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

21 Women fill in a quarter of managerial positions in GAZ-SYSTEM S.A. Managerial positions, of which: 48 Men 36 Women 12 Currently, the company employs only Polish nationals. The demographic structure of the employees of GAZ-SYSTEM S.A. is presented in the following table. Percentage of employees by age Age below % 203 Men 60.1% 122 Women 39.9% 81 Age % 1237 Men 73.4% 908 Women 26.6% 329 Age over % 749 Men 79.8% 598 Women 20.2% 151 Employees of years of age represent the majority (56.51%), followed by staff members over 50 years of age (34.22%), while the personnel aged below 30 accounts for 9.27% of the total workforce. In the reporting period, all the senior managers employed by the company were locally hired from the Polish labour market. All the employees, regardless of their working time and type of contract are covered by the Collective Labour Agreement of 8 March The document sets forth the employee entitlements under the generally applicable labour regulations and additional benefits offered by the company. Any matters concerning employment and major organisational changes are subject to consultations with social partners. two incidents of this kind were identified in the organisation in These occurrences were investigated, a corrective action was taken and its results were reviewed in an internal process. In 2011, GAZ-SYSTEM S.A. did not hold any training for newly hired security personnel as regards the polices or procedures concerning aspects of human rights addressed in the company s Code of Ethics, but they were provided with the opportunity to review the contents of the Code using the corporate intranet site. The company plans to organise such training during the coming year. Remuneration and Benefits The remuneration principles of the company are set out in the Collective Labour Agreement. In 2011, the average salary was higher for women than for men. In this comparison, only women in senior management and among administration professionals are paid less than their male counterparts. The ratio of basic salary of women to men is illustrated by the following table. Ratio of basic salary of women to men, by level of the position within the organisational hierarchy: Senior management 93% Middle management 123% Specialist positions (employees performing specific industry-related tasks 100% Administration professionals (e.g. HR, accounting) 98% Technical positions 104% Responsible workplace also means that fair remuneration is offered to the employees in the lowestlevel positions. The ratio of the salary level of these employees to the minimum market wage at 240% for men and 267% for women (assuming the 2011 minimum wage level of PLN 1386). The minimum wage is independent of the location or the employee s gender. Its levels applicable to individual positions were determined in the Collective Labour Agreement. GAZ-SYSTEM S.A. guarantees the freedom of association for its employees. There are three union organisations within the company, which engage in the dialogue with the employer and take part in shaping the HR policy. In accordance with the applicable laws and regulations GAZ-SYSTEM S.A. does not employ any children or minors under 18 years of age, and does not use any forced or compulsory labour. Despite all the reasonable efforts used by the company to prevent discrimination, 38 39

22 Each employee of GAZ-SYSTEM S.A. has access to free healthcare services outside the public system, including comprehensive specialist consultations, examinations and diagnostics. The healthcare package is also available to employee families and retired employees. The employees are also covered by a group life insurance including the risk of disability or incapacity for work. In response to the expectations of the employees, a Pension Scheme was launched at GAZ-SYSTEM S.A., which has been joined by over 70% of the company s employees. The personnel of GAZ-SYSTEM S.A. have a guaranteed social package, which covers a partial or full reimbursement of the costs of holidays, sports and leisure activities, cultural and educational events or support in case of accidents. In addition, the company offers other employee benefits beyond the scope required under the generally applicable regulations. Among other things, the employees may expect the following: a day off work falling on the Saint Barbara s Day (except for Saturdays and Sundays) and a financial bonus on this occasion. extra financial benefits such as: profit sharing bonus, discretionary bonus or jubilee bonus, awarded in accordance with the current Collective Labour Agreement, two extra days of holiday (for employees with at least 15-year tenure in the industry), extra sickness compensation for employees with at least 10-year tenure in the industry. Return to Work After Parental Leave The responsibility of GAZ-SYSTEM S.A. for the employees also entails the guarantee of return to work for parents who take advantage of parental leave. Most women return to work in their original position and remain with the organisation for at least 12 months to follow. Number of persons in parental leave in 2011, of which: 61 Women 29 Men 32 Women in child care leave 3 Number of women who returned to work after maternity leave 16 Number of women who returned to work after maternity leave and continued to work until 16 the end of the reporting period Number of men who returned to work after paternity leave 28 Number of men who returned to work after paternity leave and continued to work until the 27 end of the reporting period Employee Development The professional development of personnel is one of the key objectives of the human resources policy. The principles regulating the access to training are set out in the Rules for Professional Qualifications Improvement of the Employees of Gas Transmission Operator GAZ-SYSTEM S.A. The employees of GAZ-SYSTEM S.A. take part in mandatory training programmes, professional development courses, competency building sessions, workshops, language courses, as well as university studies including post-graduate and MBA programmes. The employer also sponsors the participation in industry conferences, both domestically and abroad. The employees who improve their qualifications take advantage of training leave in accordance with the amended regulations of the Labour Code. In 2011, the total amount spent on training by the company reached PLN 4.9 million. Some training programmes are delivered internally. Since 2011 they include training on integrated management system and occupational health and safety

