
Company. Despite the fall in imported gas prices anticipated since January 2009, the sales of highmethane
natural gas will continue to be unprofitable. Lower gas prices may positively contribute to the
financial results of PGNiG S.A. no sooner than in Q3 2009.
On February 13th 2009, PGNiG S.A. applied to the President of URE for a change of the gaseous fuel
tariff. The financial standing of the Company in the coming quarters will largely depend on whether
the President of URE approves new tariffs, providing cover for the costs of imported gas.
PGNiG S.A.’s financial performance is materially affected by the situation on foreign-exchange
markets. The second half of 2008 saw a clear rise in the exchange rate of the US dollar against the
Polish złoty. The stronger dollar has an adverse effect on the cost of imported high-methane natural
gas. As the risk related to fluctuations in exchange rates is high, the Company will seek to mitigate its
impact through active and consistent financial risk management.
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