News

The new strategy covers four business areas of key importance and ten strategic initiatives whose implementation will help the Company achieve its main objectives:

• EBITDA growth to PLN 7bn in 2022;
• capital expenditure of PLN 40-50bn by the end of 2022;
• maintaining domestic hydrocarbon production at current levels;
• increasing crude oil and gas production volume abroad through purchases of exploration and production assets;
• developing new areas of operation by expanding the value chain;
• significantly increasing the internal operational efficiency of the PGNiG Group;
• upholding the current dividend policy.

1. Maintaining stable value (both in retail and wholesale)

Trade is the first area of focus in the PGNiG Group's Strategy. Within this area, PGNiG will seek to maintain its leading position on the gas market and to remain the preferred gas supplier across all customer segments. The Company intends to pursue these objectives by developing and implementing mechanisms designed to encourage customers to continue their relationship with PGNiG and by improving customer service quality. PGNiG intends to maintain the high stability of gas supplies to end customers and to enhance its product offering through such initiatives as launch of dual fuel products and development of additional services.

2. Maximising cash flows from the infrastructure and generation area

The PGNiG Group's grid infrastructure, gas storage and electricity and heat generation assets are a source of predictable, stable revenue and are characterised by attractive rates of return relative to the risks to which the Group is exposed in these segments. In the coming years, the assets will prove important in stabilising the Group's financial performance and enhancing its ability to finance new projects. The role played by the infrastructure and generation area will call for ongoing cost control and optimisation of capital expenditure. At the time of intense competition, ensuring that this business area generates maximum free cash, particularly for new growth-oriented projects, will be of paramount importance. Furthermore, new investment projects will have to be carefully selected to ensure that the Group's potential and available synergies offered by new growth areas are fully leveraged.

3. Strengthening and transforming the exploration and production area

Hydrocarbon exploration and production, i.e. the third business area, is where PGNiG has recognised a considerable growth potential. The growing importance of holding a diversified deposit portfolio, and the expertise and experience obtained by the PGNiG Group in the upstream segment make this business area essential to the Group's further development.

PGNiG's main objective is to maintain stable production of natural gas and crude oil in Poland. However, to secure further meaningful growth of
shareholder value, the Company intends to take active steps to build a portfolio of foreign exploration and production assets.

The Company will also continue efforts to confirm the geological and economic potential of shale gas deposits in Poland, within its most promising licence areas, with a view to verifying recoverable unconventional hydrocarbon reserves and commencing economically-viable gas production in the shortest possible time.

4. Laying foundations for growth along the entire value chain

To ensure further growth, the Group will take steps to improve its cost effectiveness and organisational efficiency at each stage of the value chain, including under the Efficiency Improvement Programme. These steps will include cost rationalisation at the PGNiG Group, necessary in light of the market deregulation and growing competitive pressures, and development of new operations (upstream and infrastructure).The Group will also focus on segments of key importance to its future. These measures will improve the Group's ability to finance new projects and enhance its competitive position on the market.

PGNiG also intends to intensify its R&D activities, looking to ensure more efficient R&D and innovation management, obtain financing for
its R&D projects from EU funds, and optimise its portfolio of innovative projects.

"At the heart of the objectives set under the PGNiG Group's strategy for 2014-2022 lies its extensive experience in the industry and the competencies available to it at each stage of the sector's value chain. Having so far delivered stable business performance and pursued a
conservative financial policy, we can set the course for objectives which are commensurate with the challenges facing the Group, such as those created by the deregulation of the gas market, the need to adapt to the changing business and regulatory environment, and the need to restructure our gas supply portfolio.

We will change our organisation is such a way as to meet these challenges and maintain our position as the industry's leader in Poland, intent on pursuing value growth in the upstream and distribution segments, both in Poland and abroad. We believe that the Group's efficient, professional personnel and many years' experience position it well to achieve these strategic objectives. We plan to allocate PLN 40-50bn to our investment projects in 2014-2022, increasing EBITDA to approximately PLN 7bn and laying robust business foundations for the coming years," says Mariusz Zawisza, President of the PGNiG Management Board.

The Strategy for the PGNiG Group in 2014-2022 was approved by the Supervisory Board of PGNiG S.A. on December 29th 2014.

Dorota Gajewska

Press Officer