23 Detailed figures showing number of training hours per employee broken down by workforce structure are provided in the following table: Average hours of training during the year per employee, by gender and employment structure Total hours of training annually per employee: Women Men Senior management (directors and higher levels) Directors and deputy directors Middle management (managers) Managers, deputy managers, foremen Professional functions (employees performing specialised tasks, e.g. environmental) Employees of technical, operating, investment units, etc. Administration functions (e.g. HR, accounting) Employees in positions not related to operation Technical positions Employees in operational positions In 2011, as the definition of the new procedure was still in progress, the employees did not undergo any regular assessment of the quality of their work or a carrier development review. Newly Hired Employees Prestigious awards received by GAZ-SYSTEM S.A. as a reliable employer, as well as positive perceptions of the employees have been attracting an ever-increasing number of job applications. The principles and methods of recruitment and selection of candidates for hire are set out in the Recruitment Procedure. The document guarantees equal rights of the candidates and prevents any discriminatory practices, as it is based on the assessment of the candidates predispositions, qualifications and professional experience. The package offered to newly hired employees is an example of good practice and includes: orientation manual for new employees a comprehensive guide on the corporate culture, rules and other information necessary for effective functioning within the company, the Code of Ethics and brochure Our Values, information booklet Strategy of GAZ-SYSTEM S.A. until The structure of the employees hired in 2011 is presented in the following table. Total number of employees hired by the company in the reporting period, of which: 115 Women 45 Men 70 Age below Age Age over 50 8 Rural residents 18 Urban residents 97 Percentage of employees hired in the reporting period, of which: 5.3% Women 39.1% Men 60.9% Age below % Age % Age over % Rural residents 15.7% Urban residents 84.3% 42 43

24 Turnover High level of employee satisfaction means that those who decide to leave the company represent only a small percentage of the workforce. Detailed figures showing the number of leaves in different age groups taking into account gender and place of residence are provided in the following tables. Total number of employees who left the company in the reporting period, of which: Women 5 Men 33 Age below 30 3 Age Age over Rural residents 2 Urban residents 36 Percentage of employees who left the company in the reporting period, 1.8% of which: Women 13.2% Men 86.8% Age below % Age % Age over % Rural residents 5.3% Urban residents 94.7% 38 Occupational Health and Safety Recognising that due to the nature of the company s operations some employees may be especially exposed to the risk of accident or certain diseases, GAZ-SYSTEM S.A. adheres to the highest standards of occupational health and safety. In order to mitigate the risk of accident occurrence, employees undergo training on occupational health and safety and job hazard analysis is performed for every position. In addition, the company has established a safety management system and appropriate procedures to provide aid and minimise any hazards to employee health and life. With a view to ensuring safe and healthy working conditions and the protection of employee rights set out in the applicable labour regulations, a Social Labour Inspector has been appointed at the company. The questions of employee safety is also addressed in the agreements with trade unions, which include provisions concerning personal protective equipment, joint health and safety committees composed of the management and employees, training, complaint reporting mechanisms, periodic health and safety inspections, right to refuse the performance of dangerous job, participation of employee representatives in health and safety inspections and audits and in accident investigations. GAZ-SYSTEM S.A. not only cares about the safety of its own personnel but also about the employees of the suppliers and subcontractors engaged in the projects implemented by the company. The company organises dedicated seminars for them, concerning health, safety and environmental aspects pertinent to the performance of jobs involving a gas hazard. In March 2011, GAZ-SYSTEM S.A. was admitted to the Forum of Work Safety Leaders. The company went through a review of its performance in respect of safety and human protection in the working environment, which was carried out by a special committee established at the Central Labour Protection Institute National Research Institute. Furthermore, GAZ-SYSTEM S.A. gets involved in educational events related to the issues of occupational safety. The company joined the Safe Workplace initiative and as a part of this initiative organised a national conference on Safe Workplace in Explosion Hazard Zones, which was addressed primarily to gas industry operators, as well as an art competition for children of the employees of GAZ-SYSTEM S.A. How do I imagine the safe workplace of my Mum/my Dad. In addition, the company became a partner of a social campaign called Prevent Accidents. The campaign activities consisted principally in the promotion of good practices in cooperation with contractors, improvement of knowledge on accident prevention, development of safety awareness among employees, as well as the dissemination of guidelines for safe working at heights

25 Owing to the approach of GAZ-SYSTEM S.A. to personnel safety issues, the number of incidents representing a risk to employee health or life is very low. In the reporting period, no severe, group or fatal accidents occurred. All the reported incidents were related to employee movement. Rates of injury, occupational diseases, lost days and absenteeism of the employees of the organisation in the reporting period, by gender: Total number of accidents at work, of which: 3 Women 0 Men 3 a) number of fatal, group and severe accidents 0 Women 0 Men 0 b) Total days of incapacity for work due to accidents at work 154 Women 0 Men 154 c) Accident frequency rate* 1.4 Women 0 Men 1.4 d) Accident severity rate 51.3 Women 0 Men 51.3 e) Number of diagnosed occupational diseases 0 Women 0 Men 0 Total number of contractor accidents, during the performance of services for the 0 company Women 0 Men 0 a) number of fatal, group and severe accidents 0 Women 0 Men 0 GAZ-SYSTEM S.A. has systems for tracking and reporting accident statistics, include: System name Register of accidents at work Monthly update on accidents at work Best Employer 2011 Description In 2011, GAZ-SYSTEM was ranked as the second in Poland and first in Central and Eastern Europe in large employers category of the Best Employers Study Our rating was 39% higher than the sector average and 6% higher than the Best Employers average. As a result of our strategic approach to create a friendly work environment, we managed to increase our employees job satisfaction and commitment levels. According to a study conducted by the international consulting company Aon Hewitt, the GAZ-SYSTEM s employee commitment score reached 80% in It means that the majority of our employees has a positive view of the company and the company image is consistent with their work experience within the organisation. Furthermore, 71% of our employees declare that the company values are similar to the ones they abide by in their private lives. Employee commitment score (average sample 895 employees) 28% 67% 73% Procedure ZB-01 for the investigation of the circumstances and causes of accidents at work and potential accident hazards Information for employees on reported occurrences and accidents distributed through the intranet (Health and Safety section) *Total accidents/headcount x %

