We turned PLN 1.6bn in net profit and PLN 1.7bn in operating profit. Further, sales revenue rose by 8% on the previous year, to PLN 23bn. Regrettably, due to crude prices soaring on global markets and the dollar having appreciated against the złoty, gas tariffs in Poland failed to keep up with the rising cost of gas imports, which adversely affected the performance of the Trade and Storage segment.

On the other hand, strong performance was reported by the Exploration and Production segment, with operating profit having risen by 92% year on year to PLN 1.1bn. This rate of growth in revenue is a source of pride for us, and confirmation that our strategy of investing in production and exploration is right. The major growth in the segment was driven by the rising prices of crude oil, oil production forecasts having been met, and enormous interest in the exploration for unconventional gas in Poland. The PGNiG Group successfully participates in projects run by various operators to satisfy the growing market requirements. Our strong financial performance is also a testament to the competence and professionalism of our personnel.

Although this year’s results are something to be pleased about, we hope for further growth and improvement in our financial performance. PGNiG is actively involved in exploration for unconventional gas, holding 15 exploration and appraisal licences, a number that leaves several dozen of our peers in Poland far behind. We are satisfied with the positive results of the Lubocino-1 well fracturing on the Wejherowo licence. Tests carried out on the well encourage further work – horizontal drilling and more hydraulic fracturing operations. If successful, these efforts may result in the launch of commercial production of shale gas at the end of 2015. Our ambitious plans are capital-intensive: the Group intends to spend approximately PLN 1bn on gas exploration in 2012. We also aim to forge relationships with Polish and foreign partners with sights set on shale gas exploration, to help increase the budget of the strategic shale gas project. Apart from the Wejherowo licence, drilling will be performed on the Tomaszów Lubelski licence, while exploration work will cover several other licence areas.

Unfortunately, for apparent reasons, exploration work in Libya was suspended in 2011. Also, production from the Skarv field, where PGNiG Norway holds an interest, has been delayed. We hope that 2012 will be more generous as regards our presence on international markets.

As for growth-oriented projects implemented at home, I should mention the Gas Deregulation Programme (PUG). As an outcome of negotiations held with the Polish Energy Regulatory Office (URE) in autumn 2011, we prepared a draft PUG for public consultation in February 2012. It is a step towards liberalisation of the Polish gas market, with the target date set by the URE being January 1st 2013. Implementation of the PUG initiative is necessary to align national law with the EU legislation, but it also offers an opportunity to let gas prices be determined by market forces, thus increasing our ability to cover the cost of gas imports.

In 2011, we successfully continued projects designed to bring PGNiG closer to achieving its primary objective, which is to secure reliable and uninterrupted gas supplies for households and industrial customers. Attaining this objective requires both time and significant cash outlay to finance extension of the domestic gas system and increase underground gas storage capacities. Large volumes of gas injected into storage facilities after the 2010/2011 winter season, which was marked by high consumption, and the ongoing extension of underground storage capacities, allowed us to secure a record-high level of gas stocks (1.8bn m³) before the winter season, which is an enormous success. Also, an extension of the cross-border connector to the Czech Republic and the availability of the virtual reverse service on the Yamal line enable us to further diversify gas supply sources.

In this past year, PGNiG consolidated its position in the power segment – a recent addition to our business. Having purchased the assets of Vattenfall Heat Poland (VHP), we are set to become a multi-utility group offering its customers heat, gas and electricity. The acquisition process, initiated in August 2011 and completed in January 2012, will not only help PGNiG strengthen its position in the new segment, but will also diversify revenue streams in line with the adopted growth strategy which identifies power generation as one of the three major growth areas. The takeover of VHP, renamed PGNiG Termika in January 2012, will also enhance development prospects for gas-fired power generation and contribute to increased competition in the Polish power sector. The year 2011 also saw continuation of the 400MW CCGT project in Stalowa Wola. In July 2011 an agreement was signed to connect the unit at the Stalowa Wola CHP to the transmission network, and a Contract Engineer was selected. Work was also underway to secure financing and select the General Contractor for the project.

It is also worth noting that the PGNiG Group has gained a new company – PGNiG Technologie. The company was formed through successful consolidation of four entities providing construction and assembly services to the oil and gas sector.

For the projects planned for 2012–2013, significant capital resources need to be secured. To this end, PGNiG aims to extend the scope of its reliance on external financing by increasing its Polish note programme to PLN 7bn while maintaining reasonable funding costs, and launching a Eurobond programme for up to EUR 1.2bn whereunder EUR 500m-worth of notes was already placed with investors in February 2012.

Summarising this past year, we may say that amidst turbulent market conditions PGNiG stock was a safe haven for investors, yielding returns on investment in the range of 17.6% (including dividend). The Company achieved this result following the principles of corporate social responsibility. We continuously adhere to these principles, which fact was rewarded by inclusion of PGNiG in the WSE’s RESPECT Index and by the title of Socially Responsible Company of the Year 2011 in the Fuels and Energy category of a poll by the Dziennik Gazeta Prawna daily. This is a guarantee that even our most complex business ventures are implemented in keeping with the principles of sustainable development and to the benefit of our shareholders, employees, local communities and the natural environment. The involvement in the Global Compact initiative confirms the PGNiG Group's commitment to the implementation of objectives and values recognised by the global business community and set by the respected UN agency.

September 30th 2012 will mark PGNiG’s 30th anniversary, an occasion which offers an opportunity to look back. We believe that it was time well-spent and our operations have provided us with strong foundations for further growth.

We would like to express our gratitude to all of you who have contributed to the Company's success – our shareholders and customers, members of the Supervisory Board and all the employees of the PGNiG Group.

Thank you for your trust. Let me assure you that we will strive to further enhance our operations and maximise the Company’s value for existing and future shareholders.

I hope you find the time to read our “Responsible Energy” CSR report, which this time is available only in an electronic version. Since 2011 was rich in important corporate events and developments, the report places a focus on the key activities we undertook in four areas of sustainable business. Next year, our CSR report will be enhanced to include an extensive section devoted to sustainable development activities in the area of unconventional natural gas exploration. You are already welcome to read it.

Yours faithfully,

Grażyna Piotrowska-Oliwa, CEO
President of the Management Board
PGNiG SA