annual report - gaz-system · the system that connects annual report 08/09 our company allows...

annualreport2008/2009

the system that connects

raport roczny 07/08

2


annual report 08/09

Our company allows business entities to use its transmission network based on non-discriminatory and transparent rules.

Corporate MissionWe develop the natural gas transportation system, combining the expectations of our customers with the growth of the company and the gas market in Poland. GAZ-SYSTEM – the system that connects.

Corporate VisionThe long-term goal of the company’s operations is to reach the position of one of the best performing suppliers of transmission services in Europe by: ensuring safety in the operation of the national transmission system, also as an element of the European gas pipeline network,

ensuring long-term growth of the company’s goodwill to its owner,

implementing best practices and standards in the company in order to offer the optimum deals to customers,

managing the company in line with the Responsible Business Principles,

maintaining stable, positive relations with investors.

3annual report 08/09

Table of contents

1. Letter of the Chairman of the Supervisory Board 4

2. Letter of the President of the Management Board 6

3. Calendar of Events 13

4. Company Profile 15

5. Transmission System 17

6. Investment Projects 25

7. Polskie LNG sp. z o.o. 33

8. Customer Relations 39

9. Human Resources Policy 43

10. GAS-SYSTEM S.A. in the International Arena 47

11. Economic Information 53

12. Responsible Business 57

13. Auditor’s Opinion 63

14. Financial Statements 64

15. Contact Details 67

raport roczny 07/08

4


annual report 08/09

Dear Ladies and Gentlemen,

The past financial year was extremely important to Gas Transmission Operator GAZ-SYSTEM S.A. The company was assigned a new role – that of the entity responsible for the development of the first LNG Terminal in Poland to be built in Świnoujście. The Council of Ministers adopted a resolution which recognizes the strategic importance of the project for the interest of our country, in line with the plans aimed at diversification of sources and routes of natural gas supply and ensuring the energy security of Poland.

Consequent ly , s ince December 2008 GAZ-SYSTEM S.A. has been the owner of Polskie LNG. The LNG Terminal is one of the most important investment projects in our country, which will permanently rearrange the situation on the natural gas market in Poland and will contribute to diversification of natural gas supply directions.

The Company has also started intensive preparatory process to embrace execution of new strategic investment projects related to the construction of new gas pipelines. GAZ-SYSTEM S.A. consequently pursues its development strategy which is clearly reflected in strong financial results achieved by the company. Net result for the last financial year was PLN 288 million. The company’s return on assets rate (ROA) was 5.8% and the return on equity (ROE) was 8.8%. High profitability

Letter of the Chairman of the Supervisory Board

Jerzy MolakChairman of the Supervisory Board


and liquidity rates ensure strong position of the company on the market. This is particularly important with a view to exceptionally ambitious investment tasks planned to be completed within the next 5 years.

In the past financial year assets worth almost PLN 950 million were transferred from the State Treasury to the company. As a result, the share capital of the company was increased to over PLN 3 billion. The Supervisory Board participated in all these activities as part of its area of competence.

The dynamically changing operating environment GAZ-SYSTEM S.A. posed extraordinary challenges before the company in the past financial year. The enterprise faced an emergency test for its transmission system steering capability when gas supply limitations were undertaken by Ukraine. However, experience of our staff and the implemented procedures proved that the company is able to ensure a secure and stable natural gas transportation in a crisis situation.

Everything that GAZ-SYSTEM S.A. has accomplished so far, allows to believe that the company will meet the challenges facing it at present, and that the execution of the current investment projects will contribute to further growth of the company, strengthening of its market position and increase of its goodwill. As the Supervisory Board, we are convinced that both the Management Board and the employees will successfully accomplish all the tasks lying ahead of the company.

Yours faithfully,

Jerzy MolakChairman of the Supervisory Board

Jerzy Molak Chairman

Monika Kacprzyk-Wojdyga Vice Chairman

Włodzimierz Wolski Secretary

Agnieszka Godula Member

Zbigniew Marek Member

Jan Matuszewski Member

Rafał Wardziński Member

*until 22 October 2008 duties of a Supervisory Board member were performed by Ms Marzanna Kwiecień

Composition of the Supervisory Board*:

raport roczny 07/08

6


annual report 08/09

Letter of the President of the Management Board

Ladies and Gentlemen,

On behal f of the Management Board I am truly pleased to present our Annual Report outlining the most important events in the activity of Gas Transmission Operator GAZ-SYSTEM S.A. in the financial year ending on 30 April 2009.

In the above period the company achieved very good financial results. The shareholders equity increased by over PLN 1.2 billion. This was possible as a result of both substantial profit (nearly PLN 0.3 billion) and the inkind contribution of transmission assets by the State Treasury (over PLN 0.9 billion). The value of the company’s assets exceeded PLN 5 billion, of which over 75% is funded with shareholders equity. At the balance sheet date of 30 April 2009, the value of the company’s fixed assets exceeded PLN 3.7 billion.

The excellent performance results, stable financial situation and the expectations coming from the economy prompted GAZ-SYSTEM S.A. to undertake intensive efforts to pursue a number of investment projects. On one hand, they are aimed at diversifying the directions of gas supply and enhancing the national energy security, on the other, they will create growth opportunities for business by increasing the gas supply potential.

GAZ-SYSTEM S.A. is the owner of Polskie LNG, a company that has been established with the

Jan Chadam President of the Management Board


purpose of building and operating the LNG terminal in Świnoujście. It oversees the development of the terminal, which has been recognised as an investment of strategic importance for the energy security of Poland. GAZ-SYSTEM S.A. is also the key sponsor of the project and is responsible for arranging the project financing.

In addition, the company plans to undertake projects concerned with the development of system interconnections, i.e. the expansion of the Lasów interconnection point at the Polish-German border, as well as the interconnection of gas transmission systems of the Czech Republic and Poland. These investments will improve the energy security of the southern provinces and, in the future, enable increased gas transmission to other regions of Poland.

In implementation of its objectives, in the years 2009 - 2014 GAZ-SYSTEM S.A. plans to complete a number of investment projects related to the expansion of the domestic transmission system. By 2014 the company intends to build about 1,000 km of new gas pipelines and the investment expenditures on the transmission system expansion will exceed PLN 5 billion. The investment program comprises, among other things, the following gas pipelines: Świnoujście – Szczecin, Szczecin – Gdańsk, Szczecin – Lwówek oraz Gustorzyn – Odolanów. The company is pursuing intensive efforts to raise the financing for some of the investment projects from EU funds. The purpose of the company’s official representation in Brussels is to facilitate the relations with the European Commission.

In the last year GAZ-SYSTEM S.A. was the first player of the energy sector in Poland to launch the Open Season procedure, which was to aimed at assessing and confirming the demand for transmission capacity among the transmission system users. The assessment concerned the demand for gas transmission between the gas systems of Poland and Lithuania, and Poland and Denmark. Due to the fact that no requests for gas transmission through the planned interconnections were submitted, the Open Season procedure was concluded without taking any investment decision. GAZ-SYSTEM S.A. is prepared for the execution of such projects and will take again appropriate measures once the interest in new system interconnections arises in the market.

In January 2009 the natural gas transmission was taking place under exceptional circumstances of interrupted natural gas supply at the delivery point in Drozdowicze at the Polish-Ukrainian border. This situation was a test for the effectiveness of the contingency procedures implemented in the company. Thanks to the experience of its staff and increased volume of gas supply through the Vysokoye delivery point, GAZ-SYSTEM S.A. maintained uninterrupted gas supply for the consumers in Poland.

In the years 2008/2009 GAZ-SYSTEM S.A. implemented a modern information system (SCADA) enabling the management of the transmission network operation. The SCADA project included the alignment of IT systems that support the activities of dispatching crews in Poland. In October 2008, the company launched Data Processing Centre established to ensure secure conditions for IT systems operation. In addition, an IT system has been developed to ensure fully automated data gathering from measurement points, its preliminary verification and sharing with other IT systems and users. Owing to this solution, the company benefits from on-line access to measurement data, which leads to improved data reliability and enables the implementation of many new services.

The past year was exceptional not only in terms of business success. The responsible business policy pursued by GAZ-SYSTEM S.A. became an inherent part of the European standards with regard

raport roczny 07/08

8


annual report 08/09

to strategic, long-term decisions and projects involving community interests and environmental aspects.

The company’s strategy to raise the service standards and develop the dialogue with its business partners has been reflected in the received recognitions and awards. GAZ-SYSTEM S.A. was second among the infrastructure industry players in the prestigious ranking Pearls of the Polish Economy. The Company also received the Mazovian Quality Award in the business organisations category, and was recognised among the top of the Best Employers of 2009.

The successes of the past accounting year are our pride and a source of satisfaction. Yet, there are new challenges ahead of the company and its employees. The construction of the LNG Terminal, expansion of the gas pipeline network, launch of new interconnections, implementation of the ERP system, continuous efficiency improvement – to name only some of the challenges expecting all of us in the nearest future. I cherish the hope that in tackling them my colleagues will find a lot of professional satisfaction and joy.

At this point I would like to thank our clients and business partners for their cooperation, loyalty and trust they place in our company. In the name of the Management Board I also wish to express our recognition for the employees of the company for their commitment to the performance of their tasks, which are aimed at developing a modern organisation doing very well in the realty of market economy. With your professionalism, talent, effort and dedication we can think together about undertaking even most difficult tasks and achieving new objectives.

I kindly invite you to reading this report.

Yours faithfully,

Jan ChadamPresident of the Management Board

raport roczny 07/08

10


annual report 08/09

President of the Management Board: Jan Chadam

Member of the Management Board for Technical Issues: Wojciech Kowalski

Member of the Management Board for Investment Affairs: Sławomir Śliwiński

Management Board*:

* Jan Chadam was appointed to the position of the President of the Management Board on 30 June 2009. Prior to this appointment, he had been a Member of the Board since 25 February 2009. Until 30 June 2009 the position of the President of the Management Board was held by Igor Wasilewski. Until 22 October 2008 Members of the Board were: Krzysztof Rogala, responsible for the company’s financial affairs and Paweł Stańczak, supervising the technical area. Members of the Management Board currently holding office are Wojciech Kowalski – since 15 January 2009 and Sławomir Śliwiński since 20 April 2009 respectively.


Jan ChadamJan Chadam is a holder of a PhD degree in economics and author of numerous local and foreign publications in the field of finance and management, as well as an academic teacher working, among other things, at MBA studies. He has developed extensive experience in the management of commercial companies, specifically in corporate finance. During his professional career he has served as Financial Director, Vice President of the Management Board and President of the Management Board of Pro Futuro S.A. in Warsaw and Board Member of Elzab S.A. in Zabrze. He has also worked as Financial Director in the SIPMA Group in Lublin, President of the Management Board of SIP-MOT S.A. in Zamość, as well as Director of the Internal Audit Department in Polkomtel S.A. (the operator of the PLUS GSM mobile network). Since February 2009 he has been a Board Member, and since July 2009 President of the Management Board, of Gas Transmission Operator GAZ-SYSTEM S.A.

Wojciech KowalskiHe graduated from the Faculty of Mechanics at Wrocław University of Technology. He possesses building qualifications for the performance of independent technical functions in the construction industry. He completed post-graduate studies in the gas field at the Warsaw University of Technology, as well as in project management at the Warsaw School of Economics. He has taken part in many specialist courses in the field of quality management, company finances as well as project risk and feasibility studies. Wojciech Kowalski has been working in the gas industry for 22 years. From 1986, he worked in the GAZOPROJEKT S.A. Office of Gas Studies and Projects. In 1995, he was appointed Vice President of the Management Board of BSiPG GAZOPROJEKT S.A., responsible for technical and subsequently, commercial issues. He has a wealth of experience in company management, designing industrial structures, as well as investment process management in the energy and gas sector. Since January 2009 – Member of the Gas Transmission Operator GAZ-SYSTEM S.A. Management Board.