26 Responsible Partner The company engages in various community oriented initiatives. One of the projects in this area is a grant competition known as the Natural Energy Fund, whose key objective is to co-finance the best regional environmental protection ideas. The first edition of the competition yielded 23 entries and the top 5 projects received financial grants totalling PLN 50 thousand. Winning Projects Patrolling Squads: a project put forward by the Special Education and Childcare Centre in Nowogard. Healing the Chestnut Trees: project by the School Complex in Lubiana. Educational Trail: a project proposed by the Primary School in Czaplinek. The World is Waiting for Green People: a project prepared by the Janusz Korczak Primary School in Gostomia. Live actively but economically: a project submitted by the Władysław Szafer Primary School No. 2 in Wapnica. Detailed descriptions of the above projects are available on GAZ SYSTEM also operates a school kit programme, under which 815 first formers received school bags and fully stocked pencil cases in Since the launch of the initiative, the company has presented school kits to 1400 children across Poland. The above described projects are aimed at fostering positive relations with local community representatives. As part of GAZ-SYSTEM s educational initiatives, we have continued our cooperation with the AGH University of Science and Technology in Krakow. Thanks to our efforts the Faculty of Drilling, Oil and Gas and the Faculty of Energy and Fuels were equipped with the latest version of SIMONE software for monitoring transmission system operation. The practical use of the simulator in gas industry was presented in a lecture given by a specialist from GAZ-SYSTEM s Gas Dispatch Centre. In 2011, the company supported over local communities. community projects. The beneficiaries included 48 49

27 Awards Our strategy to raise investment standards, maintain excellent employment conditions and foster dialogue with our business partners continued to win us multiple awards and recognition. GAZ-SYSTEM s sponsoring activity is based on cohesion, transparency, effectiveness and responsibility. In this regard, the activities of the company are regulated by internal Sponsorship Guidelines and the annually updated Sponsorship Plan. Areas of sponsorship include: environmental initiatives, research, education and sports. Our sponsorship activity is carried out on a national and local, rather than international scale. Each sponsorship project is evaluated in terms of company image, media reception, brand improvement and company value growth. In our sponsorship activity at GAZ-SYSTEM, we follow the guidelines of Regulation No 5 of the Minister of State Treasury of 13 February 2009 concerning principles of sponsorship activity conducted by companies with State Treasury participation, as well as the principles of Global Compact. Our responsible and transparent performance meant that no inconsistencies with national law or internal marketing communication (incl. sponsoring) documents were found in the reporting period. In 2011, GAZ-SYSTEM made 10 donations for the total amount of PLN 80,500. In 2011 GAZ-SYSTEM S.A. received the following awards: Main award in the category Investment of the Year 2011 for the Goleniow compressor station in the Marshal of the West Pomeranian Provincial Business Competition 2011 Investor of the Year award presented at the Energy World Leaders Gala of the 14th International Energy Conference EUROPOWER 2011 Investor of the Year for Central and Eastern Europe title at the 4th Investment Forum in Tarnow The 2011 Seahorse Statuette GAZ-SYSTEM S.A. received the annual business award bestowed by Business Club Szczecin for the Swinoujscie LNG Terminal construction as the largest infrastructure investment project in Western Pomerania; European Medal for gas transmission services awarded by Business Centre Club, under an programme operated with the support of the Ministry of International Affairs and under the honorary patronage of the European Economic and Social Committee Innovation Certificate a prestigious award bestowed by the Institute of Economics of the Polish Academy of Sciences and the International Research Network to projects marked by exceptional market and process innovation, expenditure on innovation, innovative patent solutions and European contracts Best Employer of the Year 2011, 2 nd place large employers category Best Employer of the Year 2011, 1 st place in the Central and Eastern Europe ranking Occupational Safety Leader title awarded by the Central Institute for Labour Protection 50 51

