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Performance of the PGNiG stock

Since September 23rd, 2005, the PGNiG stock has been listed in the continuous trading system of the main market at the Warsaw Stock Exchange. Its issue price in the public offering was PLN 2.98. In 2016, the PGNiG stock was included in the following WSE indices: WIG, WIG20, WIG30, WIG-Poland, RESPECT Index, WIG-PALIWA (sectoral index) and WIGdiv (until December 16th, 2016).

Performance of the PGNiG stock vs. WSE indices

PLN

Source: Warsaw Stock Exchange

The PGNiG stock price movements ranged between -13% (lowest price: PLN 4.47 on January 14th, 2016) and +12% (highest price: PLN 5.76 on July 13th, 2016) from the 2015 closing price (PLN 5.14 on December 31st, 2016). For comparison purposes, fluctuations of the WIG20 index ranged between -10% (lowest value: 1674.57 points on January 20th, 2016) and +7.5% (highest value: 1,999.3 points on March 30th, 2016). Compared with 2015, both the PGNiG stock and the WIG20 index fluctuated within a much narrower range. The main reasons behind their changes included:

fluctuations in crude oil prices globally (historical lows in the first quarter, upsurge in the fourth quarter),
declining prices on PPX (the average spot price of gas on PPX in 2016 fell 24% compared to 2015),
ongoing deregulation of the gas market in Poland.

In the first quarter of 2016, the PGNiG stock slid to the year’s low of PLN 4.45 (on January 14th, 2016). The beginning of the year saw a massive slump in crude oil prices. The price per barrel on the Intercontinental Exchange (ICE) and London Metal Exchange (LME) fell below USD 30 – a level unseen in some 12 years. With the gas price equally depressed, this signalled a possible deterioration in the performance of the Exploration and Production segment. For all that, at the end of Q1 2016 the PGNiG stock price on the Warsaw Stock Exchange rallied – closing at PLN 5.32 on March 31st, 2016. Although in Q4 2015 PGNiG’s net loss was slightly higher than the market consensus, analysts appreciated the Company’s strong balance sheet and dividend capacity.

In Q2 2016, the PGNiG stock price was highly volatile − on June 16th, 2016, it fell to the quarterly low of PLN 4.83, to surge to the quarterly high of PLN 5.60 only two weeks later (June 30th, 2016). The Company’s performance in Q1 2016, especially in the Trade and Storage segment, was well received by analysts and investors. A major increase in the PGNiG stock price in late June was driven, among other factors, by URE’s decision on a lower-than-expected reduction in the PGNiG Obrót Detaliczny Sp. z o.o. retail tariff until the end of 2016. Therefore, the robust performance of the Trade and Storage segment was expected to continue in H2. Furthermore, on June 28th, 2016, the Annual General Meeting of PGNiG passed a resolution on the distribution of net profit for 2015. The dividend amount was PLN 1.062bn (PLN 0.18 per share).

In early Q3 2016, the upward trend continued, with the stock price peaking for the year at PLN 5.76 on July 13th, 2016. After that date, the trend reversed and in September 2016 the price sank below PLN 5 again. The first major plunge took place following the release of the Company’s selected operating data estimates for H1 2016. Some analysts and investors were slightly disappointed with lower oil sales by the PGNiG Group and a high share of gas from Gazprom in PGNiG’s basket. The stock price fell also after the Management Board’s decision to repurchase shares.

The downward trend continued throughout most of Q4 2016, bringing the PGNiG stock back to the year’s lows (PLN 4.57 at the close of trading on November 14th, 2016). Following the OPEC deal to cut oil production, the trend reversed again in late 2016 and the PGNiG stock price rebounded to PLN 5.6 on December 13th, driven mainly by increases in oil and gas prices. During the key week of negotiations by OPEC members, the crude oil price per barrel on ICE rose by over 13% (Brent crude monthly futures contract price at the close of trading on November 28th vs December 2nd, 2016).

On December 30th, 2016 (the last trading day of the year), the PGNiG stock price closed at PLN 5.63. The price was nearly 89% above the issue price of 2005 and 28% above the closing price on the first day of listing. Factoring in the dividends of PLN 1.46 per share paid in 2005–2016, investors who acquired PGNiG shares at the issue price and held them until the end of 2016 saw a profit of 138%.

Performance of the PGNiG stock vs. WSE indices

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Index / PGNiG stock price*	Value/price as at Dec 30, 2015	Value/price as at Dec 30, 2016	2016 low	2016 high	PGNiG’s weight in the index as at Dec 30, 2016
WIG	46,467 points	51,754 points	42,152 points	51,754 points	3.3%
WIG20	1,859 points	1,948 points	1,675 points	2,000 points	5.2%
WIG30	2,076 points	2,243 points	1,879 points	2,244 points	4.8%
WIG-Poland	47,412 points	52,584 points	43,016 points	52,584 points	3.4%
WIG-Paliwa	4,468 points	5,669 points	3,950 points	5,702 points	22.8%
RESPECT Index	2,269 points	2,516 points	2,066 points	2,519 points	9.0%
PGNiG	PLN 5.14	PLN 5.63	PLN 4.47	PLN 5.76	–

Source: Warsaw Stock Exchange

*PGNiG stock price and index values based on closing prices, excluding the ex-dividend day effect.