Sławomir ŚliwińskiHe graduated from the Faculty of Law and Administration at the Nicolaus Copernicus University in Toruń. He has also completed post-graduate studies at the University of Mining and Metallurgy in Cracow in gas distribution company management. He acquired quality auditor competence certified by both the Polish Centre for Testing and Certification and the European Organization for Quality. In 2008, he was awarded the MBA degree. Sławomir Śliwiński has held the function of President of the Management Board of the Pomeranian Gas Company Sp. z o.o. (distribution system operator from the Polish Oil and Gas Company Capital Group). Prior to that, he worked for eight years in ZRUG Toruń S.A. (contractor of construction and engineering works in the gas sector) where, among others, he was also the Management Board plenipotentiary for quality management issues, Vice President and subsequently President of the Management Board. Since April 2009 Member of the Gas Transmission Operator GAZ-SYSTEM S.A. Management Board.

Management Board

raport roczny 07/08

12


annual report 08/09


Calendar of Events

14 May 2008Opening of the permanent representation office in Brussels.

24 July 2008Amendments to Part II of the Transmission Network Code (TNC) approved by the President of the Energy Regulatory Office and TNC validity date determined to be until 31 December 2009.

18-30 June 2008Agreements with distribution system operators signed.

27 September 2008Announcement of the Preliminary Market Screening for construction of new system connections under the Open Season procedure.

15 October 2008Increase in value of share capital up to PLN 3,019,393,716 (takeover of almost PLN 950 million worth of assets being a contribution in kind from the State Treasury as a material dividend from PGNiG SA).

28 November 2008Agreement on sales of Polskie LNG sp. z o.o. to GAZ-SYSTEM S.A. signed with PGNiG SA.

9 December 2008Adoption of the report on the impact of legal regulations on the terms of operation and development of technical linear infrastructure of the fuel and energy sector.

11 December 2008„Gas Limitation Scheme no 2/2008” approved by the President of the Energy Regulatory Office.

1 April 2009Mazovian Quality Award – GAZ-SYSTEM S.A. – winner of the business organization category.

20 April 2009Announcement of Phase I of the Open Season procedure.

7 May 2009„Tariff no 3 for Gas Transmission Services” approved by the President of the Energy Regulatory Office.

By virtue of its resolution of 14 April 2009 General Meeting of the Gas Transmission Operator GAZ-SYSTEM S.A. adopted a decision on the new time frame of the financial year lasting from 1 January to 31 December. With reference to the foregoing, the current financial year of GAZ-SYSTEM S.A., which started on 1 May 2009 will last until 31 December 2010.

raport roczny 07/08

14


annual report 08/09


Company Profile

Gas Transmission Operator GAZ-SYSTEM S.A. is an enterprise responsible for the transmission of natural gas and the management of the transmission network on the territory of Poland.

GAZ-SYSTEM S.A. was awarded the status of a company of key strategic importance to the Polish economy and national energy security. Responsibilities of the company include, but are not limited to: managing network traffic in a coordinated and effective manner while maintaining the required reliability of the gaseous fuel supply and the fuels quality, ensuring non-discriminatory access to the transmission network to gas market participants, operation, repairs and expansion of the transmission network installations with due environmental protection awareness, providing every transmission, storage, distribution and LNG system operator with sufficient information to guarantee that transportation and storage of natural gas is conducted in the manner proper for secure and effective operation of the combined systems,

provision of information required to obtain efficient access to the network to transmission system users.

GAZ-SYSTEM S.A. is the owner of the Special Purpose Vehicle Polskie LNG sp. z o.o., which was established to build and operate a Liquefied Natural Gas (LNG) Terminal in Świnoujście. The LNG Terminal will enable diversification of the destinations of natural gas deliveries, which entails the improvement of Poland’s energy security. GAZ-SYSTEM S.A. supervises the LNG Terminal building process.

GAZ-SYSTEM S.A. employs almost 2000 people.

Corporate Governance of the company is exercised by the State Treasury which owns 100% shares in the company.

GAZ-SYSTEM S.A. holds a license for transmission and distribution of natural gas until 2014.

Share capital of the company is PLN 3,019,393,716.

raport roczny 07/08

16


annual report 08/09


Transmission System

14.5 bcm of natural gas was transported via this network in 2008/2009 financial year (including transmission to underground gas storage facilities and transmission of nitrogenous gas (L) calculated into high-methane gas (E)).

GAZ-SYSTEM S.A. oversees also the operation of transmission system facilities which include e.g. 14 compressor stations, 56 interconnection points and 974 exit points.

On 15 October 2008 the Company took over almost PLN 950 mill. worth of transmission assets as a contribution in kind from the State Treasury. Supervision of the transmission system at GAZ-SYSTEM S.A. is exercised by the National Gas Dispatching Division and Gas Dispatching Units in Branches.

Owing to constant monitoring of the system operation as well as professionalism and the commitment of our specialists, the transmission of gaseous fuel on the territory of Poland occurs on a continuous basis, ensuring secure natural gas deliveries to all consumers.

Transmission Network Code

Transmission Network Code (TNC) sets forth the rules of rendering and use of gaseous fuel transmission services, embracing all legal and technical requirements included in the underlying regulations and provisions applicable to the transmission of gaseous fuel. This document, developed and updated by GAZ-SYSTEM S.A. ensures the safe operation of the transmission network while maintaining the highest quality standards of the services provided.

The objective of TNC is to establish rules ensuring safe and reliable gaseous fuel supply to consumers and maintaining the balance between the supply and off-take of gaseous fuel from the transmission network. TNC covers the entire technical infrastructure managed by Gas Transmission Operator GAZ-SYSTEM S.A. and defines rights and obligations of participants in the gaseous fuel transmission process.

TNC consists of two parts:

Part I (General Conditions for Use of the Transmission System), Part II (Balancing and System Congestion Management).

Full version of the document is published on our website www.gaz-system.pl

Over 9.7 thousand kilometers of the transmission gas pipeline network is operated by Gas Transmission Operator GAZ- SYSTEM S.A.

raport roczny 07/08

18


annual report 08/09

Limitation Scheme

As a transmission system operator GAZ-SYSTEM S.A. is obliged to develop a limitation scheme on natural gas consumption, to keep it up-dated on an annual basis and to submit it to the President of the Energy Regulatory Office (ERO) for approval.

On 11 December 2008 President of URE approved the updated gas limitation scheme submitted by GAZ-SYSTEM S.A. entitled “Gas Limitation Scheme no 2/2008”.

This document regulates inter alia the procedure for introduction of gas limitations by a transmission system operator and defines natural gas consumption volumes for the power supply levels of individual consumers.

Operation of the Transmission System in Emergency Situations

Transmission of natural gas in the past financial year was affected by extraordinary circumstances. In the first days of January 2009 supply of natural gas from Ukraine was interrupted. Gaseous fuel shortages were partly compensated by increased deliveries from Belarus. Simultaneously, following the request of GAZ-SYSTEM S.A. the Polish government by its decree of 6 January 2009 introduced gas consumption limitations for some consumers on the territory of the Republic of Poland.

The situation posed a challenge to Gas Transmission Operator GAZ-SYSTEM S.A., verifying the efficiency of solutions contained both in the “GAZ-SYSTEM S.A. Crisis Management Policy” and in the guidelines to the “Gas Limitation Scheme”, which defined the operation framework of the transmission system in emergency situations.

GAZ-SYSTEM S.A. emerged successfully from this crisis owing to operational measures at the

supreme management and technical level which allowed GAZ-SYSTEM S.A. to maintain uninterrupted gas deliveries on the territory of Poland.

GAZ-SYSTEM S.A. kept its customers and business partners informed about the current situation of the transmission system operation inter alia by special reports published on www.gaz-system.pl website.

Operative Management of Underground Gas Storage Facilities

In order to ensure a coordinated and effective operation of network traffic and to maintain the required reliability of gas supply to consumers, GAZ-SYSTEM S.A. steers transmission system traffic and manages the operation of the underground gas storage facilities. Systemic solutions, which enable the transmission system operator to use both instruments, ensure smooth cooperation of the transmission system with the underground gas storage facilities and minimize costs to gaseous fuel consumers.

GAZ-SYSTEM S.A. signed an agreement with Polskie Górnictwo Naftowe i Gazownictwo S.A. on the operative capacity management of storage facilities.

With respect to the unbundling of the Storage System Operator, GAZ-SYSTEM S.A. offers an option of additional services aimed at storage capacity management for each shipper, who will be in possession of such capacities. The proposed solution is highly advantageous from the point of view of market development because it enables the operational optimization of the transmission system and the underground gas storage facilities, simultaneously ensuring a high level of safety. Optimum use of storage facilities also improves cost-efficiency and leads to reduced costs incurred by shippers and consumers.


Gazociągi przesyłowe :E gaz wysokometanowyLw gaz zaazotowanyLs gaz zaazotowanyE gazociąg tranzytowy EuRoPol Gaz S.A.

Stan na 30.06.2009 r.

węzły systemowe

tłocznie gazu

Biernatki

Żołynia

nowe punkty pomiarowe

Świnoujście

Lubaczów

Kamminke

Rembelszczyzna

Zielona Góra

ŁódźŻary

Żory

Warszawa

Wałbrzych

Włocławek

KłodzkoLeżajsk

Lublin

Malbork

Nysa

Piaseczno

Piotrków Trybunalski

PoznańPłońsk

Radom

Rybnik

Skierniewice

Gdańsk

KatowiceKraków

Bielsko-Biała

Brzeg

Bydgoszcz

Częstochowa

Ełk

Opole

Świebodzin

Gubin

Lwówek

Gorzów Wielkopolski

Mirosławiec

Piła

Mogilno

Toruń

KoninŻerków

Radomsko

Kielce

Mielec

Nowy Sącz JasłoPrzemyśl

Puławy

Kraśnik Hrubieszów

Chełm

Zamość

Biała Podlaska

Płock

Ostrołęka

Bielsk PodlaskiCiechanów

Białystok

Suwałki

Starogard Gdański

Szczecinek

GrudziądzPolice

Szczecin

Słupsk

KoszalinKołobrzeg

Lębork

Elbląg

Szczytno

Mława

Olsztyn

Kondratki

Mallnow

Wysokoje

Tietierowka

Jeleniów

AleksandrowiceKrzywa

KiełczówDziwiszów

Biernatki

ŚciegnyOłtaszyn

Lasów

Krobia

PogoriaTworzeń

Węgrzce

Oświęcim

Tworóg

Cieszyn

Odolanów

Gustorzyn

Włocławek

Rozwadów

Sędziszów

Zarzekowice

Hermanowice

Mirocin

Jarosław

Rzeszów

Pogórska WolaTarnów

Łukanowice

Wronów

MoryHołowczyce

Lwówek

Kotowo

Sandomierz

Wrocław

Legnica

Maćkowice

Jelenia Góra

E high-methane gasLw low-methane gasLs low-methane gas transit pipeline of EuRoPol Gaz S.A.

Gas Transmission Pipelines:

system network connection points

compression stations

Gas Transmission System:

raport roczny 07/08

20


annual report 08/09

Measurement of Quality and Quantity of Transmitted Gas

In 2008/2009 further facilities designed to be used for analysis of the natural gas composition were installed on the network managed by GAZ-SYSTEM S.A. Process gas chromatographs were installed at interconnection points in Wronów, Rembelszczyzna, Łukanowice and Śledziejowice.