28 Energy Security 52 53

29 As a company of strategic importance for the Polish economy, GAZ-SYSTEM S.A. is responsible for ensuring the security of gas supply and efficient operation of the transmission network. Reliable and safe transportation of gas to customers requires investments in the development and modernisation of transmission infrastructure. Therefore, the company is taking active measures to ensure that individual infrastructure components are integrated into a single transmission system in Poland and Europe. By 2014, the company plans to commission around 1000 km of new pipelines. The development of the domestic transmission network and the construction of new interconnectors will enable GAZ-SYSTEM S.A. to become a major integrator on the European gas market, while contributing to the improvement of EU energy security. Investment projects completed in 2011 Commissioning of a new Polish-Czech gas interconnector It provides the capacity of around 0.5 bcm of gas per annum and guarantees enhanced security of gas supply for the Central European region. The interconnection is the first point linking the Polish gas system with the European transmission network in the south of Poland. In case of increased market interest, the capacity of the interconnection may be increased significantly. Gas Pipeline Wloclawek Gdynia Will improve security of gas transmission in the Pomerania region, offer increased gas transportation capacity and create conditions for gas market development in the area. The completion of a 64-kilometre long section of this high-pressure gas pipeline was the final stage of the project and enables full utilisation of the 252-kilometre long pipeline. The projects completed by GAZ-SYSTEM S.A. in 2011, along with the introduction of a virtual reverse flow service for the Yamal pipeline, resulted in the increase of technical capacity of the import entry points to the gas grid in Poland of over 3.3 bcm of gas annually (approx. 30% of the current import volume). 0.5 bcm Poland Czech Republic Expansion and upgrading of the transportation system in Lower Silesia The investments projects in the region included the construction of the following gas pipelines: Jeleniow node Jeleniow compressor station, Taczalin Radakowice, Radakowice Galow, upgrading of gas pipeline Dziwiszow Taczalin and capacity expansion of the point in Lasow. With the system expansion in Lower Silesia, the transmission capacity from the western direction increased by approx. 0.5 bcm per annum, up to 1.5 bcm per annum. At the same time, it enhanced the interoperability with the Underground Gas Storage (UGS) facility in Wierzchowice. Commissioning of Jaroslaw II Gas Compressor Station The facility serves for the compressing of gas imported from Ukraine through the Drozdowicze Hermanowice node and produced from domestic fields located in the vicinity of Jaroslaw and Przemysl, which makes it one of key components of the Polish transmission system. The nominal capacity of the new compressor station Jaroslaw II is 300 mcm/h. Gas Compressor Station in Goleniow Will enable the development of gas supply in the region and the transportation of increased gas volumes originating from the LNG Terminal in Swinoujscie to the domestic transmission network. 0.5 bcm Poland Germany 3.3 bcm increase of technical capacity of the import entry points to the gas grid in Poland 2.3 bcm virtual reverse flow service for the Yamal pipeline 54 55

30 Cross-border Interconnections Cross-border interconnections play a major role for energy security, as they not only enable the diversification of natural gas supply but also improve the stability of the system while reducing the dependence of Poland on gas imports from a single direction. The Gas Interconnection Poland Lithuania (GIPL) will establish a cross-border connection between natural gas transmission systems in both countries (the project is currently at pre-investment stage). This connection will contribute to the integration of the European gas system and the development of a liberalised gas market in the Baltic Sea region. GIPL is perceived as a key project in the elimination of energy islands, i.e. regions that are dependent on gas supply exclusively from one direction, that currently exist in the Baltic States. Another interconnection is planned between Poland and Slovakia with the aim to increase the degree of market integration of Central European countries, thus resulting in increased interest among suppliers in sourcing major gas volumes from new directions. The construction of the gas interconnection between Poland and Slovakia (expected after 2016) will also be an important component of gas infrastructure development within the North-South Gas Corridor in Central-Eastern Europe. The Baltic Pipe project provides for the construction of an offshore gas pipeline connecting gas transmission systems of Denmark and Poland. The implementation of the project fits well with the North-South Gas Corridor and the Baltic Energy Market Interconnection Plan (BEMIP), which represent the energy infrastructure priorities indicated by the European Union as regards energy infrastructure development. The Baltic Pipe is currently in the pre-investment phase and its implementation will enable the delivery of gas from the Norwegian Continental Shelf to Poland. The planned pipeline could be connected with the LNG Terminal in Swinoujscie through the Polish transmission system, which in the future would open up access to global market for liquefied natural gas (LNG) for the Scandinavian countries, via the Polish gas infrastructure. The strategic solutions we have presented on the international arena, coupled with specific regulatory provisions will ensure effectiveness of our projects. We have been applying these solutions in practice through establishing interconnected infrastructure with the neighbouring EU countries. Thereby our company has the chance of becoming a major gas market player in the European Union and the champion of gas market development and integration, competition and security of supply in the region. Rafał Wittmann, Director of Development Division 56 57

