WARSAW (Reuters) - Poland’s gas monopoly PGNiG (PGN.WA) plans to cut expenses and sell non-core assets to offset the rising cost of Russian gas imports and to prepare for a planned liberalization of Central and Eastern Europe’s largest gas market.
The state-controlled group’s chief executive told Reuters in an interview cleared for release on Wednesday that it would publish a two-year strategy in October outlining plans to cut costs, consolidate its units and spin off assets.
PGNiG buys most of its gas through a long-term contract with Russia’s Gazprom (GAZP.MM) at what it views as a highly uncompetitive rate, but cannot pass the costs on to customers as gas prices in Poland are capped by the regulator URE.
The regulator two weeks ago rejected PGNiG’s request to raise prices as the monopoly sought to mitigate the negative effect of a stronger dollar and high oil prices, which are used to calculate the price of gas in its contract with Gazprom. <ID:L5E8KD4DO>
“We must put a cap on costs to offset an unfavorable gas tariff and to account for the necessity to invest and reduce debt,” Grazyna Piotrowska-Oliwa said.
“There will be concrete numbers in the strategy.”
The CEO of the group, which with its 32,000 workers is Poland’s sixth largest employer, declined to say whether jobs would be affected by the cost-cutting.
PGNiG plans to float its exploration unit PGNiG Poszukiwania and its much smaller pipeline construction business PGNiG Technologie on the Warsaw Stock Exchange in 2013. PGNiG wants to sell stakes and raise equity in the firms at the same time.
“PGNiG Poszukiwania will be prepared to enter the stock exchange in the first half of 2013. We are also planning the stock market debut of PGNiG Technologie in the fourth quarter,” Piotrowska-Oliwa said.
As of 2013, the monopolist will start facing competition as Poland begins to liberalize its 14 billion cubic meters gas market.
PGNiG is also at the forefront of Poland’s shale gas drive, which requires huge amounts of capital to fund exploration and, if successful, extraction.
But the group is burdened with debt taken out to finance the takeover of Vattenfall’s VATN.UL heating assets in Poland in 2011 and by losses on trading.
PGNiG tumbled to a net loss of 314 million zlotys ($99 million) in the second quarter when its margin on gas sales dropped to minus 13 percent, the lowest level since the end of 2008.
Reporting by Pawel Bernat and Maciej Onoszko; Editing by William Hardy and Pravin Char