New measuring stations which will replace the existing provisional settlement points are being built on the borderline of the transmission network and the network transferred to and operated by Distribution System Operators. Precise measurements of the quantity and quality of the transmitted natural gas will enable smoother settlement of the transmission services provided.

Another addition is an IT system designed to ensure fully automated data collection from measurement points, preliminary verification of such data and its provision to other IT systems and users. The system enables automatic communication by means of data transmission links with all measurement points equipped with data transmission interface. The system will cover all pressure reduction and measuring stations and chromatographs.

Owing to the system the company has gained an on-line access (at present with maximum gradation of 5 minutes) to measurement data. It enables not only the improvement of data reliability but also the provision of many new services such as interruptible services.

Anticorrosion Protection of Gas Transmission Pipelines

GAZ-SYSTEM S.A. successively implements anticorrosion programs and modernizes anticorrosion protection methods applicable to

high-pressure gas pipelines, which is the essential measure influencing technical condition of the transmission network facilities.

GAZ-SYSTEM S.A. uses: remote monitoring systems for cathodic protection, remote control of cathodic stations, ECDA measures – involving direct assessment of the corrosion of gas pipelines dug-out in selected locations and a modern measurement technique –resistance corrosimetrics – which involves special corrosimetric sensors installed in various points of the gas network.

In November 2007 an operation of covering the protective pipes with special insulative mass was carried out for the first time in Poland on one of the pipelines in the area of Gdańsk. In 2008 as many as 6 protection lines were filled with insulative mass in the DN 400 Toruń – Gardeja gas pipeline. In the same year the first technical standard – ST-IGG-0601 “Protection Against Corrosion of Underground Steel Gas Pipelines. Functional Requirements and Recommendations” was established with vital contribution from GAZ-SYSTEM S.A. specialists.

Aerial Inspection of Gas Transmission Pipelines

Control of gas pipeline routes is one of the elements of operational works undertaken by GAZ-SYSTEM S.A. to ensure the continuity of supply and secure the transportation of natural gas. Pipelines are overseen in line with the Transmission Network Operation System document by means of aerial inspection of the gas pipeline route, control of the condition of the gas pipeline route and system facilities by personal inspections on foot or by car and observation of gas flows using the SCADA system.

Aerial inspections by helicopter of the gas pipeline route are carried out at least on a quarterly basis. Aerial inspection conducted


in the previous reporting year enabled linear observation of the transmission system facilities along with the supporting infrastructure particularly in highly urbane locations and the monitoring of all projects carried out at a longer distance from the network (road projects, sewage development, other works) which might collide with the gas network in the future. It also proved to be an additional source of information for operational services that carry out inspections of the gas network on foot in terms of the lay of the land and the spatial location of linear facilities.

SCADA IT Project

In the past reporting year GAZ-SYSTEM S.A. implemented state-of-the-art SCADA IT systems for traffic management in the transmission network. SCADA project involved the development of a new orderly setup for IT systems supporting dispatching services in Poland.

As part of this project a new version of the Telwin software was prepared and implemented in the upgraded form in the entire company.

Newly implemented systems include simulation software used for analyses of the monitoring of the system facilities. These analyses are used in the decision-making process for gas flow management in the national transmission system. Completion of the project has streamlined the activity of the dispatching services at the head office and six regional branches of GAZ-SYSTEM S.A.

Data Processing Centre

Data Processing Centre was launched in October 2008. The objective behind the establishment of the Centre was to ensure safe conditions for operation of IT systems across the company.

The Centre is equipped with systems ensuring 24-hour power supply as well as air condition and fire-fighting systems accommodated to suit the needs of IT systems. The power supply system consisting of a voltage maintaining device and a power generating unit enables operation even during a long-term interruption in the power supply.

The installed air condition systems are cutting-edge solutions on a global scale and one of the first of this kind in Poland. They enable maintenance of proper working conditions for electronic devices and the cooling of the whole premises is no longer required. Application of such a solution leads also to reduced electricity consumption and a smaller quantity of heat discharged in to the atmosphere. It is therefore a cost-efficient and an environmentally friendly solution. The Centre is operated 24 hours a day.

Joint Operator Initiative

In 2008 GAZ-SYSTEM S.A. along with operators of electric energy and oil transmission systems and operators of electric energy, gas and heat distribution systems appointed a Steering Committee. The first initiative of the Committee was the development of a report on the impact of legal regulations on the terms of operation and expansion of technical linear facilities in the fuel and energy sector, crucial to the national energy security.

The document presented problems signalled by GAZ-SYSTEM S.A. jointly with operators of transmission and distribution systems, related to the planning and completion of linear investment projects, caused by lack of land access rights necessary for their location and completion. Additionally, the report contained a description of the existing technical infrastructure, its modernization needs and expansion possibilities. It identified regulations which entail a barrier or impediments to fulfillment of the statutory obligations of operators.

raport roczny 07/08

22


annual report 08/09

Operators expressed their conviction that the report adopted by their environment will enhance social acceptance of their efforts and will spur a speedy and effective initiation of the required legislative process.

The report was well received by the authorities and fuelled a discussion on the adoption of necessary changes in the regulations. It had also an impact on enacting the “Act on Liquefied Natural Gas Regasification Terminal Investment in Świnoujście” embracing inter alia:

LNG Terminal investment;

expansion of underground storage facilities in Wierzchowice, Mogilno, Kosakowo;

construction of gas pipelines: Świnoujście – Szczecin; Szczecin – Gdańsk; Szczecin – Lwówek; Gustorzyn – Odolanów; Włocławek – Gdynia; Rembelszczyzna – Gustorzyn.

raport roczny 07/08

24


annual report 08/09


Investment projects completed by Gas Transmission Operator GAZ-SYSTEM S.A. are conducted based on the “GAZ-SYSTEM S.A. Investment Plan” that embraces the company’s expansion strategy and is consistent with the national energy policy.

When planning investment tasks related to the expansion and modernization of the transmission system GAZ-SYSTEM S.A. was guided by the following criteria:

strategic investment (including the tasks submitted for co-financing from EU funds), enabling off-take of gas imported from new sources and its distribution in North-Western Poland, cooperation of the transmission system with gas storage facilities and enhancing the extent of the transmission reliability via major entry points for imported gas;

diversification of gas supply sources which will enable natural gas acquisition from new sources;

expansion of the gas market – the investment projects will increase the capacity of the transmission network so as to satisfy the needs for natural gas transmission services both within reach of the direct impact of the investment as well as in other regions of Poland;

security of gas supply which enforces the necessity of adjusting the transmission system to new operating conditions resulting from the connection of new sources of imported gas located in Western Pommern, while ensuring full technical operationability and reliability of the system. These are also

measures which enable reconstruction of the existing transmission network facilities so as to ensure operational safety and continuous gas supply to consumers;

elimination of “bottlenecks” in the transmission system which will enable the increase of network capacity in places with capacity constraints. This applies both to the existing sections where there is currently no possibility to issue technical conditions for connection to the network as well as any potential ones which may arise in the near future.

Investment projects completed in the past financial year aimed at the remodelling and expansion of the transmission system along with investment projects aimed at the connection of new consumers and the modernization of the existing connections made in possible to win new customers and to increase gas supply to the existing customers (mainly distribution companies).

Investment Projects

raport roczny 07/08

26


annual report 08/09

PLN 39 mill. on leased assets

PLN 332 mill. on assets owned by GAZ-SYSTEM S.A.

9,5%

90,5%

Goals determined by GAZ-SYSTEM S.A. ensured the continuity of the transmission service while maintaining the required level of safety and reliability of the system. By implementing strategic projects aimed at expansion and the modernization of the transmission system, the Company has planned and is currently pursuing the following investment projects:

Opening of the LNG terminal (construction of Świnoujście – Szczecin gas pipeline)

The project involves the construction of a gas pipeline connecting the planned LNG Terminal in Świnoujście with the transmission system in the Szczecin area, i.e. the planned Goleniów interconnection point and a gas compression station. Total length of the gas pipeline will be 80 km.

Completion of this task will enable offtake of gas from a new point of entry to the transmission system and will simultaneously enhance the level of security of gas supply.

Goleniów Gas Compression Station

Gas compression station is a set of appliances designed to compress, regulate and measure natural gas flow. This facility will play an important function of a transmission interconnection point in the existing and planned natural gas transmission system in Poland.

Gas compression station in Goleniów near Szczecin will be the 15th gas compression station in the transmission system managed by GAZ-SYSTEM S.A., and its construction in the area of Goleniów is dictated by the need to increase the capacity of the power supply framework in the region of Szczecin, Police Chemical Works and Przymorze. In May 2009 the company signed an agreement for the construction of a gas compression station. Net value of the investment will amount to almost PLN 60 million. Construction works started in August 2009.

Execution of the Investment Plan in 2008/2009 Financial Year

Expenditure incurred on completion of investment projects in 2008/2009 financial year amounted to over PLN 371 mill., including:


Construction of the Szczecin – Lwówek Gas Pipeline

This project involves the construction of a gas transmission pipeline intended to increase the capacity of the already existing Odolanów – Police gas pipeline. The Szczecin – Lwówek gas pipeline will be a transmission main line for gas off-taken from a new direction of supply i.e. the LNG Terminal in Świnoujście. There will be a change in the direction of gas transmission i.e. gas from the terminal will be transmitted via the gas main line to the central and southern parts of Poland, and in the summer season it will be used to put gas into the storage tanks in Wierzchowice and Mogilno.

Construction of the high-pressure gas pipeline between Szczecin and Lwówek will be completed in the following stages:

1st stage – Szczecin – Gorzów Wielkopolski gas pipeline with a diameter of 700 mm and length of approx. 106 kilometres,

2nd stage – Gorzów Wielkopolski – Lwówek gas pipeline with a diameter of 700 mm and length of approx. 80 kilometres.

Construction of the Szczecin – Gdańsk Gas Pipeline

The project is an extension of the already started construction of Goleniów – Nowogard – Płoty gas pipeline with a diameter of 500 mm. Szczecin – Gdańsk gas pipeline will be an element of the Northern gas main line network connecting Gdańsk and Szczecin agglomerations. Total length of the gas pipeline will be approx. 267 kilometres.

The gas pipeline with a diameter of 700 mm will consist of the following sections:

1st section – Płoty – Karlino gas pipeline with a length of approx. 65 kilometres,

2nd section – Karlino – Koszalin gas pipeline with a length of approx. 22 kilometres,

3rd section – Koszalin – Słupsk gas pipeline with a length of approx. 68 kilometres,

4th section – Słupsk – Wiczlino gas pipeline with a length of approx. 112 kilometres.

Transmission route for gaseous fuel which will emerge as a result of this project may become an element of the main gas line connecting European markets in the Baltic region (Baltic Interconnection).

Construction of the Gustorzyn – Odolanów Gas Pipeline

The opening of the LNG Terminal in Świnoujście and the expansion of the underground gas storage facilities in Wierzchowice and Mogilno will change gaseous fuel outflow patterns in the transmission system. Connection of two main interconnection points – Gustorzyn and Odolanów – as well as Wierzchowice and Mogilno storage facilities will enhance gaseous fuel transmission capacity, thereby contributing to the improvement of the national energy security.

Szczecin – Lwówek, Szczecin – Gdańsk, Gustorzyn – Odolanów and Włocławek – Gdynia gas pipelines will form a North-Western ring network of gas transmission main lines.

Construction of the Włocławek – Gdynia Gas Pipeline

This project is intended to finish the undertaking, involving the construction of a 252 km long

raport roczny 07/08

28


annual report 08/09

high pressure gas pipeline on the route from Włocławek to Gdynia (Wiczlino). The outstanding last gas pipeline section needed to complete the project is 64 km.