31 LNG Terminal The construction of a receiving terminal for liquefied natural gas (LNG) in Swinoujscie is another important development contributing to enhanced energy security for Poland and the Baltic and Central European regions. The project is implemented by Polskie LNG S.A., a special-purpose subsidiary company wholly owned by GAZ-SYSTEM S.A. which is at the same time responsible for project financing and for the connection of the terminal to the domestic transmission network. The terminal construction is realized in partnership with the Maritime Authority in Szczecin and the Harbour Authority in Szczecin and Swinoujscie, which are preparing the harbour infrastructure for receiving LNG vessels. The terminal completion and commissioning date has been scheduled for 30 June The project includes the following components: breakwater in the Baltic Sea, port infrastructure for receiving LNG vessels, connecting gas pipeline Szczecin Swinoujscie, receiving terminal for liquefied natural gas. Due to its significance for the improvement of energy security the Council of Ministers of the Republic of Poland recognised the project as a strategic investment for our country. In the first stage the terminal will be able to receive approx. 5 bcm of natural gas per annum, which corresponds to roughly 35% of the domestic consumption. Along with demand growth the receiving capacity of the terminal may be upgraded up to 7.5 bcm per annum. Domestic Transmission System The way to enhance energy security in Poland leads through the expansion of the transmission network and, therefore, GAZ-SYSTEM S.A. is actively investing all around the country. In 2011, the company obtained majority of location decisions for new pipeline projects and building permits for gas pipelines Swinoujscie Szczecin, Rembelszczyzna Gustorzyn, Szczecin Gdansk (section 2 and 4) and Gustorzyn Odolanow (section 1 in Kujawsko-Pomorskie Province). Unconventional Gas Investment programme of GAZ-SYSTEM S.A. by 2021The potential of unconventional gas has become a broadly discussed issue, especially as Poland is believed to be endowed with major reserves. The report published by the Polish Geological Institute titled Assessment of Recoverable Gas and Oil Reserves in Lower Palaeozoic Shales in Poland estimates the maximum level of recoverable reserves at 1.92 tcm. This means that gas reserves would be 2.5 to 5.5 times larger than the current proven figures for conventional gas. Assuming the current level of natural gas consumption in Poland, they would meet the full demand of the Polish market in the upcoming years. Along with the progress of the exploration and production activities, geological knowledge and accurate assessment of the resource size will be regularly revised. If the reserve estimates are confirmed and decisions are made to proceed with field exploitation, GAZ-SYSTEM S.A. will expand the gas pipeline system to enable the transmission of shale gas to domestic customers and market participants on other European markets

32 LNG TERMINAL IN SWINOUJSCIE Unconventional gas may become a major fuel in the Polish economy, also in the context of the requirements of the EU climate and energy package. Areas of unconventional gas reserves in Poland ANALYZED GAS PIPELINE BALTIC PIPE GDANSK ANALYZED GAS PIPELINE POLAND-LITHUANIA Maintenance and Operation of Gas Infrastructure in Poland In of its operation activities GAZ-SYSTEM S.A. follows, among other things, the provisions of the of its Transmission Network Operation System (SESP). It is a proprietary collection of procedures and manuals describing in detail the behaviour in the performance of operations for specific elements of the transmission network. SESP addresses the need for standardised performance and documentation of operations in the transmission infrastructure for the entire company. This enables the delivery of the operation process in a technically correct and structured manner, as well as the supervision over proper performance of the operations and benchmarking. In 2012, the company plans to update SESP in line with the policies set out in the corporate strategy, i.e. the optimisation of operating procedures and manuals, reorganisation of operating crews and technology development. POZNAN REMBELSZCZYZNA WARSAW The safety of gas transmission is a fundamental element of the mission of our company. This dimension entails, above all, the measures aimed at proper maintenance of the infrastructure (day-to-day operation and repairs), but also proper management of network flows. As a collection of procedures and manuals developed and continuously optimised by our operating crews in order to ensure the proper maintenance of the transmission system, including the operation of the Technical Gas Emergency Service, SESP is a powerful instrument helping us ensure the safe operation of the transmission system. Adam Nowakowski, Director of Operation Division Lasow WROCLAW GAZ-SYSTEM S.A. handles the claims of the landowners whose properties are crossed by transmission infrastructure. For this purpose, the company has established the Procedure for handling claims of landowners of properties where gas transmission system facilities are located. The procedure sets out guidelines for the clarification of the legal status of the rights-of-way with respect to gas pipelines running through properties of either private individuals or business entities. ANALYZED GAS PIPELINE DEVELOPMENT POLAND-CZECH REPUBLIC 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 SWIERKLANY Cieszyn TARNOW ANALYZED GAS PIPELINE POLAND-SLOVAKIA During the reporting period, GAZ-SYSTEM S.A. continued to work on the implementation of a passporting system, i.e. a tool that, among other things, serves as the source of technical details of gas facilities and equipment, their location, and supports the scheduling and tracking of operations. The system will also be used for the preparation of reports and analyses concerning the transmission infrastructure and will support the process of project alignment with other utility operators. In 2011, the pilot implementation was completed in Wroclaw, and full roll-out of the system in the remaining branches has been scheduled for years Gas pipelines shown on this map are schematic. Detailed map of the gas transmission system is available at VERY LOW POTENTIAL LOW POTENTIAL MEDIUM POTENTIAL HIGH POTENTIAL 60 61

