PGNiG announced yesterday that Polands's natural gas consumption hit a new record on Tuesday reaching 63.5 million cubic meters after Monday’s record of 61.5 mcm. The CEO of gas transmission company Gaz System said that the daily gas deficit is roughly 1.5-2.0 mcm, which is currently covered by lower supply to certain industrial groups (mainly power stations and fertilizer makers).
PGNiG shares were up yesterday on speculation that strong demand for natural gas could drive 1Q profits and might put the gas pricing issue on the spotlight again. We disagree with the first argument. Due to the lower regular import from the Ukraine pipelines, PGNiG needs to buy natural gas on the spot market at a much higher price than long-term contract prices, while retail tariffs are fixed for the quarter. Moreover, recent supply stability concerns might drive households to look at alternative heating solutions for the future, which makes PGNiG’s long-term growth prospects less attractive.
At the moment, however, we do not feel it necessary to revise our gas sales volume forecasts for PGNiG. We maintain our hold recommendation on the stock and PLN 3.50 price target.