The project will align the technical parameters of the transmission network from Gustorzyn interconnection point to Gdańsk area and the planned underground gas storage facility at Kosakowo. It will also facilitate natural gas deliveries to consumers interested in natural gas purchases in the region of Pommern.

Rembelszczyzna – Gustorzyn Gas Pipeline

Completion of the project, owing to extensive modernization measures, will allow GAZ-SYSTEM S.A. to improve the security of gas transmission to consumers located on the Rembelszczyzna – Gustorzyn gas pipeline route. It will also enable enhancement of power supply systems leading to the Uniszki interconnection point, which is of particular importance in the winter season. Additionally, it will provide conditions for transmission of larger flows of gaseous fuel to North-Eastern Poland.

Furthermore, when the new gas source on the Polish coast is set up and gas flows in the system will be reversed accordingly, this gas pipeline will ensure undisturbed off-take of gas from the Gustorzyn interconnection point. In accordance with the current assumptions, completion of the project is planned in three stages, where priority will be given to construction of the Gustorzyn – Płock and Rembelszczyzna – Płońsk sections, followed by their interconnection i.e. Płock – Płońsk.

Expansion of Gas Pipelines in Lower Silesia

Investment in the high-methane gas system in this region is aimed at expansion of the Lasów

measurement point on the Polish-German border and construction of new gas pipeline sections connecting this point with Wrocław’s outer ringway system.

The project covers:

Jeleniów – Dziwiszów gas pipeline with a diameter of 500 mm and length of approx. 65 kilometres, Taczalin – Radakowice gas pipeline with a diameter of 500 mm and length of approx. 32 kilometres, Radakowice – Gałów gas pipeline with a diameter of 500 mm and length of approx. 7 kilometres.

Construction of new gas pipelines in Lower Silesia will allow off-take and transmission of larger gas volumes from the Lasów measurement point.

Another investment project currently in progress in the Lower Silesia region is the Polkowice – Żary gas pipeline which will be used for the transmission of nitrogen rich natural gas. This pipeline will comprise of two sections:

1st section – Polkowice – Gaworzyce – Szprotawa,

2nd section – Olszyniec – Żary

Planned diameter of this gas pipeline will be 300 mm and its total length will be approx. 78 kilometres. Construction of the new Polkowice – Żary gas pipeline is aimed at ensuring stable and safe operation of the nitrogen rich natural gas system. Completion of the project is planned in 2012.

Lubliniec – Częstochowa Pipeline

In the past reporting year GAZ-SYSTEM S.A. participated in the construction of the Lubliniec – Częstochowa gas pipeline, where the project investor is PGNiG SA.


Construction of approx. 55 km long gas pipeline was started in 2007. GAZ-SYSTEM S.A. (not being the project investor) provided assistance in contacts with authorities and inhabitants of Częstochowa and neighbouring counties to facilitate fulfillment of administrative procedures and raise local community awareness of the project’s strategic importance for the development of the region. Construction of the pipelines is combined with the modernization of the Częstochowa gas interconnection point.

When put into operation, the Lubliniec – Częstochowa gas pipeline will be connected to the national transmission system.

Intersystem Connections

Discussions concerning the interconnection of the gas transmission systems of the Czech Republic and Poland were initiated in 3Q 2008 (inter-connector). Construction of such a gas pipeline will enhance the energy security level in the Podbeskidzie region, and in the future it will also affect Silesia and other provinces of southern Poland. Further development of the project will enable gas transmission to other regions of the country.

Moreover, the Polish-Czech Inter-connector fits into the development project of the preferred Trans-European interconnection along the North-South axis as an element of the Action Plan designed to foster energy security and solidarity across the EU.

Additionally, as part of the investment assumptions adopted for the 2008/2009 reporting year by GAZ-SYSTEM S.A., the company carried out modernization works on the transmission system facilities: pressure reduction and measuring stations, compression stations and interconnection points.

Development Plan for the Gas Transmission Operator GAZ-SYSTEM S.A. for the years 2009

– 2014 encompasses measures designed to ensure continuity and security of gas supply and foster the development of the natural gas market in Poland by the expansion of the national transmission system.

The company plans to build approx. 1,000 km of new gas pipelines by 2014. Capital expenditure allocated to the expansion of the transmission system in Poland is in excess of PLN 5 billion.

Expansion of the transmission network will enable gas supply to the areas not covered by the gas transmission framework so far and will allow off-taking and transportation of gaseous fuel from the LNG Terminal. These investment efforts will also provide conditions for new industrial projects based on the use of natural gas.

GAZ-SYSTEM S.A. will further continue to fulfill tasks aimed at the improvement of IT systems designed to collect and share information with the transmission system users and the implementation of modern management solutions focused on monitoring and cost reduction of the on-going and investment activity of the company.

European Union Funds

GAZ-SYSTEM S.A. is actively involved in monitoring and analyses of information concerning community support programmes for projects related to the development of the transmission infrastructure by participating in meetings and information sessions. Such measures are aimed at obtaining EU funding for GAZ-SYSTEM S.A. investment projects, which include among others the following sections of gas transmission pipelines: Szczecin – Gdańsk, Gustorzyn – Odolanów, Szczecin – Lwówek, Świnoujście – Szczecin, Włocławek – Gdynia, Rembelszczyzna –Gustorzyn.

raport roczny 07/08

30


annual report 08/09

Open Season Procedure at GAZ-SYSTEM S.A.

In 2008/2009 financial year GAZ-SYSTEM S.A. as the first business entity of the energy sector in Poland initiated the Open Season procedure.

Open Season procedure is a useful tool for assessment of the market demand for transmission capacity and its efficient implementation allows GAZ-SYSTEM S.A. to ensure successful implementation of inter-system connection expansion plans. Additionally, it provides the economically justified basis for investment decisions supporting the development of a new gas infrastructure. At the same time, investment in diversification projects resulting from the implemented Open Season procedure helps to enhance security of gas supply to consumers in Poland and reinforce integration with gas systems from other EU countries. The working rules of the Open Season procedure were prepared based on ERGEG good practice guidelines for Open Season procedures (ref: C06-GWG-29-05c, www.ceer-eu.org).

The aim of the 2009 Open Season procedure was:

to identify and confirm the demand for transmission capacity among the potential users of the transmission system; to conclude long-term service agreements for the transmission of gaseous fuels, which would facilitate the investment decision-making process and allow GAZ-SYSTEM S.A. to raise external financing (e.g. under a Project Finance formula); to enhance the security of gas supply owing to the construction of new interconnections with the neighbouring natural gas transmission systems in Europe; to foster the expansion of the natural gas market in Poland.

The 2009 Open Season Procedure conducted by GAZ-SYSTEM S.A. was planned in three stages:

Preliminary Phase of „Market Screening” conducted in September 2008 in order to collect non-binding declarations of interest in gas transmission via four potential interconnectors connecting Poland with the neighbouring countries. Phase I involving the submission of non-binding orders for power under defined medium- and long-term contracts by participants of the procedure. Based on the analysis of the results of the Preliminary Phase – „Market Screening” and after consultations with gas market participants and the national regulatory offices, Open Season procedure related to two potential intersystem connections: - connection via the Baltic Pipe – the undersea gas pipeline between the gas transmission systems of Poland and Denmark in the area of Niechorze (with Energinet.dk sytem) – and the connection between the Polish and Lithuanian transmission systems in the region of Suwałki (with the Lithuanian AB Lietuvos Dujos system). Phase II involving the submission of binding orders for power and further on, the signing of long- and medium-term transmission contracts between the interested parties.

In Phase I of the Open Season Procedure which ended on 15 June 2009, no non-binding orders for gas transmission via the two planned two-way-traffic intersystem connections between Poland and Denmark and between Poland and Lithuania were placed. With respect to the foregoing, Phase II of the Open Season procedure was not commenced and the Open Season procedure was closed without taking any investment decisions. GAZ-SYSTEM S.A. may announce a new Open Season procedure when gas transmission via the new international connections raises interest on the market.

raport roczny 07/08

32


annual report 08/09


In December 2008 GAZ-SYSTEM S.A. became the owner of Polskie LNG sp. z o.o. (Polskie LNG), a special purpose vehicle established with a view to the construction and operation of a liquefied natural gas terminal (LNG). Owing to the LNG Terminal it will be possible to diversify the directions of the natural gas supply, which will entail enhancement of the national energy security.

On 19 August 2008 the Council of Ministers adopted a resolution where the construction of the LNG Terminal was recognised to be a key strategic investment for the interest of our country, consistent with the plans for diversification of sources and natural gas supply routes and ensuring Poland’s energy security.

Responsibilities of Polskie LNG include the development of technical and economic documentation, obtaining relevant administrative approvals and permits for the project, selection of the general contractor for the construction of the terminal in Świnoujście as well as the monitoring and coordination of all activities related to the project.

Development of the LNG Terminal Project is overseen by GAZ-SYSTEM S.A.

LNG Terminal

Location

The LNG Terminal intended for off-take of the liquefied gas will be located in the Świnoujście, Warszów district. In order to address the needs of the project in Świnoujście, pipelines to offtake liquefied gas from ships, LNG tanks and regasification installations will be built. The regasification process means restoring gas from liquefied form back into the gaseous form. In such form, gas is transmitted via a gas pipeline network to consumers. The LNG Terminal will be built on the right bank of the Świna river, in the area long intended for the development of the port.

LNG Offtake

The LNG Terminal will allow offtake of 5 bcm of natural gas annually. Subsequently, depending on the growth of demand for gas, it will be possible to increase offtake capacity even to 7.5 bcm without any need to enlarge the area where the terminal will be built.

Polskie LNG sp. z o.o.

Supervisory Board of Polskie LNG sp. z o.o.Chairman of the Supervisory Board Jan Chadam

Vice-Chairman of the Supervisory Board Krzysztof Żuk

Secretary of the Surpervisory BoardWojciech Kowalski

Member of the Supervisory BoardSławomir Śliwiński

Management Board of Polskie LNG sp. z o.o.President of the Management Board Zbigniew Rapciak

Vice-President of the Management Board Tadeusz Zwierzyński

raport roczny 07/08

34


annual report 08/09

Safety and Environment

The whole project will be completed with respect for the natural environment. In order to preserve the historic fortifications, bunkers and gray sand dunes, the LNG Terminal will be moved about 750 metres from the coastline and will be built in the industrial area of the Świnoujście Port Complex.

In December 2008 the “Environmental Impact Report” for the project was completed. The document was submitted to the Regional Environmental Protection Authority in Szczecin and to the President of Świnoujście.

Environmental decisions issued in February 2009 for the maritime part and in March 2009 for the land part state that “the project will not have a negative impact on NATURE 2000 areas and will not affect their integrity in a negative manner”.

The Investor

The investor of the project is Polskie LNG sp. z o.o. – a company established for the purpose of construction and operation of a liquefied natural gas terminal (LNG). The company started its activity in May 2007 and since December 2008 it has been owned by the Gas Transmission Pipeline Operator GAZ-SYSTEM S.A.

On 12 May 2009 the designer of the terminal – a Canadian firm SNC Lavalin Services Ltd. – on behalf of Polskie LNG sp. z o.o. submitted an application for the building permit for the land part of the LNG Terminal to the Voivodship Office in Szczecin.

The building permit was issued by the Voivod (administrative head) of the Western-Pommern Province on 15 July 2009. Construction works will start as soon as the general contractor for the project (GCP) is appointed. According to the working schedule, the LNG Terminal will be ready to launch its operations in 2014.