33 Market Development 62 63

34 Market Development in the European Context The gas market harmonisation processes in the European Union strongly accelerated in the year The European Council called for actions to complete a single energy market (for natural gas and electricity) until 2014 and put an end to the energy isolation of the areas having the status of energy islands within the EU by In March 2011, the Third Energy Package came into force, which marks another step in the creation of the natural gas market in the European Union. The efficient functioning of the natural gas market is impossible without appropriate operational and commercial solutions. In order to ensure coherent interaction between transmission systems and their smooth interoperability in practice, European TSOs draft network codes under the umbrella of ENTSOG. Europe is also in the process of establishing common balancing and capacity allocation platforms, which contribute to improved liquidity of the gas market and closer integration between individual market areas. Transmission system operators also offer bundled products to market participants. The North-South Gas Corridor The North-South Gas Corridor is one of the concepts that contributes to the creation of a single European energy market. The project is intended to connect the LNG Terminal in Swinoujscie with the LNG Terminal planned in Croatia, running through the transmission systems of Poland, Czech Republic, Slovakia and Hungary. The North-South Gas Corridor will lead to closer integration of regional gas markets, improved security of supply and enhanced access to new sources of gas for European countries. The corridor will also help align the operating models of individual national markets and, in the long run, reduce gas prices owing to strengthened interconnectivity and efficient cooperation between operators. The Vysehrad countries (Poland, Czech Republic, Slovakia, Hungary) set up working groups to develop the North-South Gas Corridor, which include the representatives of both the governmental administration and gas industry. Due to its market potential and location, Poland has a chance to become an important country shaping the European gas market. Thereby the projects implemented by GAZ-SYSTEM S.A. will be of crucial importance towards well-integrated European transmission network. Market Development in the National Context In 2011, preparatory works were continued for the liberalisation of the gas market in Poland which is expected to be opened for new entreats and, thereby, support competition and gas price deregulation. The process is designed to change the gas market model through the reconstruction of price setting mechanisms and creation of a virtual point which does not have any specific location but enables the gas trade by customers within the transmission network. To address the current and future market needs, GAZ-SYSTEM S.A. intends to broaden the range of its services. At the same time, the company supports the implementation of favourable regulations, and, for example got involved in the drafting process of the new Gas Law. The objective of the new legislation is to implement the new EU law on the Polish market. With a view to effective gas market liberalisation, GAZ-SYSTEM S.A. and Polish Power Exchange (POLPX) established cooperation to set up an exchange-based gas market in Poland. In November 2011, the President of the Energy Regulatory Office (ERO) published the Recommendations for the Gas Release Programme in Poland charging GAZ-SYSTEM S.A. with the task of adapting the network code of the transmission system operator to the changes resulting from the establishment of a single virtual point and for the interoperability with the exchange market

35 In 2011, in line with the guidelines set out in the above document, GAZ-SYSTEM S.A. came up with a concept for the implementation of the virtual point. The work including the drafting of a new Transmission Network Code, which introduces the virtual trading point and provides for exchangebased trade in gas, was underway. The trade in the gas exchange will take place independently of the physical delivery and will be made possible owing to the separation of the physical entry and exit points, i.e. by enabling the transportation of gas from physical entry points to the virtual point and from the virtual point to physical exit points. The new gas market model also provides for the modification of the balancing regime and use of balancing instruments by the operator, for facilitated access to services at the interconnection with the infrastructure of storage, distribution or LNG system operators. Furthermore, new types of contracts and enhanced change of supplier with respect to gas supply agreements and at the level of gas transportation are also envisaged The implementation of the changes contributing to exchange-based trade in gas in Poland are planned for 3rd quarter of In the reporting period, GAZ-SYSTEM S.A. also worked out a new tariff model for natural gas transmission services in accordance with the Entry-Exit tariff system, and thereby adapted its tariffs to the EU standards. Regulation (EC) No 715/2009, which makes part of the Third Package, obligates transmission system operators to set separate tariffs for individual entry points to and exit points from the transmission system. The calculation method and the tariff rates proposed by GAZ-SYSTEM S.A. are each time reviewed and approved by the President of the Energy Regulatory Office. Detailed information on tariff design and the methods of its calculation can be found at. The level of tariffs depends, to a large extent, on the level of costs incurred by the company. Thanks to cost optimisation and attractive terms of investment financing, in 2011, GAZ-SYSTEM S.A. reduced the average charges for gas transmission on a per-unit basis from PLN to PLN per 1000 m³ of gas, which corresponds to a decrease of the tariff by 7.75%. The continued liberalisation of the gas market and launch the virtual reverse flow service were made possible, among other things, thanks to the designation of GAZ-SYSTEM S.A. as the operator of the Polish section of the Yamal pipeline. The transfer of the operatorship to an independent party is an important step towards ensuring a transparent and equal access to transmission capacity available in this gas pipeline for all interested participants of the energy market. In addition, the President of the Energy Regulatory Office approved the Transmission Network Code (TNC) for the Polish Section of the Transit Gas Pipeline System Yamal Europe, which, together with a model contract form, sets out the terms of transmission services provided in the Polish section of the Yamal-Europe Pipeline. As a result, GAZ-SYSTEM S.A. has already entered into contracts for reverse-flow services with three companies, and the incremental off-take volumes went up to around 2.3 bcm of gas per annum

