Poland's URE Thursday hiked the tariff for wholesale prices for natural gas by 9.9% versus 14.3% what PGNiG applied for. In the meantime the end customers will be paying 4-8% higher bills. The tariffs were approved only for the 1st quarter 2007. The gas transmission tariffs for EuRoPol Gaz will amount to USD 2 per 1,000 cubic meters of natural gas per 100 kilometers, which is approximately mid-way between the proposals submitted by the Polish and Russian executives at EuRoPol Gaz.
Our view: Though the tariff hike is lower than PGNiG requested, we regard the news as positive for PGNiG. Please note, that the summer surge in crude oil prices will be reflected in import prices for natural gas in 1Q07 due to the 6-9 months lag in the calculation of the contract price. However further weakened US-Dollar against the Polish Zloty is expected to support the company’s utility business and to reduce the gap between the import prices and retail tariffs.