2009 Opening Procedure for the LNG Terminal in Świnoujście

On 23 June 2009 Polskie LNG sp. z o.o. initiated the “2009 Opening Procedure for the LNG Terminal in Świnoujście”.

The objective of the procedure is to determine market demand for basic regasification services and additional services as well as to ensure access to the newly built infrastructure based on non-discriminatory and transparent principles to all interested gas market players. The LNG Terminal opening procedure will be carried out in three phases.

In the Preliminary Phase a seminar will be arranged by Polskie LNG in order to present an overview of the 2009 Terminal opening procedure. During Phase I the company will determine market demand for regasification services, expectations with respect to the availability of the infrastructure (e.g. frequency, volumes and the timeframe of the services rendered) and the regasification power. During Phase I consultations with the Procedure participants will be held to exchange experience and to determine their expectations as to the framework of the gas regasification services. In order to address the expectations of the participants, Polskie LNG will prepare and present for public consultation an instruction and a contract specimen which will specify the types and the rules underlying the regasification and additional services. After the end of public consultation the company will publish the final version of the instruction and a contract specimen. The objective of Phase II will be the conclusion of long-term contracts for regasification services with the Participants of the Procedure.

Website www.polskielng.pl

In April 2009 a new corporate website was launched – www.polskielng.pl, dedicated


to the company and its flagship investment project. The www.polskielng.pl website provides not only background information about Polskie LNG but also about the gas regasification technology services. Its primary objective is to serve as a compilation of knowledge related to the investment managed by the company – i.e. construction and operation of the terminal for the offtake of the liquefied natural gas.

All visitors to the website interested in the Project will find a step-by-step description of consecutive construction stages, may follow all notices on the tender procedure and dates of information meetings as well as read about the company’s environmentally friendly measures applied in the project. The Open Season bookmark contains documents and up-to-date information about the procedure.

raport roczny 07/08

36


annual report 08/09

LNG – Liquefied Natural Gas

LNG is a fuel produced from natural gas in the process of eliminating impurities and then changing its state of aggregation under pressure and in a very low temperature of approx. minus 160°C (-270°F). The effect of liquefaction is a very pure, colourless and odourless fuel without any toxic and corrosive properties. LNG is composed mainly of methane and small amounts of other hydrocarbons. Liquefied natural gas has a volume approx. 600 times smaller than in the gas (natural) state, which makes it more economic for transport and storage purposes.

After the delivery of LNG to the point of destination, it is subsequently treated to the process of re-gasification, or transformation into gas again by heating the raw material in the liquid state. Modern technologies which comply with safety standards are applied in the liquefaction and regasification processes.

Trade in the liquefied natural gas is carried out as part of LNG projects which are also called LNG

chains. The supply system consists of pipelines transmitting the natural gas from the deposit to the liquefaction facilities, the loading (export) terminal, tankers (methane carriers) and the unloading (import) – regasification terminal.

LNG System

The natural gas transmitted via pipelines from its deposits is liquefied. LNG is then transmitted to storage containers from which special tankers, so-called methane carriers are filled. They have a capacity ranging from a number of thousand to approx. 250 thousand m3 of liquefied gas (at present ships exceeding a capacity of 250 thousand m3 are under construction).

Once the load has been transported by sea to the receiving facility (import and re-gasification terminal), the liquid fuel is transmitted to special cryogenic containers. At the import terminal, LNG is treated to the re-gasification process and then transmitted further through pipelines or cisterns (by rail or by road).

Extraction liquefaction sea transport regasification

-160°C1m3 LNG

600m3natural

gas=

Source: Polskie LNG sp. z o.o.

raport roczny 07/08

38


annual report 08/09


Gas transmission service

In the financial year 2008/2009 Gas Transmission Operator GAZ-SYSTEM S.A. considered 6 applications for the provision of gas transmission services and rendered gas transmission services on the basis of two transmission agreements concluded with PGNiG SA and one transmission agreement with HANDEN Sp. z o.o.

Under the above mentioned agreements GAZ-SYSTEM S.A. also rendered gas transmission services on an interruptible basis to nine customers.

Provision of gas transmission services on an interruptible basis enables optimal technical utilisation of the available transmission network capacity. Owing to this solution, GAZ-SYSTEM S.A. offers the service to new customers in these areas of the network, where the service provision on a continuous basis is not possible, whereas the existing customers may increase the level of their orders for power and of off-take of gas fuel.

The terms and conditions of gas transmission service provided on interruptible basis were laid down in the draft model agreement which was prepared by GAZ-SYSTEM S.A. and was published on its corporate website. The adopted solution meets the legal requirements stipulated by the Regulation of the European Parliament and the Council no 1775/2005.

Connection to the transmission network

In the financial year 2008/2009 Gas Transmission Operator GAZ-SYSTEM S.A. considered 60 applications for specifying the connection conditions and entered into 16 agreements for connection to the transmission network.

At the same time, in order to address the expectations of customers who were applying for connection to the transmission network and to pursue the company quality policy, the connection application procedures assume a considerable shortening of the processing time as compared to the timeframes set forth by the legal regulations. In GAZ-SYSTEM S.A. the average time used to determine the conditions for connection to the transmission network is 50 calendar days, which means the shortening of the official timeframe by 15% for end consumers and by 45% for other power companies applying for connection to the transmission network.

Account Manager

Contact with customers to whom the service of connection to the transmission network is provided was improved owing to the introduction of Account Managers.

An Account Manager is a person who is responsible for the supervision of a given application for the specification of connection conditions and who handles the matter from the moment of receiving such an application until the requested connection is delivered.

Customer Relations

raport roczny 07/08

40


annual report 08/09

The Account Manager is, inter alia, responsible for the conclusion of the connection agreement, maintaining day-to-day contact with the customer, providing all necessary information, facilitating and coordinating meetings during the whole connection process as well as informing about changes of legal regulations and about the status of the execution of the connection agreement. If a customer applies again for connection to other points of the transmission system, the relevant documentation and the entire process is handled by the same employee of GAZ-SYSTEM S.A.

Natural gas odorification

In addition to services provided under a concession, Gas Transmission Operator GAZ-SYSTEM S.A. offers also other services, including the natural gas odorification service. In order to provide high quality services to all customers of the Company and to ensure uniform principles of control, documentation and settlement of the natural gas odorification process, the standard conditions of the natural gas odorification service were determined. A template of a draft agreement was placed on the company website www.gaz-system.pl, in the “download” bookmark – Draft agreement templates.

Agreements with operators of the cooperating systems

In 2008 in order to be compliant with the provisions of the Energy Law (art. 9c point 5.), stipulating that a transmission system operator is responsible for cooperation with other gas system operators, and to ensure reliable and efficient operation of gas systems and coordination of their development, GAZ-SYSTEM S.A. entered into cooperation agreements with six distribution system operators.

These agreements set forth the principles of cooperation between GAZ-SYSTEM S.A. as

a transmission system operator and distribution system operators from the PGNiG SA Capital Group, regarding the following areas:

transferring and checking the compliance of nominations and renominations in the distribution system, sharing telemetric data, sharing measurement and settlement data, transferring allocation data for points at system interconnections, managing traffic and operation of gas stations located at interconnections of cooperating systems, running general overhauls and modernisation of gas stations located at the interconnec-tions of cooperating systems, exchanging information on planned general overhauls, modernisation and works in the cooperating systems affecting working conditions of the co-operating system, framework of and exchanging information on execution of procedures granting access to the transmission and distribution networks, exchanging information on planned investments affecting the working conditions of the cooperating system, cooperation covering the hook-up of new points – interconnections of the transmission and distribution systems, cooperation in the event of gas quality disturbances affecting the operation of the cooperating system, procedures in emergency situations affecting the operation of the cooperating system, preparing and agreeing gas limitation schemes, procedures in case of introducing limitations in gas supply, providing information during the effective period of limitation schemes, specification of the data and communication protocol formats enabling the cooperation of information exchange systems.


2008 Customer satisfaction survey

In June 2008 Gas Transmission Operator GAZ-SYSTEM S.A. conducted the third Customer Satisfaction Survey, which gives it an annual insight into the expectations of its business partners and stimulates the improvement of the service standards. Also last year, customers appreciated the high quality of service, professionalism, competence and communicative skills of GAZ-SYSTEM S.A. employees. Moreover, they recognised the customer service culture and individual approach to the problems reported. During the survey customers had the opportunity to put forward their proposals and comments regarding the operations of GAZ-SYSTEM S.A. Customer feedback acquired during the survey led to the implementation of a new service – a new communication channel – an on-line Consultant, available on the company website www.gaz-system.pl

Quality parameters of transmitted gas

G a s e o u s f u e l t r a n s m i t t e d b y GAZ-SYSTEM S.A. is subject to analyses at many points of the transmission system. These measurements enable GAZ-SYSTEM S.A. to ensure proper quality of gaseous fuel in line with the requirements of Polish norms as well as the Transmission Network Code. On the company website w w w . g a z - s y s t e m . p l – i n t h e Transmission System bookmark, the map of the transmission system is displayed where gas quality measuring points are marked and the tables specifying the frequency of measurements made for all exit points in the transmission system.

On-line consultant

The On-line Consultant application enables GAZ-SYSTEM S.A. to provide quick replies to customer inquiries and ensures consultant’s assistance e.g. when help to complete application forms for the connection and natural gas transmission services is required.

The service operates as a text chat between customer and consultant. Service is activated by pressing the “Chat to the Consultant” button available on the company website www.gaz-system.pl. The consultant dialogue window shows up by clicking the relevant topic. Application ensures safe encryption of the connection and does not require any additional software to be installed by the customer.

raport roczny 07/08

42


annual report 08/09


Almost 2 000 persons make one of the most important assets of GAZ-SYSTEM S.A. This is a team of employees, who by their professionalism and commitment to their duties, contribute to the Company’s success and boost its growth. Employees of GAZ-SYSTEM S.A. demonstrate a high job satisfaction level and appreciate the synergy of the corporate systems and practices applied. At the same time they create the corporate image of GAZ-SYSTEM S.A. as an enterprise that cares about working conditions, while maintaining the highest available safety standards and good interpersonal relations at different organisational levels, fostering and supporting employee development.

System of periodical employee assessments and evaluation of job positions

In the last financial year Gas Transmission Operator GAZ-SYSTEM S.A. completed work on a number of human resources projects and implemented new programmes, inter alia, a modified System of Periodical Employee Assessments and Evaluation of Job Positions.

A system of Periodical Employee Assessments is an element of communication between an employee and his/her superior. It serves the purpose of explicit presentation of expectations to an employee, at the same time allowing for exchange of views on the possibility of fulfilment of the targets set. Its main objective is to motivate the employee to embark on more ambitious tasks as well as to concentrate employee’s efforts on the fulfilment of corporate goals. The implemented project of

the System of Periodical Employee Assessments facilitates combining the individual goals of employees with the corporate goals. Defining and harmonising corporate human resources policy with the company’s strategy enables GAZ-SYSTEM S.A. to determine the direction of personnel development and is a foundation for the creation of corporate culture in GAZ-SYSTEM S.A.

Evaluation of job positions is a method used to determine the measurement of the “size” of a position in a given organisation. It aims at defining the relative importance of a given job position in the whole company based on the analysis of a job content. Determination of relative importance of job positions in the company serves as a solid, reliable and efficient foundation for the payroll system.

As a result of the evaluation of job positions in GAZ-SYSTEM S.A., a new orderly set-up of job positions was established, job descriptions were unified and updated with respect to market changes, and an outline of standard competence and skills required at a given job position was developed. Transparent payroll policy and promotion principles have a significant impact on employee job satisfaction and their integration with the company.