36 European Partner 68 69

37 Responding to the challenges related the development of the energy market and the need to ensure energy security of Poland, GAZ-SYSTEM S.A. has directed comprehensive efforts for the integration of European transmission systems. Apart from infrastructure investments, the company is actively taking part in the industry debate, strengthening its position of an important partner in Europe. GAZ-SYSTEM S.A. established cooperation with transmission system operators in all the neighbouring EU countries. The cooperation covers both commercial and operational agreements, as well as joint ventures aimed at the construction and development of physical transmission infrastructure. The plans for offering bundled services are also being discussed. A project implemented jointly with the Czech transmission system operator, NET4GAS s.r.o., is an example of effective cooperation. GAZ-SYSTEM S.A. built a 22-kilometre gas pipeline running from the Polish-Czech border in the vicinity of Cieszyn to Skoczow, and a measurement station in Poland, near Cieszyn. NET4GAS s.r.o. completed a 10-kilometre long gas pipeline from the border to the connection with the transportation system near Tranovice in the Czech Republic. Other initiatives pursued by GAZ-SYSTEM S.A. together with operators of neighbouring transmission systems concern the assessment of the potential for the development of the transmission system in the region. The cooperation in this regard is already underway with operators from Lithuania (AB Lietuvos Dujos), Denmark (Energinet.dk) and Slovakia (Eustream a.s.). Together with other transmission system operators from the Central European region, GAZ- SYSTEM S.A. prepared the first edition of the Gas Regional Investment Plan (CEE GRIP) The working group include the transmission system operators from Poland, the Czech Republic, Austria, Slovakia, Hungary, Romania, Bulgaria and Croatia. The purpose of the study was to share information on the development of gas infrastructure in the region and analyse broader aspects related to natural gas market, such as supply scenarios, market integration and security of supply on the regional level. The document presented a list of infrastructure projects that will enable the integration of individual national markets into a single, properly interconnected regional market. Furthermore, in cooperation with transmission system operators from the Baltic region, GAZ-SYSTEM S.A. also prepared the first edition of the respective Gas Regional Investment Plan (BEIMP GRIP) , acting as its coordinator. The document provides information on the development of natural gas market and infrastructure and analyses the challenges and barriers that hinder the infrastructure expansion in the Baltic region.the BEMIP GRIP was developed with the participation of transmission system operators from Estonia, Denmark, Finland, Latvia, Lithuania, Poland and Sweden. In 2011, a Working Group for Gas Interconnections in Central and Southern Europe was debating under the leadership of the European Commission. GAZ-SYSTEM S.A. contributed to the discussion by presenting the activities of the company and strategic development plans for the Polish transmission system. The report and action plan adopted by the Group ranked very highly the company s projects in terms of their impact on market integration and energy security. GAZ-SYSTEM S.A. is also involved in the activities of international industry organisations and takes part in numerous conferences, debates, workshops and plenary sessions. The participation in such events is an opportunity for the exchange of experience and good practices, 70 71

38 and stimulates R&D efforts and the promotion of new solutions for the natural gas sector. In addition, being active member of international organisations the company gains better visibility as an important player in the Central and Eastern Europe, and builds support to attract funds for the implementation of its key projects. In many of such events the company is represented by its Brussels Office. In March 2011, Jan Chadam, President of the Management Board of GAZ-SYSTEM S.A., was invited by the European Parliament Committee on Industry, Research and Energy for public hearing at the European Parliament on Energy Infrastructure Priorities. The public hearing When presenting our point of view and position, we represent one voice in the discussion among dozens of others. Therefore the ability of building broader coalitions and understanding the intentions of other groups within the EU or industry organisations is so important. The key areas of interest for the Brussels Office include infrastructure policy, access to financial support and new financial instruments, which may be used in the implementation of the company s projects under the new financial framework of the European Union. made part of a broader discussion dedicated to the EU policy for energy infrastructure. The President of GAZ-SYSTEM S.A. provided an overview of the natural gas market in Central Europe and the needs related to the expansion of transmission networks and diversification of gas supply in the region. At the same time, he underlined that the implementation of the EU energy policy is a key priority for GAZ-SYSTEM S.A., which is demonstrated by the strategic investment projects undertaken by the company. In the middle of 2011, Edinburgh hosted the international conference of Gas Infrastructure Europe (GIE), which was focused on the latest infrastructure projects in the gas sector. During the event, GIE invited GAZ-SYSTEM S.A. to organise the next jubilee edition of the conference in th International GIE Conference was held in May 2012 in Krakow and was the first gas industry event of such significance to take place in Poland. Moreover, GAZ-SYSTEM S.A. in cooperation with members of Gas Infrastructure Europe (GIE) launched the GasNaturally initiative dedicated to the promotion of natural gas as a safe and environmentally friendly source of energy. GasNaturally is a response to the Commission s appeal for a comprehensive debate on solutions that will contribute to security of energy supply while ensuring to the achievement of the CO2 emission reduction targets. Piotr Kuś, Director of Brussels Office 72 73

39 Effective Management 74 75

40 GAZ SYSTEM S.A. aspires to achieve a leadership position among European gas transmission operators striving to grow in accordance with the principles of sustainable development. To this end, the company is focused on long-term improvement of its operational and organisational performance. Advanced Management Approaches The implementation of an integrated Enterprise Resource Planning (ERP) system in the entire organisation was one of the highlights of the year The system supports the management process through information gathering and enables the processing of the collected data. At the same time, the system integrates the typical managerial functions. Previously, the applications used by the company were not integrated. The ERP system not only ensured their consolidation in terms of information flow between individual but also the alignment of business processes in accordance with corporate standards across all the branches. As a result, consistent information is provided and matters are handled in the same way in the entire company. The implementation of the tool ensured efficient implementation of key projects and comprehensive managerial and controlling solutions. Effective management of the company is reflected in careful planning and analysis of individual projects both before and during their implementation. GAZ-SYSTEM S.A. takes a prudent approach in its operating activities, which means that each project is preceded with the process of identification and analysis of potential risk factors that could affect its successful implementation. Having this in mind, GAZ-SYSTEM S.A. implemented the GazStep project management methodology, which defines the guidelines for each of the ten dimensions of project management: Communication management Measurement management Project definition Quality management Schedule and budget definition GazStep HR management Schedule and budget management!risk management Critical issue management Change management The GazStep methodology has been applied in practice in the construction of strategic gas pipelines, as well as during the implementation of large and medium-sized investment projects (around 40 projects)

