Business daily Parkiet reports that PGNiG shortlisted 4 consortia for the preparation of a feasibility study on a potential LNG terminal. These are: 1) ICF Resources LLC and Taylor–Dejongh, 2) Ove Arup & Partners Int Ltd and Doradca Consultants Ltd, 3) Poten & Partners and HSBC, and 4) PricewaterhouseCoppers, ILF Consulting Engineers, ILF GmbH and Radzikowski Szubielska & Co (legal counsel). Negotiations with the bidders will start next week and the final selection will be made at the end of February. According to PGNiG's plan, the feasibility study should be ready in 4Q 2006, and construction works could start in 2007. Since construction works are expected to take 3 years, the new terminal would not be operational before 2010. PGNiG plans the capacity of the system in the 3-5 bcm per annum range. The company estimates total cost of the project at EUR 400-500m. However, PGNiG is also considering buying/leasing three special LNG tankers. Buying the tankers would cost another EUR 300m (EUR 100m per ship).
Given the size of the investment, PGNiG should reconsider its CAPEX plans, in our view. According to our model the company should be able to finance the LNG storage investment from its own cash plus debt. However, buying (and not leasing) the ships would mean that the company seriously commits itself to the LNG business, which is a risk factor, in our view. At the moment it is too early to speculate as PGNiG will make the decision only after the feasibility study is completed in 4Q2006. Therefore, we consider the news as neutral to the share price today. We maintain our Hold recommendation on the stock with a price target of PLN 3.58.