Human Resources Policy

raport roczny 07/08

44


annual report 08/09

The Magnificent Seven

As in the recent years, also in 2008 the “The Magnificent Seven” contest was arranged for The Employee of the Year title. There were seven GAZ-SYSTEM S.A. employees representing branches and the head office who were short-listed for the contest. The Employee of the Year title was awarded to Ms Danuta Cichy from the GAZ-SYSTEM S.A. Świerklany Branch, who initiated several changes involving the modification of human resources procedures.

GAZ-SYSTEM S.A. in the top league of The Best Employers of 2009

Thanks to the appraisal of its employees, GAZ-SYSTEM S.A. was qualified for the top league of The Best Employers of 2009 rating. Out of 126 companies taking part in the ranking organised by Hewitt Associates, the international consultancy firm in collaboration with GazetaPraca.pl, GAZ-SYSTEM S.A. was ranked 8th in the category “Large corporations” and 25th in the general ranking.

The ranking – The Best Employer of 2009 measured primarily satisfaction and commitment of the employees and of the management. Other criteria were also analysed, such as business strategy or human resources strategy. Two ratios – commitment and coherence were calculated on the basis of over 20 criteria. GAZ-SYSTEM S.A. scored very high in terms of both those ratios. Commitment rate measured the degree of employees’ loyalty to the organisation and their efforts to fulfil corporate goals. The commitment rate for GAZ-SYSTEM S.A. was placed on the level of 67%, which qualified the Company to the so-called “Best Employers Zone”.

GAZ-SYSTEM S.A. reputation, working conditions in the company, its resources and tasks were also evaluated at a very high level. Such factors as the benefits provided by the Company, level of self-fulfilment, colleagues and the fact that work enables the employees to keep the balance between the professional and private life was also highly acclaimed by the Company’s employees.

In the photo from the left: Aldona Tomczyk (Wrocław Branch), Barbara Olczyk (Head Office), Marcin Andrejczyk (Gdańsk

Branch), Andrzej Fedor (Tarnów Branch), Elżbieta Dzirba (Rembelszczyzna Branch), Danuta Cichy (Świerklany Branch).

Katarzyna Marcinkowska from Poznań Branch, who is not in the photo, was also nominated.

raport roczny 07/08

46


annual report 08/09


Representative Office in Brussels

The Representative Office of the Gas Transmission Operator GAZ-SYSTEM S.A. in Brussels launched its activity in May 2008.

GAZ-SYSTEM S.A. Office in Brussels ensures effective representation of the Company’s interests on the EU institutional forum and runs day-by-day monitoring of gas-related events in the European Union as well as legislative processes affecting the energy sector.

The Representative Office closely follows the activities related to the energy issues of the European Commission, the European Parliament and other bodies based in Brussels communicating the GAZ-SYSTEM S.A. point of view.

Additionally, the exchange of experience among gas transmission system operators from EU member states during varoius meetings provides GAZ-SYSTEM S.A. with valuable insight on operating activity with respect to investment projects and the use of modern technologies. The Representative Office in Brussels monitors and analyses information concerning the Community financial support schemes in the area of develpment of the gas transmission infrastructure e.g.: Regional and Structural Funds, Trans European Energy Networks (TENE), the European Energy Plan for Recovery (EEPR).

Gas Transmission Europe (GTE)

GAZ-SYSTEM S.A. is actively involved in the activities of international industry organizations, such as inter alia Gas Transmission Europe (GTE), an organization which assembles European

gas transmission system operators and GERG – European Gas Research Group.

GTE is an organization of profound importance for building the EU internal gas market. At present, it undergoes a transformation phase, by GTE+ structures, in ENTSOG (European Network of Transmission System Operators of Gas), whose establishment and area of competence is sanctioned by the Third Energy Package adopted in May 2009.

GTE+ activities focus on measures defined by priority areas included in the Third Energy Package and are handled by dedicated permanent working groups, e.g.:

Strategy, Transparency, Investment, Capacity, Interoperability, Balancing.

Furthermore, representatives of GAZ-SYSTEM S.A. participate in the activities of working groups set up on an ad-hoc basis within the GTE. One of such bodies is the Security of Supply Task Force, a group working on the development of a recommendation to serve the purposes of the amendment of the Directive on the Safety of Gas Supply prepared by the European Commission. The group is also working on the assessment of individual provisions and mechanisms contained in the proposal for a new EC regulation. The second group is the Reverse Flow Task Force, which emerged as a result of the crisis in the supply of natural gas to Europe caused by the January conflict between Russia and Ukraine. Its objective is to propose infrastructure investment (interconnectors between transmission systems

GAZ-SYSTEM S.A. in the International Arena

raport roczny 07/08

48


annual report 08/09

of the EU member states and the growth of national network potential), which will enable reverse gas flows contrary to normal conditions in the case of interruptions in gas deliveries. The outcome of the group’s activity will contribute to stronger security of gas supply in the European Union and integration between individual national transmission systems. This initiative was noted by the European Commission which granted support to this type of investment in the framework of the European Energy Plan for Recovery (EEPR).

GTE+ TP (Transparency Platform)

The GTE+ Transparency Platform system was launched on 17 November 2008, as part of GIE (Gas Infrastructure Europe) and GTE+ (Gas Transmission Europe) activities. It is integrated with an interactive map of the European transmission system available since January 2008. The objective of GTE+ Transparency Platform is to improve the information flow by the provision of data significant for the transparency of the European Energy Trade market by Transmission System Operators. The system facilitates searching and the transfer of information about possible gas transmission routes between two points in the European gas transmission system selected by the user. Additionally, it enables users to find information about a point selected in this network.

GAZ-SYSTEM S.A. representatives are actively involved in the creation process of the GTE+ Transparency Platform, participating in a few working groups e.g. in GTE+ TP Project Team and GTE+ IT Systems. One of the tasks of a project team was to identify and solve problems resulting from legal differences, discrepancies in standards and internal rules of gas balancing applied by the parties participating in this undertaking. The platform is available on www.gas-roads.eu

European Gas Research Group (GERG)

Activity of the GERG group, where GAZ-SYSTEM S.A. is involved, is focused on projects related to e.g. inspection methods for unpiggable gas pipelines (the objective of the project is to find alternative methods for inspection of gas pipelines, where measuring pigs cannot be applied), review of methane emission measurement and measurement of dust particles and aerosol mist in natural gas (the main objective in this project is to develop an on-line method for measurement of the dust and aerosol mist content using a laser method.

GAZ-SYSTEM S.A. has also initiated working contacts with the Permanent Representation of the Republic of Poland in the European Union and the Polish Embassy in the Kingdom of Belgium.

Contacts with EU Institutions

Gas Coordination Group

GAZ-SYSTEM S.A. supports the Polish delegation to the Gas Coordination Group with the status of an observer. The Group consists of the European Commision, member states and representatives of various stakeholders (producers, shippers, TSOs and SSOs, traders and consumers). The group assembles periodically in order to discuss the security of supply within the Community and in emergency situations. The Group manages the emergency and crisis situations, but it is used as a communication channel by EU member states to provide the European Commission with information on the safety of their gas systems.

Participation in this group provides an opportunity to benefit from direct access to information on the Commission’s activities and initiatives in the area of security of supply, particularly important in crisis situations or serious failures.


Baltic Energy Market Interconnection Plan – BEMIP

Baltic Energy Market Interconnection Plan (BEMIP) was set up following a political initiative during the autumn EU Council summit in 2008. Interconnection of the Baltic Sea markets is one of the infrastructural priorities set out in the Second Strategic Energy Review (SER 2), which was published at the end of 2008. The Group was divided into sub-groups dealing with specific areas, including natural gas market. Invitation to participate in the activities of the gas subgroup was extended to a representative of Polish Ministry of Economy and the Energy Regulatory Office, and to a GAZ-SYSTEM S.A. representative. The objective of the subgroup was inter alia to assess regulatory barriers impeding market integration, identify key projects and to analyse the progress level of infrastructure projects in the region. The European Commission based on the activities of the group identified support tools for the proposed projects which will contribute to the integration of energy markets and enhancing the security of natural gas supply in the Baltic region.

GAZ-SYSTEM S.A. actively participated in the meetings of the subgroup, which were held from January to May 2009 at the European Commission and presented its projects (construction of international connections, LNG Terminal, expansion of the national transmission network and Open Season procedure). At the end of BEMIP activity, a special report was presented and a Memorandum of Understanding was signed by heads of the Baltic region countries. The report aim is to indicate regulatory, systemic, physical and procedural barriers impeding the integration and define tools and solutions which will facilitate interconnection of national markets and will simultaneously reinforce their energy security.

European Energy Policy

GAZ-SYSTEM S.A. monitors and analyses legislative work related to the European Energy Policy conducted by the European Commission, the European Parliament and the EU Council. In 2008/2009 it related to the Energy Package 3, Second Strategic Energy Review (SER 2) and the EEPR program.

Co-operation with the Environmental Protection Agency under the Natural Gas Star Program

Following the initiative of the US Environmental Protection Agency (EPA) an international organization – Methane to Markets Partnership (M2M) – was established. Among 26 member states there is also the European Commission and Poland, represented inter alia by GAZ-SYSTEM S.A. M2M is focused on activities aimed at reducing methane emissions from a variety of sources, including landfill sites, underground coal mines, natural gas and oil systems undertaken at the government level of the member states. Under the NATURAL GAS STAR (NGS) program individual companies are working with measures designed to reduce the emissions. In order to complete the projects both M2M and NGS closely cooperate with the Pacific Northwest National Laboratory owned by the US Department of Energy, which is managed by Battelle Memorial Institute.

During the meeting with representatives of EPA and Pacific Northwest National Laboratory in May 2008, GAZ-SYSTEM S.A. defined the scope of activities scheduled for the first stage of co-operation. The objective of this initial action round is to improve gas emission

raport roczny 07/08

50


annual report 08/09

rates applied at GAZ-SYSTEM S.A. taking into account diverse specification set-ups of the transmission network facilities, inventory of emission sources, the number and types of devices used in the transmission infrastructure, estimate of the volume and recommendation of the technology to recover or to reduce gas emissions from technological processes (blow-outs on gas compression stations or degasification of pipelines etc.) as well as the estimate of volumes and recommendation of technology to reduce gas leaks (e.g. from valves, orifice plates, screw joints etc.). Under the EPA cooperation framework GAZ-SYSTEM S.A. signed a confidentiality agreement with Battelle Memorial Institute and Pacific Northwest Division and a Memorandum of Understanding with the US Environmental Protection Agency (EPA), aimed at a reduction of methane emission into the atmosphere by using cost-effective technology and procedures. Furthermore, information concerning the overall transmission network in the company was collected and sent to Pacific Northwest National Laboratory for analysis. the Materials contained the specifications of inter alia compressors, gas pipelines, hook-ups and drying facilities. A report will be developed following the analysis of these facilities, where the methods of reducing methane emission and an outline of economic analysis will be indicated.

International Gas Union (IGU)

GAZ-SYSTEM S.A. participates in the activities of the International Gas Union (IGU) and is involved in research concerning the sustainable development as well as identification of methods and best practices for reducing the impact of TSO activity on the environment. The results of this research will be officially presented as part of the summary of IGU’s work under the “2006-2009 Triennial Work Programme” during the 24th World Gas Conference which will be held in Buenos Aires in 2009.

24th World Gas Conference

In 2009 GAZ-SYSTEM S.A. will actively participate in the exhibition associated with the conference summarising three years of IGU activity, which will be arranged at La Rural exhibition centre in Argentina.

