MANUFACTURING CAPITAL

One of the key directions for Group-wide innovation efforts is to improve the efficiency of production assets managed by the individual companies. 

• Under the agreement between the National Centre for Research and Development and Gaz-System, the Group is engaged in the largest research programme in its history – INGA (Innovative Gas Industry). Together with external partners, we have been working on such projects as use of methane from decommissioned mining facilities in the Upper Silesian Coal Basin, development of technologies for obtaining dimethyl ether in the context of developing small hydrocarbon deposits, as well as on a gas pipeline monitoring system.
• In 2019, the cooperation under the MIT Enterprise Forum Poland acceleration program implemented in cooperation with the Foundation for Technological Entrepreneurship ended. As part of the program, 12 start-up pilots were carried out, the solutions of which concerned, among others: the use of drones to create orthophotos or to monitor air pollution, increase the efficiency of oil extraction or the use of virtual reality to train employees on a simulator of a measurement and reduction station.

The PGNiG Group strives to build a culture of employee engagement and drive innovation. In the case of energy companies, the problem of generation gap is becoming increasingly widespread. Despite advancing automation, the efficiency of production assets remains hugely dependent on the availability of competent and well qualified technical personnel.

PGNiG takes measures to recruit highly qualified staff and manage generation gap through projects such as:

• ‘GeoTalent’ – an educational and internship programme targeted at students interested in future career in the E&P industry. The programme is meant to enhance the students’ theoretical knowledge and develop hands-on skills in hydrocarbon exploration, appraisal, and production from conventional and unconventional sources.
• ‘Energy for the Future’ – 2019 saw the fourth edition of the scholarship programme run by the Ministry of Energy, the PGNiG Group, PGE, PKN ORLEN and PSE. Its objective is to seek out the best university students and graduates to reinforce staffing in the industry.
• Mentoring Program - in 2019, a pilot initiative was carried out, the purpose of which is to share professional experience and distribute substantive knowledge from employees who are experts in their field and with many years of experience to employees who do not have such knowledge.

Interactions between natural capital and manufacturing capital may be analysed on several levels:

• In the Exploration and Production segment, the Group must have access to the necessary facilities and technologies to extract hydrocarbons from various deposits, including small-scale and unconventional deposits. In 2019, PGNiG launched the "Digital field" program - a tool that enables PGNiG to use oil and gas resources even more effectively. Last year, we also continued work on the GeoMetan II project, the aim of which is to make the methane trapped in coal beds seams available. In 2019, the ELIZA research and development project was successfully completed, laying the foundations for the creation of a hydrogen competence program at the PGNiG Group.
• The Generation segment relies largely on coal assets. The Group is currently upgrading its existing generation capacities to bring them in line with the requirements of BAT. New investments will rely primarily on gas – a fuel which has significantly smaller environmental impacts.

Property, plant and equipment are the largest component of the PGNiG Group’s assets. As at December 31st 2019, their value reached PLN 40,002m. Investments in production assets require the use of external funding raised in the financial market or internal funds held by the Group. In line with the PGNiG Group's Strategy adopted in March 2017, total CAPEX will exceed PLN 34bn in 2017-2022, while average annual capital expenditure in 2017−2022 will amount to ca. PLN 5.7bn:

• of which almost a half (45%) will be spent on hydrocarbon exploration and production,
• almost 30% of capital expenditure will be spent on developing the distribution business,
• ca. 13% − on power and heat generation projects,
• additionally, ca. 12% of CAPEX will be allocated to other, selected growth projects offering attractive returns, including in distribution, trading, power and heat generation.

In 2019, the PGNiG Group’s capital expenditure on property, plant and equipment was approximately PLN 6.6bn, having gone up by 36% year on year. 

In the mid- and long-term perspective, the goal of investments in the asset base is to enhance the Group’s efficiency and upscale its business. In line with the PGNiG Group's strategy in force for 2017-2022 with an outlook until 2026, the capex programme is expected to deliver cumulative 2017-2022 EBITDAear­nings be­fo­re in­te­rest, ta­xes, de­pre­cia­tion and amor­ti­za­tion of approximately PLN 33.7bn, driving long-term growth of the Group’s EBITDAear­nings be­fo­re in­te­rest, ta­xes, de­pre­cia­tion and amor­ti­za­tion in 2023-2026 to the annual average of around PLN 9.2bn.

The Group’s operations and the location of its production assets have a direct bearing on the living conditions and development of entrepreneurship across all regions of Poland. 

• Many industries rely on gas as one of their key feedstocks, and the access to ‘blue fuel’ stimulates economic growth;

• The gas sector is one of the country’s major employers. The closeness and continuing expansion of PGNiG’s production assets guarantees financial stability to nearly 25,000 employees and their families;

• The regional presence of PGNiG’s production assets is also a source of taxes for municipalities and an opportunity to take advantage of CSR and sponsorship projects run by Group companies.

By engaging in the anti-smog campaign, the PGNiG Group promotes natural gas as a source of energy. The pro-ecological offer of the PGNiG Group for customers, supporting environmental issues, included:

• "Switch to Gas" - an action conducted in cooperation with local government units, supporting the active fight against air pollution by providing residents with easier access to ecological gas fuel.

• “Co-financing up to PLN 3,000” (1st and 2nd edition) - a promotional campaign consisting in co-financing of consumers who plan to change the heating system from solid fuel to gas fuel (co-financing for the purchase of a gas condensing boiler and for installation of a gas condensing boiler).

• The "Full Breath" loan is a joint initiative of PGNiG OD and Bank Ochrony Środowiska in fighting air pollution and improving air quality. The offer was prepared with the current and future customers of PGNiG OD in mind, in order to make it easier for them to change the heating system to an ecological one, powered by natural gas.

• In 2019, PGNiG OD signed letters of intent assuming the construction of a CNG refuelling infrastructure in Łomża, Suwałki, Bielsko-Biała, Kielce and Lubin.

• From 2019, PGNiG OD also offers the LNG bunkering service. The introduction of LNG fuel for shipping allows ship owners to meet stringent environmental standards in 2019.