Fertilizer maker Pulawy, one of the largest customers of PGNiG, has signed an agreement with Hungarian Emfesz for gas supplies. In 2H06, Pulawy plans to buy 150m m3 of gas from Emfesz versus their total annual consumption of 850m m3. The move is a part of Pulawy’s strategy to diversify gas purchases and raise the ratio of other sources to 50%. According to Gazeta Wyborcza, Emfesz wants to sell some 500m m3 of gas in Poland this year. Emfesz purchases natural gas under a 10-year contract from RosUkrEnergo, the exclusive supplier of Turkmen gas in Europe.
The news is certainly negative for PGNiG; however, it has relatively low margin on sales to the biggest buyers of natural gas. We maintain our hold recommendation on the stock and our PLN 3.45 price target.