Annual Report

Transcription

1 Annual Report

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3 Contents The present publication is the first integrated report released by GAZ-SYSTEM S.A., which, at the same time, describes the sustainability measures undertaken by the company and presents the financial and non-financial performance results for the year The document will be updated annually. To date, in addition to its annual reports, GAZ-SYSTEM S.A. has published reports related to its membership in the Global Compact, an international initiative of the UN Secretary-General (for years 2010, 2011 and 2012), which are available on the corporate website. To ensure the completeness of the document, the company set up a workshop for key employees and managers of GAZ-SYSTEM S.A., during which the guidelines for the report were defined. The participants gathered the most important data concerning the projects implemented in the company within respective business strategy areas. The report refers to performance indicators for all aspects of the company s activity, i.e. economic, environmental and social, as set out in the Global Reporting Initiative (GRI) guidelines on application level B. The content of the report was regularly consulted with key internal stakeholders and has been approved by the leaders of the respective subject areas. The content presented in the report was selected based on the materiality principle, which GAZ-SYSTEM S.A. understands as reporting on issues that are relevant in the context of sustainability both for the organisation and its stakeholders. The information provided in the report was compiled based on the analyses and statistics kept by the company, and its scope covers both the head office of GAZ-SYSTEM S.A. and its six branches. The publication was not subject to external assurance. The next sections correspond to the respective pillars of the business strategy of GAZ-SYSTEM S.A. and are marked with the following icons: Message from Chairman of the Supervisory Board 4 Message from President of the Management Board 6 GAZ-SYSTEM S.A. the system that connects 10 Sustainable Development 28 Energy Security 52 Market Development 62 European Partner 68 Effective Management 74 Financials 86 GRI Content Index Table 101 Evaluation Questionnaire 109 Contact 111 Sustainable Development Energy Security Market Development European Partner Effective Management 2 3

4 Message from Chairman of the Supervisory Board Ladies and Gentlemen, 2011 was a momentous year for GAZ-SYSTEM S.A., as it marked the completion of some major investment projects for the expansion of the domestic transmission system and integration with our adjacent systems. Over 100 kilometres of new gas pipelines were built, including the first cross-border connection with the Czech Republic. We also launched a virtual reverse flow service on the Polish section of the Yamal gas pipeline. As a result, the technical capacity for supplying gas to Poland from new sources increased by 3.3 bcm per annum, i.e. over 30% of our previous imports. This way, our company has created a conducive environment to improve the competitiveness of Poland s economy, its energy security and integrate Europe s transmission systems into a single network. Companies employing modern management solutions are able to effectively translate their positive community relations into a strong market position and sound financial standing. By adopting the corporate strategy until 2020, the Supervisory Board recognised the non-financial aspects of company s performance and made the decision to integrate the social, environmental and economic components into all its business activities. Therefore, the present report contains a comprehensive presentation of our accomplishments and pursuits both on business dimension and in terms of corporate social responsibility. The strategy developed by GAZ-SYSTEM S.A. aims to tackle the challenges of the ever-growing European gas market and in the time horizon until 2014 provides for: completion of the LNG Terminal in Swinoujscie, completion of Poland s transmission network expansion to include 1000 km of new gas pipelines, especially in north-western, central parts of the country and in Lower Silesia. The above investment projects are focused on enabling gas imports to Poland from a diversified range of suppliers and the liberalisation of the gas market in Poland. Our work plan until 2020 will support the strategic goal of connecting the so-far isolated transmission systems, specifically through the following projects: The North-South Gas Corridor in Central Eastern and South Eastern Europe (development of cross-border interconnections with the Czech Republic and Slovakia), The Baltic Energy Market Interconnection Plan (BEMIP) in gas (interconnection of Poland s gas pipeline system with transmission systems in Denmark and Lithuania). Last year, marked by uncertainty over energy resource prices, demonstrated that a holistic approach to running business activity is key to stability in turbulent times. A long-term strategy is much needed to provide financing for energy projects which naturally require a long-term commitment and address long-term energy challenges. Thanks to the fact that the PLN 8 billion investment programme put forth by GAZ-SYSTEM S.A. won the confidence of the European Commission, the European Investment Bank and a bank consortium, in 2011 we successfully secured our financing until The positive response from these partners confirmed us in the conviction that our integrated, community-based approach to doing business is the right one. Our goals of becoming a major integrator in the EU gas market and a leader in Central Europe, as well as the investment tasks facing the management and employees are very ambitious indeed. However, judging by our experience so far, we firmly believe that our projects will see completion within the planned timeframe and to the highest quality standards. Yours faithfully, Jerzy Molak Chairman of the Supervisory Board of GAZ-SYSTEM S.A. 4 5

