The upgrade by Fitch Ratings underscores PGNiG’s efforts to diversify gas import sources and directions, while developing its own hydrocarbon production capacity.
‘The effective and consistent delivery of PGNiG’s strategy has been confirmed by Fitch’s decision to raise our credit rating by one notch. Among the factors cited by the agency were our initiatives that led to diversifying the gas supply directions, which in turn empowered us not to extend the Yamal contract,’ said Piotr Woźniak, President of the Management Board of PGNiG S.A. ‘As a group with a fairly large contribution of upstream to overall performance, we are pleased to have been rated at a level typically assigned to companies operating in more regulated market sectors. The upgrade is sending another strong signal reinforcing our perception as a reliable business partner.’
In its rationale to upgrade the rating from BBB- to BBB, Fitch stressed that progress in diversifying its gas import portfolio would provide PGNiG with greater business flexibility, mitigating the adverse effects of high import costs. The pricing mechanism under the Yamal contract not being linked to market prices was pointed out by the agency as one of the reasons for the Company’s mediocre Trade & Storage performance in 2017–2019. The already undertaken diversification measures and plans to carry on along this path, including the decision not to extend the Yamal contract, which was communicated by PGNiG to Gazprom on November 15th 2019, should eventually improve the Company’s financial performance in the years to come.
Fitch also highlighted the benefits derived by PGNiG from its exploration and production business. In the agency’s opinion, the Company’s own production sources boost the security of supplies, while reducing the overall gas procurement costs given the soaring price of imports. In addition, the earnings volatility in production and trade is offset by the stability of PGNiG’s regulated segments, such as gas distribution and heat generation.
‘What is viewed positively by Fitch is the vertical integration of the PGNiG Group’s operations on the gas market and its ability to deliver on investment plans. Our financial stability is underpinned by a sound mix within the Group’s business of regulated segments with upstream and trading operations. Our strong financial footing, the available sources of finance and adequate operational flexibility make for a compelling case for the credit rating upgrade,’ said Michał Pietrzyk, Vice President of the PGNiG Management Board for Finance.
The outlook for PGNiG’s rating has been affirmed by Fitch as stable.
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