Rates of return on WSE indices vs. PGNiG stock in 2016 and from PGNiG’s IPO

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Index / PGNiG stock price*	Rate of return in 2016	Rate of return from PGNiG’s IPO¹ to Dec 30 2016
WIG	11.4%	-20.7%
WIG20	4.8%	55.8%
WIG30	8.1%	-11.7%²
WIG-Poland	10.9%	60.6%
WIG-Paliwa	26.9%	59.2%³
RESPECT Index	10.9%	151.6%⁴
PGNiG	9.5%	47.8%⁵

Source: Warsaw Stock Exchange

* Rates of return do not include dividends paid in 2005−2016.

¹Closing price on September 23rd, 2005.

²Calculated in relation to the reference value of the index (reference date: September 23rd, 2013).

³Calculated in relation to the reference value of the index (reference date: December 30th, 2005).

⁴ Calculated in relation to the reference value of the index (reference date: December 30th, 2008).

⁵ Relative to the issue price of PLN 2.98, PGNiG shares yielded a rate of return of 89%.

Financial metrics and trading multiples

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Financial metrics*	Unit	2016	2015	2014	2015/2016 change (%)
Net profit attributable to owners of the parent company	PLNm	2,351	2,134	2,823	10.2%
Earnings per share*	PLN	0.40	0.36	0.48	11.1%
Stock price at the close of trading on the last trading day of the year	PLN	5.63	5.14	4.45	9.5%
Average stock price in the year	PLN	5.16	5.94	4.85	-13%
Number of shares outstanding	million shares	5,778	5,900	5,900	–
Capitalisation at year-end	PLNm	32,532	30,326	26,255	7.3%
Average daily trading volume	million shares	4.9	4.7	3.9	4.3%
Average daily trading value	PLNm	25.5	27.9	18.8	-8.6%
Dividend amount***	PLNm	1,062	1,180	885	-10%
Trading multiples**
P/E at average stock price	–	12.88	16.41	10.14	-22.7%
P/E at year-end	–	13.85	14.21	9.3	-2.5%
P/BV at year-end	–	1.02	0.99	0.87	3%
EV/EBITDA	–	5.53	5.02	4.39	10.2%
Dividend per share***	PLN	0.18	0.2	0.13	-10%

Source: Warsaw Stock Exchange

*Attributable to holders of ordinary shares in the parent company (in PLN).

** Prices at close.

*** Dividend from previous year’s profit.

Treasury shares

The Extraordinary General Meeting held on August 25th, 2016 authorised the Management Board to repurchase Company shares for retirement. The authorisation to repurchase up to 129,870,129 ordinary bearer shares, for an aggregate amount of up to PLN 700m, was in force until December 31st, 2016. In 2016, PGNiG repurchased 121,685,143 book-entry ordinary bearer shares with a par value of PLN 1.00 per share:

on September 7th, 2016, PGNiG repurchased 92,764,327 shares which were acquired at the price of PLN 5.39 per share,
on November 14th, 2016, PGNiG repurchased 28,920,816 shares which were acquired at the price of PLN 5.00 per share.

Investor relations

Investor relations are gaining in importance as an area of business activities of public companies. Their growing role stems from the dynamic development of the Polish capital market, as confirmed by a consistent year-on-year increase in assets of the Polish and foreign investment funds, as well as stable numbers of listed companies (487 as at the end of 2016) and investment accounts registered in Poland (1.4m). Statistical data confirms that the Warsaw Stock Exchange is an attractive investment venue not only for institutional investors but also for several hundred thousand retail investors.

The strengthening of the Polish capital market is also supported by successful implementation of new legal and regulatory requirements for issuers. Since July 3rd, 2016, capital market players have been required to comply with the MAR. Acting in cooperation with the Polish Financial Supervision Authority and other bodies, the issuers had to face the challenge of adapting to the new regulations and effectively fulfilling disclosure requirements applicable to listed companies (current and periodic reporting). The PGNiG Group has implemented internal rules to assist its employees in identifying the events the information on which may be deemed inside information and thus is subject to public announcement.

Market Abuse Regulation (MAR)

Regulation (EU) No 596/2014 of European Parliament and of the council of 16 April 2014 on market abuse (market abuse regulation)

In 2015 and 2016, the PGNiG Group took steps to further improve the Company’s corporate website, with a particular focus on its investor relations sections. The website features current and periodic reports, information on the Group’s strategy, PGNiG’s updated investor presentations, with a brief and accessible summary of the PGNiG Group’s equity story, as well as the telephone and email contact details of the PGNiG Investor Relations Department.

Investors appreciated the top quality of our investor relations service: in 2016, the Company was awarded in the 9th edition of the Golden Website Award programme (assessing website operation in 2015), in the ‘Polish Companies in the WIG20 and mWIG40 Indices’ category. An analysis of scores achieved for the individual assessment criteria in the second stage of the programme shows that PGNiG’s website was assigned the largest number of maximum scores. The Company received the maximum scores for clarity of communication and content, intuitive and easy site navigation, ergonomics and aesthetic design. In March 2017, the PGNiG Group was shortlisted for the final stage of the 10th edition of the programme (assessing website operation in 2016).

In 2016, the PGNiG Group’s representatives held several dozen meetings with investors and stock analysts. The Company also actively communicated with retail investors. Key initiatives addressed to this investor group included development of dedicated educational materials building the investors’ knowledge of the Company and the gas market (e.g. the annual report accessible online) and publication of records of teleconferences for stock analysts held by representatives of the PGNiG Management Board.

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Performance of the PGNiG stock

Performance of the PGNiG stock vs. WSE indices

Performance of the PGNiG stock vs. WSE indices

Rates of return on WSE indices vs. PGNiG stock in 2016 and from PGNiG’s IPO

Financial metrics and trading multiples

Treasury shares

Investor relations