PGNiG expects to raise gas prices in September for the third and final time this year to help offset the higher cost of imported fuel.
The company asked URE on Aug. 16 to approve a 4.9% boost, after three proposals for bigger price increases were rejected. According to Cyryl Federowicz, head of PGNiG's gas tariff department, unless the zloty weakens significantly to 3.30 PLN/US$ in the next quarter, it would be the last increase this year. The URE will decide on the latest request at the beginning of next week, the regulator's spokeswoman Agnieszka Debek said.
Our view: While the timing of the decision might be new for the market, the requested hike not. We have already expressed in our recent note on PGNiG that URE is very likely to approve the lowered claim of PGNiG. The company has indicated for us that, based on the current cross rate environment, the requested tariff increase of 4.9% would be satisfactory for a reasonable operational performance of its gas trading unit. According to our calculation, even without the 4.9% hike in mid-September trading business could remain above break-even in 2H06, however, its return would be much less impressive. Please note, if URE again rejects PGNiG's claim, the reason would be the strengthening zloty, which really lowers import prices and thus compensates for the unchanged tariffs.