5 Message from President of the Management Board Ladies and Gentlemen, It is my pleasure to present to you the 2011 Integrated Annual Report of GAZ-SYSTEM S.A. which was, for the first time, drawn up in accordance with the Sustainability Reporting Guidelines prepared by the Global Reporting Initiative. The present report describes both the company s financial results and non-financial economic, social and environmental performance. Due to the remarkable scale of its impact, the energy industry is obliged to operate under a social contract. Building trust requires long-term commitment which is a prerequisite to the efficient operation of the company in its environment. A similar strategic perspective was adopted by GAZ-SYSTEM S.A. In the times of concern over energy prices and eroded confidence, we consider this approach as a chance for sustainable growth of the company. Sustainable development The ever-growing demand for natural gas from European economies, liberalisation of the gas market in Poland, need to improve market competition and the EU energy solidarity policy which envisages a full integration of the European transmission systems are challenges which we are addressing by building an organisation based on trust. The review of 2011 provides GAZ-SYSTEM S.A. with an opportunity to reflect upon the quality of our performance in the social and business environment. In 2011, we adopted a long-term business strategy which is designed to integrate and balance the environmental, social and economic aspects of our business activity. The strategic goals set the directions for our operations in the years to come. System expansion and integration With our efforts to build an integrated transmission system, we are striving to meet the energy needs of European consumers by providing the technical framework for free gas trade in the region. We are committed to enable our customers to build their supplier portfolio strategies based on a modern, flexible transmission network that is integrated with the European grid. In seeking to meet these challenges, we devoted our efforts in 2011 to expanding the gas pipeline system in Poland and establishing connections to integrate our domestic system with the European transmission network. For the first time in the history of Poland s gas industry, we have managed to build and put into operation over 100 km of gas transmission pipelines, thus creating alternative transmission options also marks the completion of several investment projects which are important to Poland s transmission system, including Goleniow and Jaroslaw compressor stations, the Wloclawek- Gdynia gas pipeline and, finally, the gas pipelines in Lower Silesia, which enabled increased import capacity via the Lasow entry point on the Polish-German border. We developed the capability for importing gas into Poland from the South by launching the Poland-Czech Republic gas interconnection. This connection is an important component of the North-South Gas Corridor, a project which we hope will enthuse our partners. Ultimately, the project will connect the Polish, Czech, Slovakian, Hungarian and Croatian transmission systems and our transmission infrastructure will play an important role in integrating gas grid in this part of Europe. We are convinced that the Corridor will enable gas customers in the region to benefit from the pricing flexibility of spot markets and the global LNG market. 6 7

6 In order to achieve this goal, our subsidiary company Polskie LNG, in conjunction with Szczecin and Swinoujscie Seaports Authority and Maritime Office in Szczecin, is building an LNG Terminal in Swinoujscie. Liberalisation of the gas market in Poland It is an operator s responsibility to encourage market liberalisation by creating transparent tools and operational mechanisms. GAZ-SYSTEM S.A. has been successful in taking on the role of an independent system operator for the Polish section of the Yamal pipeline until the end of Thanks to the Transmission Network Code (TNC) of the Polish Section of the Yamal-Europe Transit Gas Pipeline System approved by the President of the Polish Energy Regulatory Office, we currently are able to provide transparent access to unused transmission capacity on this pipeline to all interested users. The virtual reverse service was also made available, which enables importing additional gas volumes into Poland from the western direction via the Wloclawek and Lwowek entry points on the Yamal pipeline. It allows annual imports of approximately 2.3 bcm of gas. An important aspect in the development of Poland s gas market is the introduction of the Entry-Exit tariff by GAZ-SYSTEM S.A. The work carried out in 2011 to designate the physical entry and exit points of the transmission system will provide improved guidance of the system users and enable a broader scope of services to be offered by the company. In aggregate, the above investment projects increased the technical import capacity of natural gas into Poland from new (western and southern) directions by 30% per year. We have also managed to organise financing for a PLN 8 billion investment programme until 2014 in order to take full advantage of non-refundable EU aid and own resources. Once completed, these projects will contribute to the increased competitiveness of Poland s economy. The continuing development of our staff s professional qualifications and personal capabilities is reflected in the ever increasing quality of our work. We firmly believe that our investment projects, which are delivered in a responsible manner while demonstrating positive community relations and respect for the environment, will ultimately bring the benefit of lower gas prices for end consumers. In doing so, we also strive for greater public trust, as we consider it of primary importance in our market and community relations. These values will continue to drive the growth of our company. A positive conclusion of the financial year 2011 would be impossible without the on-going support and commitment all the employees of GAZ-SYSTEM S.A. and our business partners. This is why I am pleased to present our Integrated Annual Report which contains a detailed description of our joint efforts. On behalf of the Management Board of GAZ-SYSTEM S.A., let me express my sincere gratitude and wish you a pleasant read. Yours faithfully, Jan Chadam President of the Management Board GAS-SYSTEM S.A. 8 9