Participation in the exhibition, to be attended by the world’s largest gas companies will be an opportunity to present GAZ-SYSTEM S.A. to the global gas industry environment as the company of strategic importance for the Polish economy and one of the few companies on the European natural gas market, which is fully accountable for management of transmission assets, expansion of the transmission system and safe transportation of natural gas via high-pressure gas pipelines.

raport roczny 07/08

52


annual report 08/09


GAZ-SYSTEM S.A. Tariffs

New tariffs were developed and introduced by GAZ-SYSTEM S.A. during the 2008/2009 financial year.

The Company settled the accounts with its customers based on “The Tariff for Gas Transmission Services no 2” (“Tariff no 2”) approved by the President of the Energy Regulatory Office on 10 April 2008. The ”Tariff for Gas Transmission Services no 2” was prepared in accordance with the rules laid down in the Energy Law of 6 February 2008 on detailed rules of setting and calculating tariffs and settlements in gas trade.

“The Tariff for Gas Transmission Services no 2” was the second independent tariff of

GAZ-SYSTEM S.A. regulating charges for transmission services in line with EU requirements.

TTariff no 2” effective in the 2008/2009 financial year enabled the execution of short-term contracts and in order to address customer expectations introduced a novelty on the Polish gas market, namely interruptible services. Rules of application and the settlement framework for interruptible services offered by GAZ-SYSTEM S.A. were developed based on analyses of solutions applied by other European operators while accommodating the specific nature of the Polish market.

On 1 June 2009 GAZ-SYSTEM S.A. introduced “The Tariff for Gas Transmission Services no 3” approved on 7 May 2009 by the President of the Energy Regulatory Office.

Economic Information

raport roczny 07/08

54


annual report 08/09

EBIT

EBITDA

in PLN bln

0,50,6

0,4

0,91,0

0,7

ROA

ROE

in %

3,06,5

5,8

14,015,5

8,8

2006/2007 2008/20092007/2008

Balance sheet sum

Equity

Gross profit

Net profit

Net sales revenues

5,214,79

5,09

1,512,67

3,89

0,220,460,44

0,150,32

0,29

1,461,55

1,38

2006/2007 2008/20092007/2008

in PLN bln

Key Financial Ratios

Comparison of Key Financial Data

raport roczny 07/08

56


annual report 08/09


The Responsible Business Policy pursued by GAZ-SYSTEM S.A. reflects European standards for strategic and long-term decisions and projects addressing social interests and environmental protection.

This policy, incorporated in the GAZ-SYSTEM S.A. development strategy, is primarily a token of dedication of the entire management and staff to maintain the best possible relations with the business environment (customers, decision-makers and partners) and their commitment to the application of transparent business practices based on the understanding of mutual expectations related to the activities undertaken in various fields of the company’s operations.

A particularly notable approach is building strong relations with local communities based on long-term dialogue and openness. Investment projects run by GAZ-SYSTEM S.A. involving expansion of the transmission system and aimed at the diversification of the natural gas supply and national energy security, enhance the sense of company’s responsibility for the inhabitants of the affected regions and the natural resources used. The Company makes every effort to ensure that its operations are fully understood and accepted, conducted with respect for the natural environment and provide opportunities for the region to become a significant beneficiary of the projects implemented.

In order to pursue the above assumptions GAZ-SYSTEM S.A. originated a series of regional

meetings (in Szczecin, Gdańsk, Poznań and Wrocław), attended by representatives of local authorities. The meetings were an opportunity to present expansion plans for the gas transmission pipeline network in a relevant region and to listen to opinions and expectations of direct stakeholders in GAZ-SYSTEM S.A. activities.

GAZ-SYSTEM S.A. maintains high standards of its corporate activity which is proven by several certificates awarded to the Company such as inter alia PN-EN ISO 14001:2005, PN-N-18001:2004, PN-EN ISO 9001-2001 in the area of Environmental Management, HSE Management and Quality Management.

GAZ-SYSTEM S.A. also prepared a Corporate Social Responsibility project, featuring several measures (environmental projects, an educational and information programme) addressed at local communities, various groups of interest and the company staff, which will contribute to strengthening its corporate image as a socially responsible enterprise, pursuing committed and open, pro-active approach to communication with the external environment.

The Customer Satisfaction Survey conducted on an annual basis and the introduction of a new On-line Consultant application allowed GAZ-SYSTEM S.A. to get an insight into and meet customer expectations with respect to communication with GAZ-SYSTEM S.A., including the provision of professional and reliable information.

Responsible Business

raport roczny 07/08

58


annual report 08/09

GAZ-SYSTEM S.A. Corporate Code of Ethics

GAZ-SYSTEM S.A. wishes to be perceived as a company with a clearly specified system of values and defined principles of conduct. Owing to such an attitude the company becomes more predictable and credible both to its customers, investors, business partners and its employees. The standards of conduct established and effective in the company should pertain to the most important areas relevant for its corporate operations and its staff. Simultaneously all employees should identify themselves with these standards and observe them in their everyday work regardless of his/her position in the organizational chart.

With respect to the foregoing GAZ-SYSTEM S.A. appointed a team whose work contributed to the establishment of the corporate Code of Ethics. This document contains inter alia transparently defined values and the essential ethical issues which specify attitudes and conduct of GAZ-SYSTEM S.A. staff towards the external and internal environments.

The Team responsible for the development of the Code of Ethics ran in-house consultations to provide GAZ-SYSTEM S.A. employees with an opportunity to get acquainted with the draft code and to listen to their opinions and suggestions. Following the analysis of the employee feedback the final version of the document was prepared. The following key ethical values were determined:

responsibility towards the stakeholders and the GAZ-SYSTEM S.A. environment; commitment to company operations; professionalism and continuous improvement of skills; team work and faith in co-operation and mutual trust; respect for the external environment by conducting a transparent and constructive dialogue with the stakeholders.

GAZ-SYSTEM S.A. among the Top Performers

GAZ-SYSTEM S.A. corporate strategy aimed at improving the standards of services and building a dialogue with its business partners resulted in several awards and distinctions conferred on the company.

In 2008 owing to the total score achieved by the Company, calculated according to the economic criteria established by the Institute of Economic Sciences of the Polish Academy of Sciences, the company repeated its success as a runner-up in the prestigious ranking of Pearls of Polish Economy in the infrastructure category.

In 2009 the company received the Mazovian Quality Award winning in the category of business organizations. This award is conferred on firms and organizations which apply the idea of Total Quality Management in practice. GAZ-SYSTEM S.A. was appreciated for maintaining adequate relations between productivity, competitiveness and the quality of the services offered, and for the responsible attitude to environmental and HSE issues. GAZ-SYSTEM S.A. successfully passed a few-stage assessment process where positive rating was given to such fields of the company activity as strategy, HR management, customer satisfaction and Public Relations.

There is a high level of job satisfaction among GAZ-SYSTEM S.A. employees who enjoy their work and appreciate the synergy of systems and practices applied. Owing to such rating GAZ-SYSTEM S.A. was among the top companies in the 2009 Best Employer contest. The company ranked 8th out of 126 participants in the “Large Companies” category and 25th in the overall ranking.


Statuette Of The Mazovian Quality Award

raport roczny 07/08

60


annual report 08/09

GAZ-SYSTEM S.A. took a strong 15th position in the “50 Most Profitable Enterprises in 2008” ranking in the industry, trade and services sector according to “Polityka” weekly magazine, and was ranked 27th in the “100 Most Valuable Companies in Poland” rating co-authored by “Newsweek” magazine.

Management Systems

The Company Management is keen to ensure the security of the company’s IT resources and fixed assets. This has led to the introduction of internal regulations which is an important step in the company’s preparatory process to implement European ISO 27001 security standards.

Quality Management System

An audit carried out in 2008 by a supervisory body, the Polish Centre of Research and Certification S.A. confirmed the correctness of the Quality Management System in place in GAZ-SYSTEM S.A. since 2006 (certificate no 1869/1/2006) designed to cover the customer service function, and the following areas specifically: providing public information, issuing terms of connection to the transmission network, concluding connection contracts and gas transmission contracts, and settlement of the services provided. The audit of the supervisor confirmed compliance of procedures and instructions in force in the Company with the requirements of PN-EN ISO 9001:2001 norm – “Quality Management Systems. Requirements”. Being a holder of such certificate means that GAZ-SYSTEM S.A. is a company where continuous improvement of the service standards is one of the operating priorities.

An Integrated Management System

An audit carried out in 2008 by a supervisory body, the Polish Centre of Research and Certification S.A. confirmed the correctness of

the Integrated Management System in place in GAZ-SYSTEM S.A. since 2007 (certificate no BS-10/1/2007) covering the organization and security of transportation of natural gas through the high-pressure gas pipeline network across the country, as well as balancing the operation of the transmission network, including ensuring the safety of the operation of the natural gas transmission system in an environmentally friendly manner in the whole company. The audit of the supervisor confirmed compliance of procedures and instructions in force in the Company with the requirements of PN-EN ISO 14001:2005 – “Environmental Management Systems. Requirements and Application Guidelines” and PN-N-18001:2004 norms –”Health, Safety and Environment Management Systems. Requirements.” Being a holder of such certificate means legal safety of the Company and brings greater confidence of public administration authorities to the company which is duly compliant with the provisions of environmental and labour laws and other industry regulations.

Corporate Risk Management System

In the past financial year the company continued the activities stipulated by the “Risk Management Policy at GAZ-SYSTEM S.A.” adopted by the Management Board.

A key action in this period was the acquisition and implementation of an IT tool supporting a corporate risk management process. The selected solution enables communication, data collection, risk analysis and control in line with the model adopted in the company and best ERM (Enterprise Risk Management) practices.

As part of the activities undertaken by the Company, areas exposed to operational risks were analyzed and a new classification of GAZ-SYSTEM S.A. risks was prepared, which


corresponds to the current business processes. The information collected represents the basis to develop a Risk Map presenting the current risk exposure of the company.

The effect of the risk analysis (Risk Maps) provides a framework for the set-up of the audit plan. Such an approach is consistent with good practices related to audit planning and standards published by the Institute of Internal Auditors (IIA).

Owing to the implemented tool, GAZ-SYSTEM S.A. is able to automate several actions inbedded in the risk management process and efficiently gather and share information about the risk level. It means that based on the adopted risk management model, key risks will be systematically identified, analyzed and assessed. Application of this system will support the implementation of solid methods of dealing with a variety of threats with simultaneous minimization of costs and losses incurred due to a given risk.

raport roczny 07/08

62


annual report 08/09


Auditor’s Opinion

To the Shareholder and Supervisory Board of Gas Transmission Operator GAZ-SYSTEM S.A.

We have audited the financial statements of GAZ-SYSTEM S.A., with the registered office in Warsaw, at 4 Mszczonowska Street, comprising:

introduction to financial statements, balance sheet prepared as at 30 April 2009, showing total assets, equity and liabilities of PLN 5,090,094,718.49, profit and loss account for the period from 01 May 2008 to 30 April 2009, showing net profit of PLN 288,588,064.51, statement of changes in equity for the period from 01 May 2008 to 30 April 2009, showing an increase in equity of PLN 1,219,382,178.51, cash flow statement for the period from 01 May 2008 to 30 April 2009 showing an increase in cash of PLN 657,181,310.74, notes and additional information, prepared in accordance with the act dated 29 September 1994, Accounting Law (Journal of Laws of 2002, No 76 item 694) and as at 2 July 2009 we have issued an unqualified opinion.

Management Board of the Company is responsible for the preparation of the attached abbreviated financial statement. Our task was to express our opinion about the compliance of the abbreviated financial statements with the comprehensive financial statements.

