DIRECTORS' REPORT ON PGNiG SA'S OPERATIONS ... - Notowania

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Directors’ Report on PGNiG S.A.’s Operations in 2008 The key projects implemented with the use of issue proceeds in 2008 were: • increasing the capacities of underground gas storage facilities in Swarzów, Mogilno, Wierzchowice and Strachocin, and investment in transmission assets included in the list of fixed assets under a lease agreement. • Modernisation and extension of distribution network carried out by the Distribution System Operators. As at the end of 2007, the total limit set in the Issue Prospectus for expenditure on upstream activities was exhausted. Feasibility of Investment Plans PGNiG S.A. holds financial resources in the form of bank deposits as well as current investments in treasury debt securities, which are easily available for sale. The balance of available funds lends flexibility to the Group in implementing its investment plans. A low financial leverage and positive assessment of the PGNiG S.A.’s risk, as confirmed by the rating agencies, combined with appropriate creditworthiness, enable the Group to finance potential further projects using bank loans and debt issues. Transactions concluded on terms deviating from the market terms In 2008, PGNiG S.A. and its subsidiaries did not enter into any material related party transactions on terms deviating from the market terms (Note 46.2. to the Annual Non-consolidated Financial Statements for the Financial Year Ended December 31st 2008). Explanation of discrepancies between the actual results and forecasts for 2007 In 2008, the Company did not publish any forecasts. 50 of 55
2. Financial Management Directors’ Report on PGNiG S.A.’s Operations in 2008 The funds at the disposal of PGNiG S.A. guarantee the financing of all current and planned expenses related to the Company’s current and investing activities. Although no risk of liquidity loss occurs, in order to enhance security the Company has concluded current account loan agreements (for a total of PLN 230m), as well as a syndicated loan agreement (dated July 27th 2005) providing for a revolving multi-currency credit facility of EUR 600m. As at December 31st 2008, the debt under the syndicated loan amounted to EUR 191.3m. 2.1. Current Investments In 2008, free cash was invested in instruments involving minimum credit risk, i.e. treasury securities and deposits with commercial banks with investment grade rating. Investments in debt securities issued by the State Treasury represented approximately 77% of the transaction volume. The financial investments made in 2008 were current investments, maturing in up to three months, which was consistent with PGNiG S.A.’s financial investment policy and the objectives specified in the issue prospectus. 2.2. Loan Agreements In 2008, PGNiG S.A. concluded agreements for current account loans totalling PLN 110m. The Company did not disclose any liabilities under current account loans. The table below presents loan agreements concluded by the Company in 2008. Loan agreements concluded by PGNiG S.A. in 2008 Bank Loan amount [PLNm] Interest rate Type Repayment date Bank Handlowy S.A. 40.0 WIBOR T/N + 0.8% working capital loan Dec 31 2009 Millennium S.A. 40.0 WIBOR 1M + 0.8% working capital loan Dec 18 2009 PKO BP S.A. 30.0 WIBOR 1M + 0.2% working capital loan Apr 22 2009 Total 110.0 The aggregate amount of loans advanced in 2008 by PGNiG S.A. to its related undertakings was PLN 157.1m and USD 25m. The loans were granted to finance day-to-day operations and investment projects involving: the construction and expansion of the high-pressure transmission grid, construction and upgrade of the distribution network, connection of new customers to the supply system, as well as to finance prospecting work and payments under licence in Libya. The table below contains detailed information on the loans advanced by PGNiG S.A. to its related undertakings. 51 of 55
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DIRECTORS' REPORT ON PGNiG SA'S OPERATIONS ... - Notowania

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