7 GAZ-SYSTEM S.A. The System That Connects GAZ-SYSTEM S.A. the system that connects 10 11

8 GAZ-SYSTEM S.A. in numbers Value at Number of employees persons Length of transmission network km 1.53 Net sales revenues PLN BILLION 15.6 Volume of gas transported bcm 1.10 Operating costs PLN BILLION 869 Number of gas stations 0.42 Net profit PLN BILLION 14 Number of compressor stations 6.15 Total assets PLN BILLION 57 Number of system points 12 13

9 Company Overview Gas Transmission Operator GAZ-SYSTEM S.A. is the company responsible for the transportation of natural gas and the operation of the transmission network in Poland. The importance of the company s mission places it among the group of strategic enterprises for the Polish economy and the energy security of the country. GAZ-SYSTEM S.A. operates on the basis of a licence issued by the President of the Energy Regulatory Office (ERO), which is valid until 2030 and gives the company the right to transport gas. In addition, the company performs the function of a transmission system operator and an independent operator of the Polish section of the Yamal Pipeline. The company promotes the development of a competitive natural gas market in Poland and the optimisation of the domestic transmission network coupled with the expansion of cross-border connections within the European gas networks. GAZ-SYSTEM S.A. operates from its head office located in Warsaw, at 4 Mszczonowska St, and its branches in Gdansk, Poznan, Rembelszczyzna, Tarnow, Swierklany and Wroclaw. From these locations the company provides its services all around the country. GAZ-SYSTEM S.A. also has its office in Brussels which represents its interests in front of EU institutions,and a subsidiary company Polskie LNG S.A. established for the construction and operation of the LNG Terminal. GAZ-SYSTEM S.A. is a joint-stock company wholly owned by the State Treasury. In 2011, there were no changes in the company s ownership structure or form. In accordance with the Energy Policy of Poland until 2030, the Operating Lease Agreement came to its end in 2011 and, for the last time, the dividend from PGNiG S.A. was collected by the State Treasury in kind and transferred as a contribution to GAZ-SYSTEM S.A. As a result, comparing with the year 2010, the share capital increased by PLN 30,104,400 and currently amounts to PLN 3,771,990,842. LNG TERMINAL IN SWINOUJSCIE Wroclaw Branch Lasow ANALYZED GAS PIPELINE BALTIC PIPE Poznan Branch WROCLAW POZNAN Gdansk Branch GDANSK Swierklany Branch Tarnow Branch REMBELSZCZYZNA WARSAW ANALYZED GAS PIPELINE POLAND-LITHUANIA Rembelszczyzna Branch ANALYZED GAS PIPELINE DEVELOPMENT POLAND-CZECH REPUBLIC SWIERKLANY TARNOW Cieszyn CONCEPTUAL STAGE PREPARATORY STAGE GAS PIPELINES IN PROGRESS TRANSIT PIPELINE OF EUROPOL GAZ S.A. E HIGH-METHANE GAS LW LOW-METHANE GAS GAS COMPRESSOR STATIONS ANALYZED GAS PIPELINE POLAND-SLOVAKIA As of July 2012, source: Archives of GAZ-SYSTEM S.A. Gas pipelines shown on this map are schematic. Detailed map of the gas transmission system is available at 14 15