In our opinion the attached financial statements are compliant, in all material respects, with the comprehensive version of financial statements, from which it was derived. The comprehensive version of financial statements which was the subject matter of our audit, includes additional information which was not presented in its full scope in the attached abbreviated financial statement. Comprehensive financial statements of the Company for the period of 12 months, ended as at 30 April 2009, together with our opinion is available at the registered office of the Gas Transmission Operator, GAZ-SYSTEM S.A.

Deloitte Audit Sp. z o.o.Entity authorized to examine financial statements, entered into the list of licensed entities under registration number 73, kept by KRBR.

Piotr SokołowskiStatutory Auditor, Registration Number 9752/7281

Warsaw, 17 July 2009

raport roczny 07/08

64


annual report 08/09

Profit & Loss Account – comparative basis data in PLN mill.

2008/2009 2007/2008

A Net revenues from sales and sales equivalents, including: 1,382.35 1,555.47

I Net revenues from sales of products 1,376.28 1,538.42

II Change in stock of products (addition – positive value, deduction – negative value) 5.06 16.29

III Manufacturing cost of products for entity’s own needs 0.78 0.35

IV Net revenues from sales of goods and materials 0.23 0.41

B Operating expenses 986.17 974.37

I Depreciation 329.18 365.52

II Use of materials and energy 125.27 102.75

III External services 224.34 211.09

IV Taxation and charges 104.43 128.90

V Payroll 138.95 110.85

VI Social security and other allowances 47.14 40.65

VII Other costs by nature 16.63 14.29

VIII Value of goods and materials sold 0.23 0.31

C Profit (loss) on sales (A–B) 396.18 581.10

D Other operating revenues 100.49 99.75

I Revenue from sale of non-financial fixed assets 2.15 0.31

II Subsidies 0.01 0.00

III Other operating revenues 98.33 99.44

E Other operating costs 28.36 64.95

I Loss on disposal of non-financial fixed assets 0.00 0.54

II Revaluation of non-financial fixed assets 10.13 4.47

III Other operating costs 18.23 59.94

F Profit (loss) on operating activity (C+D–E) 468.31 615.90

G Financial revenues 64.48 33.56

I Dividends and distribution of profits 0.00 0.00

II Interest 64.24 33.55

III Profit on disposal of investment 0.00 0.00

IV Revaluation of investment value 0.00 0.00

V Other 0.24 0.01

H Financial expenses 97.75 190.88

I Interest 0.13 0.11

II Loss on disposal of investment 0.00 0.00

III Revaluation of investment value 0.00 0.00

IV Other 97.62 190.77

I Operating profit (loss) (F+G–H) 435.04 458.59

J Result of extraordinary events (J.I.–J.II.) (0.01) (0.02)

I Extraordinary gains 0.07 0.04

II Extraordinary losses 0.08 0.06

K Gross profit (loss) (I+/–J) 435.03 458.56

L Income tax 91.27 80.88

M Other mandatory charges to profit 55.17 53.41

N Net profit (loss) (K–L–M) 288.59 324.28


Cash-flow statement (indirect method) data in PLN mill.

2008/2009 2007/2008

A Cash flow from operating activity

I Net profit/(loss) 288.59 324.28

II Total adjustments 337.29 601.42

1 Depreciation 329.18 365.52

2 Foreign exchange gains/losses 0.00 0.01

3 Interest and participation in profits (dividends) 171.01 265.34

4 Gains/losses on investment activity (114.20) (97.05)

5 Change in reserves 30.29 51.09

6 Change in inventory (14.16) (2.00)

7 Change in accounts receivable 49.23 9.96

8 Change in short-term liabilities, except for loans and credits (125.22) 32.77

9 Change in accruals 1.17 (22.73)

10 Other adjustments 9.99 (1.49)

III Net cash flow from operating activity (I + II) 625.88 925.70

B Cash flow from investment activity

I Proceeds 540.97 0.19

1 Disposal of intangible fixed assets and tangible fixed assets 15.13 0.19

2 Disposal of investment in real estate and in intangible fixed assets 0.00 0.00

3 Financial assets 498.57 0.00

4 Other investment proceeds 27.27 0.00

II Expenses 256.62 482.85

1 Acquisition of intangible fixed assets and tangible fixed assets 200.94 71.08

2 Investment in real estate and in intangible fixed assets 0.00 0.00

3 On financial assets: 55.49 411.37

4 Other investment expenses 0.19 0.40

III Net cash flow from investment activity (I-II) 284.35 (482.66)

C Cash flow from financial activity

I Proceeds 0.00 0.00

1 Net proceeds from issue of shares and other capital instruments and payments to the capital 0.00 0.00

2 Credits and loans 0.00 0.00

3 Issue of debt securities 0.00 0.00

4 Other financial proceeds 0.00 0.00

II Expenses 253.04 423.76

1 Acquisition of shares in equity 0.00 0.00

2 Dividends and other payments to the owners 73.50 75.63

3 Expenses due to the distribution of profits other than payments to the owners 12.17 11.40

4 Repayment of credits and loans 0.00 0.00

5 Redemption of debt securities 0.00 0.00

6 Other financial obligations 0.00 0.00

7 Obligations due to financial leasing agreements 71.81 152.85

8 Interest 95.56 183.88

9 Other financial expenses 0.00 0.00

III Net cash flow from financial activity (I-II) (253.04) (423.76)

D Net cash flow, total (A.III +/- B.III +/- C.III) 657.19 19.28

E Balance sheet change in cash, incl. 227.25 19.27

F Cash as at the beginning of period 231.43 212.16

G Cash as the end of period (F +/- D) 888.62 231.43

raport roczny 07/08

66


annual report 08/09

Balance Sheet – Assets data in PLN mill.

2008/2009 2007/2008

A FIXED ASSETS 3,704.69 3,613.44

I Intangible fixed assets 13.99 6.79

II Tangible fixed assets 3.592.10 3.551.21

III Long-term receivables 0.00 0.00

IV Long-term investment 54.98 0.00

V Long-term prepaid expenses 43.62 55.44

B CURRENT ASSETS 1,385.40 1,173.28

I Inventory 49.73 35.57

II Short-term receivables 142.64 134.18

III Short-term investment 1.147.31 971.49

IV Short-term prepaid expenses 45.72 32.04

TOTAL ASSETS 5,090.09 4,786.72

Balance Sheet – Equity and Liabilities data in PLN mill.

2008/2009 2007/2008

A EQUITY (OWN FUND) 3,889.68 2,670.30

I Share capital (fund) 3,019.39 2,069.40

II Due payments to share capital (negative value) 0.00 0.00

III Own shares (negative value) 0.00 0.00

IV Supplementary capital (fund) 314.77 276.63

V Revaluation reserve (fund) 0.00 0.00

VI Other reserves (funds) 266.93 0.00

VII Profit/loss of previous periods 0.00 0.00

VIII Net loss/profit 288.59 324.28

IX Charges to net profit during the financial year (negative value) 0.00 0.00

B LIABILITIES AND PROVISIONS FOR LIABILITIES 1,200.41 2,116.41

I Provisions for liabilities 136.20 105.91

II Long-term liabilities 659.41 1.595.19

III Short-term liabilities 359.68 373.23

IV Accruals and deferred income 45.12 42.08

TOTAL LIABILITIES AND EQUITY 5,090.09 4,786.72


Contact Details

Management Board: phone: fax: e-mail:

President of the Management Board +48 22 220 18 07 +48 22 220 17 10 [email protected]

Member of the Management Board for Technical Issues

+48 22 220 18 05 +48 22 220 17 98 [email protected]

Member of the Management Board for Investment

+48 22 220 18 31 +48 22 220 17 98 [email protected]

Divisions: phone: fax: e-mail:

Financial +48 22 220 18 19 +48 22 220 16 94 [email protected]

Trade +48 22 220 18 27 +48 22 220 16 38 [email protected]

National Gas Dispatching +48 22 532 49 44 +48 22 532 49 42 [email protected]

Operation +48 22 220 18 25 +48 22 220 16 61 [email protected]

Development and Investments +48 22 220 18 22 +48 22 220 17 45 [email protected]

Human Resources +48 22 220 18 15 +48 22 220 17 44 [email protected]

Support +48 22 220 18 09 +48 22 220 17 70 [email protected]

IT +48 22 220 18 13 +48 22 220 17 63 [email protected]

Audit and Security +48 22 220 17 59 +48 22 220 17 16 [email protected]

Spokesperson +48 22 220 17 55 +48 22 220 16 06 [email protected]

Registered Head Office:

Gas Transmission Operator GAZ-SYSTEM S.A.

e-mail: [email protected]

phone +48 22 220 18 00fax +48 22 220 16 06

ul. Mszczonowska 402-337 Warszawa, Poland

raport roczny 07/08

68


annual report 08/09

Branches: phone: fax: e-mail:

Gas Transmision Operator

GAZ-SYSTEM S.A.

Branch in Gdańsk

ul. Podstoczna 10/11

80-860 Gdańsk

(address for correspondence)

ul. Wałowa 41/43

80-858 Gdańsk, Poland

+48 58 323 05 00 +48 58 323 05 01 [email protected]


GAZ-SYSTEM S.A.

Branch in Poznań

ul. Grobla 15

61-859 Poznań , Poland

+48 61 854 43 10 +48 61 854 43 12 [email protected]


GAZ-SYSTEM S.A.

Branch in Rembelszczyzna

ul. Jana Kazimierza 3

05-126 Nieporęt

Rembelszczyzna, Poland

+48 22 767 08 01 +48 22 767 09 52 [email protected]


GAZ-SYSTEM S.A.

Branch in Świerklany

ul. Wodzisławska 54

44-266 Świerklany, Poland

+48 32 439 25 00 +48 32 439 25 60 [email protected]


GAZ-SYSTEM S.A.

Branch in Tarnów

ul. Bandrowskiego 16A

33-100 Tarnów, Poland

+48 14 622 53 00 +48 14 621 37 31 [email protected]


GAZ-SYSTEM S.A.

Branch in Wrocław

ul. Gazowa 3

50-513 Wrocław, Poland

+48 71 335 31 00 +48 71 335 31 01 [email protected]


Subsidiaries: phone: fax: e-mail:

Registered Head Office:Polskie LNG sp. z o.o. ul. Bunkrowa 1 72-602 Świnoujście, Polandwww.polskielng.pl

[email protected]

Office in Szczecin:ul. Energetyków 3/4 70-950 Szczecin, Poland

+48 91 489 90 20 +48 91 489 90 21

Office in Warsaw: ul. Mszczonowska 402-337 Warszawa, Poland

+48 22 589 84 00 +48 22 589 84 01

Representative Office in Brussels: phone: fax: e-mail:

Gas Transmission Operator GAZ-SYSTEM S.A. – Brussels OffceBoulevard Saint-Michel 47 1040 Brussels, Belgium

+32 2 400 00 52 +32 2 400 00 32 [email protected]

raport roczny 07/08

70


annual report 08/09

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................


Notes

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

.............................................................................................................................................................................

raport roczny 07/08

72


annual report 08/09

Publisher:

Gas Transmission OperatorGAZ-SYSTEM S.A.

ul. Mszczonowska 4, 02-337 Warszawa, Polandphone +48 22 220 18 00, fax +48 22 220 16 06e-mail: [email protected]

Material delivered for printing in August 2009

Photographs made by:

Masterfile (cover), Andrzej Tyszko (9, 10, 11, 42, 53), Ryszard Nater (12, 14, 15, 16, 23, 24, 37, 38, 50, 51, 52, 55, 56, 61),

Andrzej Mroczek (16), Marcin Chimiczewski (31, 37, 38, 42, 45), iStockphoto LP (32, 62),

Own files (41, 44, 46), Agnieszka Ozga (59)

annual report - gaz-system · the system that connects annual report 08/09 our company allows...

Documents