PGNiG speculates on gas prices? The company is responding to the allegations of Radosław Sikorski

Twitter has been buzzing with reports since Wednesday morning that PGNiG was to lose billions of zlotys by speculating with gas price indices. Radosław Sikorski said that if these reports were confirmed and the nominees of Law and Justice in the state-owned company pursued such a policy, “this government should be swept away”.

The topic itself was started by one of the Twitter users who delved into the company’s reports. According to him, they show that PGNiG concluded derivative transactions, which was supposed to speculate on gas prices, on which only in the third quarter of 2021 it lost PLN 1.5 billion.

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First, let’s explain what derivative transactions are. PGNiG has been abandoned to generate losses on SWAP transactions. In simple terms, it is a type of contract between two entities that defines the rules of mutual payments, depending on a specific market parameter, e.g. interest rate or exchange rate.

In this case, the SWAP was to hedge the gas price for the Polish company. The data shows that PGNiG lost money during these operations. This is where the allegations of speculation, which ended in the company’s failure, arose.

See also: Pensioners unjustly lose on the Polish Lada? “Mistakes Happen”

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PGNiG: This is standard industry practice

Therefore, we asked PGNiG to explain these transactions to us. In response from the company’s press office, we can read an assurance that there can be no speculative activity.

“The company consistently implements a long-term strategy of managing the risk of volatility of commodity prices, currencies and interest rates. It is a widely accepted practice used throughout the industry“- we read.

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For this purpose, the company uses SWAP contracts for gas price indices. PGNiG assures money.pl that thanks to this, it is possible to limit the impact of fluctuations in the purchase and sale price of gas fuel on the company’s financial results. Their value itself is a derivative of the gas price indices.

“The sharp increase in gas prices in Q3 2021 translated into a corresponding increase in the value of hedging instruments. In other words, the same volume of derivatives had a higher valuation due to the increase in the value of the underlying,” the press office said in response.

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“PGNiG may incur a loss on hedging instruments”

The company ensures that “may incur a loss on the hedging instruments”like other trading companies. Especially that – according to PGNiG – the dynamic increase in gas prices in the third quarter of 2021 was impossible to predict.

“However, please note that payout on financial instruments is counterbalanced by a positive result from activity on the physical market and vice versa. Instruments are entered into for the purpose of stabilizing the cash flow of activities in the physical market and not to take advantage of increases or decreases in commodity prices, currencies or interest rates. Therefore, the assessment of the segment’s operating activity should take into account all the elements that make up the financial result, and not just one component “- argues the company’s press office.

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About Eric Wilson

The variety offered by video games never ceases to amaze him. He loves OutRun's drifting as well as the contemplative walks of Dear Esther. Immersing himself in other worlds is an incomparable feeling for him: he understood it by playing for the first time in Shenmue.

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