10 Internal environment Key Stakeholders of GAZ-SYSTEM S.A. In its stakeholder relations GAZ-SYSTEM S.A. strives to combine the economic value creation with a positive impact on its environment. The business strategy of the company defines the key stakeholder groups and takes into account the expectations of these groups in the process of making business, social and environmental decisions. In the definition of its business strategy until 2020 the company identified the following stakeholder groups: Governmental Shareholder administration Gas market and local regulators authorities Employees Trade union organisations Subsidiary company Distribution and storage system operators Customers Business partners Market environment Membership in Organisations GAZ-SYSTEM S.A. is a member of the following organisations: International industry organisations Gas Transmission Europe Natural Gas STAR Program The European Network of Transmission System Operators for Gas (ENTSOG) Gas Infrastructure Europe (GIE) European Association for the Streamlining of Energy Exchange (EASEE-gas) Baltic Gas Marcogaz International Gas Union Environmental Protection Agency National industry organisations Towarzystwo Rozwoju Infrastruktury ProLinea (Association for Infrastructure Development) Izba Gospodarcza Gazownictwa (Chamber of Natural Gas Industry) Polskie Zrzeszenie Inzynierow i Technikow Sanitarnych (Polish Association of Sanitary Engineers and Technicians) Stowarzyszenie Naukowo-Techniczne Inzynierow i Technikow Przemyslu Naftowego i Gazowniczego (Scientific and Technical Society of Oil and Gas Industry Engineers and Technicians) Local communities residents of communes where the company carries out its operations, including the landowners, users and leaseholders of the sites affected by the company s investments Social environment Non-governmental organisations Financing institutions Academic communities Media National and international industry organisations Organizations promoting sustainable development Global Compact Forum Odpowiedzialnego Biznesu (Responsible Business Forum) (since 2012) Odpowiedzialna Energia (Responsible Energy) Initiative CSR working party set up at the Ministry of Economy Business organisations Business Centre Club 16 17

11 Services of GAZ-SYSTEM S.A. The primary service provided by GAZ-SYSTEM S.A. consists of the transportation of natural gas from the entry points selected by the Shipper to the indicated exit points. In addition, the company may perform other services requested by customers, including: gas odorisation, i.e. saturation with a strongly odorous substance, additional measurements related to gas transmission, operation, maintenance, repairs and projects carried out within the networks and installations of the customer, suspension, reduction or restoration of deliveries to points in the system, at the request of the customer. GAZ-SYSTEM S.A. provides its services on the basis of the Transmission Network Code (TNC), which sets out the rules with respect to the provision and use of the gas transmission service. The TNC establishes detailed criteria of the safety of the gas system operation, which provide the guarantee of continuous and secure supply of the fuel to customers. The document also regulates the matters concerning the cooperation between the entities involved in gas transmission, and its scope covers the entire technical infrastructure operated by GAZ-SYSTEM S.A. As of 1 October 2011, the new updated Transmission Network Code has been in effect. The customers connected directly to the network of GAZ-SYSTEM S.A. represent the chemical, fuel, energy, metals and mineral industries. Companies from the chemical and fuel sector are the largest gas customers. In connection with the European climate policy that supports low-emission power generation GAZ-SYSTEM S.A. has also noted considerable interest in the use of natural gas for fuelling power units Services in Numbers contracts for the provision of firm or interruptible gas transmission services contracts for the provision of gas transmission services in connection with the additional capacity made available at the Lasow entry point contracts for gas odorisation services transmission network connection agreements specifications of the conditions for connection to the network new applications for the provision of transmission services Volume of gas transported to top 20 customers by industry sector in Minerals mmcm Metals mmcm Power mmcm Electric 25.9 mmcm Volume of gas transported to top 20 customers by industry sector in 2011 Total consumption: 4.4 bcm Chemical 2.3 bcm Fuel 1.03 bcm 18 19

12 Business Strategy of GAZ-SYSTEM S.A. In July 2011 the company adopted a new business strategy until The strategy was defined in a process that involved the representatives of all the organisational units of GAZ-SYSTEM S.A. During workshop meetings a detailed action plan was worked out around five pre-defined strategic directions that will set the path for the company s growth in the coming years. As a result, a coherent strategy document was put together, which defines the company s mission and vision, objective and concept, as well as the position GAZ-SYSTEM S.A. intends to achieve in the European market by The responsibility for the coordination of the strategy definition and implementation activities has been delegated to the Strategy Officer appointed by the Management Board. Strategic Growth Directions of GAZ-SYSTEM S.A. EFFECTIVE MANAGEMENT Ensure effective and sustainable improvement of the company s operational and organisational performance. EUROPEAN PARTNER Build the position of the company as a significant player in the natural gas market in the European Union, particularly in the Central and Eastern Europe region. SUSTAINABLE DEVELOPMENT Manage the company from a sustainable development perspective. MARKET DEVELOPMENT SAFETY Ensure safe operation of the transmission system as an element of the European gas pipeline network. Create optimum conditions for the development of a liberalised natural gas market in Poland to enable increased consumption of natural gas as an environmentally friendly fuel. Our organisation needs to respond to challenges that may arise in the liberalised gas market by 2020, when the following advantages will count: optimised cost structure, flexibility and the ability to identify and react to the expectations of the market. Marcin Gronowski, Managing Director, Strategy Officer 20 21

13 Mission We ensure safe transportation of natural gas in Poland and are actively engaged in the creation of an integrated transmission system in Europe. In our day-to-day activities, we are committed to environmental stewardship and sustainable development. Vision Provide energy security and building the position of a major operator driving the integration of the transmission system in Europe through: the creation of conditions for the development of a competitive market in natural gas in Poland, and the companies operating in the sector; the construction of interconnections with the transmission systems of the neighbouring countries as part of the European gas networks. Corporate Governance Oversight over all the aspects of the company s activities is provided by the Supervisory Board, which is composed on 3 to 9 members appointed by the General Meeting (i.e. the State Treasury), including one member elected from among the company s employees (dependent member). The candidate for the Supervisory Board to be elected by the employees must not report directly to any of the Board members. The activities of the Supervisory Board are evaluated each year by the General Meeting (i.e. the State Treasury), which acknowledges the fulfilment of duties by the Supervisory Board and assesses the progress in the implementation of the business strategy, which includes the management from a sustainable development perspective as one of the dimensions. The Supervisory Board is currently composed of seven members, three of whom are women. Jerzy Molak Monika Kacprzyk-Wojdyga Włodzimierz Wolski Agnieszka Godula Zbigniew Marek Jan Matuszewski Katarzyna Ranc-Dobrzańska independent member, Chairman of the Supervisory Board, does not have any function within the Management Board independent member, Deputy Chairperson of the Supervisory Board dependent member, Secretary of the Supervisory Board independent member of the Supervisory Board independent member of the Supervisory Board independent member of the Supervisory Board independent member of the Supervisory Board The members of the Supervisory Board are entitled to monthly remuneration in the amount determined by the General Shareholder Meeting within the limits stipulated by the relevant regulations

14 The day-to-day activities of the company are run by the Management Board. It is currently composed of three members: Jan Chadam President of the Management Board, Doctor of Philosophy in Economics. In the course of his career, he has held a host of executive positions, including Financial Director, Vice President and President of the Board at Pro Futuro S.A., Warsaw, Member of the Board at Elzab S.A., Zabrze, Financial Director at SIPMA Group, Lublin, President of the Board at SIP-MOT S.A., Zamosc and Director of Internal Audit Department at Polkomtel S.A. (Plus GSM cellular network operator). In February 2009 he was appointed Member of the Management Board at GAZ-SYSTEM S.A., and subsequently President of the Management Board as of July He has written several dozen domestically and internationally recognised publications on finance and management and has taught at several universities and MBA programmes. Wojciech Kowalski Member of the Management Board, graduated from the Faculty of Mechanical Engineering of the Wroclaw University of Technology. He is a licensed construction engineer authorised to perform independent technical functions in construction industry. Mr Kowalski completed post-graduate programmes in gas industry at the Warsaw University of Technology, and in project management at the Warsaw School of Economics. He also attended specialist training courses in quality management, corporate finance and project profitability and risk assessment. He has been involved in the gas industry for over 25 years. After joining the Gas Engineering Office GAZOPROJEKT S.A. in 1986, in 1995 he was appointed President of GAZOPROJEKT S.A. initially responsible for technical, and subsequently for commercial matters. He has extensive experience in corporate management, industrial plant engineering, investment process management within the energy and gas sectors. In January 2009, he was appointed Member of the Board of GAZ-SYSTEM S.A., and since August 2011 Vice-President of the Management Board of Polskie LNG S.A. Sławomir Śliwiński Member of the Management Board, graduated from the Faculty of Law and Administration at the Nicolaus Copernicus University in Torun and completed a postgraduate program in gas distribution company management at the AGH University of Science and Technology in Krakow. He is a certified quality auditor qualified by the Polish Centre for Testing and Certification and the European Organization for Quality (EOQ) and received an MBA diploma in Mr Śliwiński was President of the Board at the Pomorska Spolka Gazownictwa Sp. z o.o. (a distribution system operator from the PGNiG Group). Prior to that, he worked for ZRUG Torun S.A. (engineering and construction contractor for gas industry), where he filled a number of positions including Quality Management Officer, Vice-President and President of the Management Board. In April 2009, he was appointed Member of the Board of GAZ-SYSTEM S.A. Wojciech Kowalski Member of the Management Board Jan Chadam President of the Management Board Sławomir Śliwiński Member of the Management Board The members are appointed by the Supervisory Board for a joint three-year term of office. In accordance with the provisions of the Articles of the company, in the selection of the candidates for the Management Board, the supervisory authority is required to take into regard their experience in managerial and supervisory positions or the relevant technical and professional qualifications, as appropriate for the position to be filled in. The determination of the remuneration level and execution of agreements with members of the Management Board lies within the competences of the Supervisory Board. All dimensions of the Management Board s activity are systematically evaluated by the Supervisory Board. Each year, based on the assessment of the performance of the Management Board, the Supervisory Board makes a recommendation to the General Meeting regarding the acknowledgement of the performance of duties by the Board Members. The company has appointed a Managing Director who is responsible for overseeing selected organisational units concerned with operating activity

15 Ethical Standards With a view to ensuring the highest ethical standards, a Code of Ethics has been defined jointly by GAZ-SYSTEM S.A. and its employees. The document defines the rules of conduct and key values to drive the behaviour and decision making in the company. Responsibility Our actions are guided by responsibility towards stakeholders and the environment we operate in. Commitment We are fully committed to our activity we appreciate the contribution of each employee to our present and future success. Professionalism We promote professionalism of our employees we want to achieve our objectives through, above all, the continuous development of the knowledge and skills of our staff. Teamwork We believe that through cooperation we will be able to provide top quality services and therefore promote teamwork in our company. This demands that we are open to others and their ideas. Respect We treat our stakeholders with the utmost respect. We are always expected to exhibit the highest standards of integrity. The principles set out in the code concern, among other things, the participation in public life and lobbying, hiring and treatment of employee family members, as well as the use of the company s assets. The code also addresses the question of providing equal opportunities for professional development, presentation of employees world view and political convictions and the principles concerning the dress code in the workplace. Each employee has received a hard copy of the Code of Ethics while for other stakeholders it is available on our corporate website. According to the provisions of the Code of Ethics, the company does not endorse nor provide any financial support for any political parties, organisations or movements, or any individuals engaged in political activities. For this reason, in 2011 GAZ-SYSTEM S.A. did not make any contributions, whether in cash or in kind, to any politicians or political parties. Anti-Corruption and Anti-Fraud Policies GAZ-SYSTEM S.A. has implemented anti-corruption procedures and policy. With respect to procurement, financial transactions, information confidentiality and IT security, control mechanisms are in place, which minimise the probability of the occurrence of any incidents. These regulation concern the entire company, including all the branches. The solutions are monitored and continuously refined. In 2011, audits were held at three branches to assess the progress in the implementation of the audit of the anti-fraud controlling system and to review other operational and support functions, which did not reveal any corruption practices. Furthermore, the fraud risk is taken into account in the risk model of the company and is periodically re-assessed as a part of the risk management system (ERM Enterprise Risk Management). There are communication channels in the company, which enable the reporting of any abuse (including potential incidents of corruption) and are accessible to all the employees. The method of abuse reporting has been described in the Code of Ethics. In addition, 4 persons (2 managers and 2 staff members) were trained on anti-corruption policies and procedures applicable in the company, which represents 0.2% of all the employees. Moreover, the Board Members and all the employees are obliged to observe the relevant procedures to avoid conflicts of interests and abuse, which are set out in the Compliance Programme of Gas Transmission Operator GAZ-SYSTEM S.A. The Compliance Programme defines the requirements for employees, which are intended to prevent any privileged treatment or discrimination of transmission system users

16 Sustainable Development 28 29

17 Sustainable development, as the notion is understood by GAZ-SYSTEM S.A., means that in the course of its activities the firm strives to balance social, economic and environmental interests. Furthermore, sustainable development entails a certain responsibility the firm has toward its environment in connection with its business activity. Sustainable development is not only about taking care of the local communities but also of the natural environment in the areas where GAZ-SYSTEM S.A. develops its investment projects and operates gas pipelines. Responsible Investments GAZ-SYSTEM S.A. executes its investment projects in a responsible manner, taking into account social, financial and environmental aspects, through: continuous environmental monitoring. building strong relations with local communities, based on long-term dialogue and open communication. 45 number of meetings with local communities held by GAZ-SYSTEM S.A. in 2011 in connection with the investment projects implemented in different regions of Poland. GAZ-SYSTEM S.A. takes care to ensure that all the investment projects are fully transparent and accepted by the local community and are implemented in conformity with the applicable legal regulations concerning environmental protection of and impact while offering an opportunity for growth in the region. In those areas where operations are undertaken, communication campaigns are addressed to the citizens and representatives of the local authorities. Information is published on the company website (), in local newspapers and sent by mail to the landowners concerned. During public meetings GAZ-SYSTEM S.A. explains to the stakeholders the significance of the project for the region and the resulting benefits for the local communities. The expansion of transmission infrastructure will enable the transportation of larger gas volumes. This will contribute to the improvement of energy security of the region and the creation of additional capabilities for distribution network operators to develop gas supply and connect new customers. Another important aspect for the commune is the property tax payable annually by the investor in the amount of 2% of the value of the project located in the territory of the commune. These funds constitute an additional source of revenue for the commune and may support its development. The construction of strategic gas pipelines is undertaken in accordance with the Act of 24 April 2009 on investment projects associated with the development of re-gasification terminal for liquefied natural gas in Swinoujscie. The Act provides for, among other things, simplified administrative and compensation procedures. GAZ-SYSTEM S.A. works together with provincial authorities to set an appropriate procedure for compensation payment. The level of compensation for expropriation is set based on an estimate prepared by a property valuer selected by the provincial governor in a tender process. Meanwhile, the award and level of compensation for restriction of the use of a property in connection with the establishment of a pipeline buffer zone, for the property occupation during the construction and for farming and other damage caused during the pipeline construction are subject to the decision of the provincial governor taken on the basis of assessments made after completion of the construction. A systemic approach to communication related to investments is defined in the Promotion and Communication Manual for Projects Co-Financed Under the Operational Programme Infrastructure and Environment. The development of such a strategic project as the construction of the Rembelszczyzna Gustorzyn gas pipeline brings a lot of benefits for everyone involved. The Commune of Wieliszew is not an exception here. The 2% property tax for the pipeline section running through our territory, which the investor is due to pay each year, will be a major contribution to the communal budget. Thereby we will have funds for new investments. The quality of life will increase for all the residents. Once the project is completed, the landowners whose property is crossed by the pipeline will receive compensation which will certainly improve the standard of living for themselves and their families. Many of our residents will thus enjoy double benefits. Undoubtedly, the greatest benefit is the sheer fact that the investment will come into being, as it will significantly enhance the gas supply for the entire Poland. Therefore we should all consider ourselves winners. Paweł Kownacki, Head of the Commune of Wieliszew 30 31

18 Our responsible approach to investments also manifests itself in the care about the natural environment in every stage of the project. At the planning stage, the project location options and execution approaches are considered from the point of view of the expected environmental impacts. Before the construction begins, long-term observations known as wildlife inventories take place for several months to assess whether any of the following features occur within the range of the project impact: bird species and their habitats, natural habitats and habitats and sites of protected plant species, amphibians and reptiles and their habitats, protected fungi and lichen species, protected mammal species and their habitats, protected insect species and their habitats, and to account for the impact of the project on the protected species and habitats identified along the route of the planned gas pipeline. When the interference is unavoidable, e.g. at watercourse crossings, trenchless techniques are used during pipeline laying. Besides, in wetlands, e.g. peat bogs, pipelines are laid in a drained trench without draining or the works take place in winter season so as to avoid draining of the adjacent land. Examples of measures mitigating the adverse impact on the environment caused by GAZ-SYSTEM S.A. Gas Pipeline Polkowice Zary In order to minimise the adverse impact of the project on the environment, highest quality materials will be used during the planned construction of the Polkowice Zary gas pipeline and the width of assembly strip will be reduced in forests and farming areas. With a view to protecting particularly valuable green areas trenchless techniques will be applied. The necessary tree removal will be carried out outside the nesting season. Gas Pipeline Szczecin Swinoujscie In 2011, the construction of a strategic gas pipeline Szczecin Swinoujscie was started. Its 80 km long route runs across protected areas, including: Wolin National Park, Olszanka Reserve and eight areas belonging to the Natura 2000 network. Thanks to appropriate changes to the construction engineering design, use of the latest technology and pipeline routing in parallel to the existing pipelines, the negative impact of the project on the natural environment has been minimised. In areas under nature conservation the works will be strictly limited to a reduced construction strip in order to mitigate any disturbance of habitats and species. The reclamation of the construction strip after the completion, including the restoration of the temporarily transplanted plants will mitigate the effects on the disturbed habitats. Responsible Financing In 2011, GAZ-SYSTEM S.A. continued its efforts to raise optimised and sustainable financing for the implementation of its investment programme until 2014 worth approx. PLN 8 billion. Project financing is largely based on internal cash generation (around 40%), subsidies from EU funds, loans from commercial bank and European financial institutions. In 2011, GAZ-SYSTEM S.A. signed an agreement with a consortium of commercial banks for the financing of its strategic investments. The company also finalised the negotiations with the European Investment Bank and continued to raise co-financing under EU funds. As a result, the company organised favourable financing on flexible terms for its investment programme. A substantial share of funds from European institutions in the total financing demonstrates that the investment projects of GAZ-SYSTEM S.A. successfully passed the assessment based on economic, financial, technical and environmental criteria. Moreover, from the investor s perspective, these are the most attractive sources of financing available in the market. The optimised approach to financing, based on the cheapest sources of capital, was a priority for the company. Thanks to this, GAZ-SYSTEM S.A. can minimise its operating costs, which are reflected in the level of tariff for gas transmission

19 GAZ-SYSTEM S.A. is the beneficiary of the following EU projects: Sources of financing for the PLN 8 bn Investment Programme of GAZ-SYSTEM S.A. in years bn EIB gas pipelines 0.6 bn EIB LNG Terminal 0.2 bn PKO BP 3.2 bn equity European Regional Development Fund ERDF (Operational Programme Infrastructure and Environment ) The company obtained co-financing under ERDF in the amount of nearly PLN 0.8 billion for the construction of the following pipelines: Szczecin Gdansk, Rembelszczyzna Gustorzyn, Wloclawek Gdynia, Szczecin Lwowek, Gustorzyn Odolanow, Jeleniow Dziwiszow and Polkowice Zary. European Energy Programme for Recovery (EEPR) The company obtained financing under EEPR in the amount of PLN 0.3 billion for the construction of the gas pipeline Swinoujscie - Szczecin and the gas compressor station in Goleniow, as well as the construction of gas pipelines in Lower Silesia and the interconnector Poland Czech Republic; 0.5 bn EEPR EU Trans-European Networks-Energy The company obtained co-financing for pre-investment studies related to the construction of the Baltic Pipe in the amount of 4.31 million Euro; 1.2 bn ERDF (OPIE) European Regional Development Fund ERDF (Operational Programme Innovative Economy ) The company obtained co-financing in the full amount of PLN 0.6 million for the construction of a gas meter calibration laboratory at the gas compressor station in Holowczyce. 1.7 bn commercial banks (consortium) As a result of the project financing obtained from EU funds and the negotiation of favourable terms of financing with commercial banks, as well as the structural changes in the company s costs, the average charges for gas transmission to final customers could be reduced on a per unit basis. It was the second time in the course of five years that GAZ-SYSTEM S.A. reduced the rates for gas transmission. GAZ-SYSTEM S.A. is one of the major beneficiaries of EU funds under the European Regional Development Fund. It is worth noting that the financial framework was the first one when Poland, as a Member State, obtained support for projects in energy sector. Thereby we are jointly gaining valuable experience in the implementation of projects co-financed by the EU. The European Funds Centre for the Energy Sector was set up within the organisational structure of the Oil and Gas Institute as the Implementing Authority for the European Regional Development Fund in the energy sector. In 2011, GAZ-SYSTEM S.A. completed the gas pipeline Wloclawek Gdynia which was the first project to obtain co-financing under the programme. We are currently taking measures to ensure that the settlement of subsequent projects is smoothly carried out in the following year. Prof Maria Ciechanowska, Director of the Oil and Gas Institute 34 35

20 Responsible Workplace The responsible approach of GAZ-SYSTEM S.A. to human resources management is reflected in the definition of transparent rules with respect to e.g. hiring, employment, promotion and professional development of the employees. At the end of 2011, the company employed 2152 persons. The employment structure by branch is shown in the following table. Total number of employees according to the type of employment contract, position and region, broken down by gender Total number of employees with employment contract, by gender: 2152 Men 1611 Women 541 Number of supervised personnel, by gender: 120 Men 95 Women 25 Number of employees by region, according to administrative division based on the activity scope of the unit Head Office 336 Gdansk 169 Poznan 251 Wroclaw 276 Swierklany 220 Rembelszczyzna 313 Tarnow 587 Men represent the majority in the personnel structure, which is related to the nature of the company s operations and jobs performed. Despite this, all the employees are afforded equal treatment and enjoy the same right of access to all the benefits and positions. The majority of the personnel in GAZ-SYSTEM S.A. are employed under full-time employment contracts for an indefinite term. Detailed employment structure by type and term of employment contract is presented in the following tables. Employees with employment contracts, of which: 2152 Full-time employees, of which: 2144 Men 1605 Women 539 Part-time employees, of which: 8 Men 6 Women 2 Employees with indefinite term contracts, of which: 2084 Men 1568 Women 516 Employees with definite term contracts, of which: 68 Men 43 Women 25 Employees with short-term contracts, of which: 29 Men 10 Women 19 Employees with contracts for a specific task, of which: 8 Men 7 Women