41 In 2011, the company launched the Information Interchange System (IES) which ensures efficient management of customer service. The system enables quick access to data related to the performance of transmission contracts, as well as the monitoring of progress for individual cases. It also displays financial transactions while conforming to most stringent data security standards. As a result, in the reporting period the company did not receive any complaints regarding breaches of customer privacy or losses of customer data. The implementation of a system that responds to customer expectations leads to their improved satisfaction from the relationship with GAZ-SYSTEM S.A. According to the customer satisfaction survey carried out by the company, the customer satisfaction ratio in 2011 was 4.23 out of the maximum score of five. The customers perceive the company as competent and professional (92% of the respondents), trustworthy, reliable and delivering on its promises (87% of the respondents). High level of service was the strongest driver of customer satisfaction (response indicated by 89% of the respondents. Thanks to transparency in the relations with customers and business, in 2011, the company avoided any fines for non-compliance with laws and regulations concerning the provision and use of its products and services. As of 1 February 2011, the company has applied a new Corporate Procurement Policy which is designed to improve the efficiency of the process. It has introduced, among other things, central coordination of procurement processes, category management and defined precisely the divisions of roles and responsibilities. Under the policy, procurement processes are executed by category managers of project teams composed of representatives of different organisational units concerned with a given procurement. Teams of specialists from relevant units at the branches are also involved. Meanwhile, the contracting manual aligned with the new procurement policy sets out detailed principles applicable to procurement execution and incorporates the recommendations from internal audits. GAZ-SYSTEM S.A. cooperates with international and local supplier selecting those contractors who offer best quality for price. Apart from the price, other selection criteria applied by the organisation include warranty term, time of delivery and availability of the service offered by the provider. The procurement of pipes and fittings for the construction of strategic gas pipelines may be a good example how the company understands good quality for price. Following a public tender, framework agreements were signed with suppliers and individual orders are delivered under separate contracts awarded each time after the most attractive price bid is approved. The tender procedures applied by GAZ-SYSTEM S.A. conform to the requirements of the Public Procurement Law. The company is not in the position to screen its business partners for human rights performance. However, GAZ-SYSTEM S.A. does verify whether the individuals who are members of the body representing the supplier, or the supplier itself as a body corporate, have not been sentenced by a final court judgement for e.g. breach of the rights of persons performing paid work. In case of discovering such occurrence, the company disqualifies the supplier from a tender procedure. In the reporting period the company did not identify any behaviours of suppliers that could compromise human rights. Internal Communication Effective management would not be possible without efficient communication and therefore it is considered a key element of the organisational culture of GAZ-SYSTEM S.A. The main objectives of internal communication include closer integration, stronger commitment and business awareness of the employees. In 2011, the company revised the Internal Communication Strategy and Action Plan of GAZ-SYSTEM S.A. The execution of the strategy relies on various communication tools such as the intranet, newsletter, online chat or text messaging. Information on past and planned events is spread through the employee magazine GAZ-eta. In addition GAZ-SYSTEM S.A. maintains direct contact with is employees, e.g. through regular meetings with the management team within individual divisions and teams. Management Systems The role of the Integrated Management System (IMS) established by GAZ-SYSTEM S.A. is to align the management processes in respect of customer service, occupational health and safety and the environment, in accordance with international standards. The management system helps the company build credibility in all the activities and supports the development of sustainable and transparent relations with stakeholders. The IMS comprises the following systems: quality management system based on PN-EN ISO 9001:2001 standard Quality Management Systems Requirements, environmental management system based on PN-EN ISO 14001:2005 standard Environmental Management Systems. Requirements and guidelines for application, occupational health and safety management system based on PN-N-18001:2004 standard Occupational Health and Safety Management Systems Requirements

42 The management systems are based on identified processes and procedures, which are systematically revised in accordance with the Plan-Do-Check-Act cycle. The application of this approach resulted in more efficient flow of information and documents in the company and precise division of tasks, authority and responsibility among the employees. GAZ-SYSTEM S.A. promotes environmental standards and occupational safety through applying mandatory Guidelines for Subcontractors in its procurement contracts, whereby contractors are obliged to act in accordance with environmental regulations and the process can be monitored in this regard, including data on accidents at work. The management of environmental impact is supported by the environmental management system. Environmental risks are identified and assessed based on the standards of the ERM (Enterprise Risk Management) system. As part of the Integrated Management System, the company carries out internal environmental audits and in case of identifying any irregularities, corrective and remedial actions are taken. In the reporting period, no fines or non-monetary sanctions for non-compliance with environmental laves and regulations were levied on the company. Energy Management In an effort to reduce the consumption of energy resources, GAZ-SYSTEM S.A. is seeking to eliminate waste at every stage of the transmission process and in the day-to-day work. The total consumption figures for natural gas and electricity from non-renewable sources for the entire company in the reporting period are presented in the following table. Emissions The greenhouse gas emissions generated by the company principally comprise methane, which is released to the environment during the operation of gas infrastructure, and carbon dioxide produced as a result of the combustion of gas for own needs. Methane is emitted to the atmosphere during pipeline blow-down process, due to gas leaks from networks or failures. The total methane emissions during the reporting period amounted to thousand Mg of CO2 equivalent. The volume of carbon dioxide emission assessed based on gas combustion in units the company accounts for in the payment of air emission charges, stood at 169 thousand Mg. The initiatives undertaken in 2011 to reduce greenhouse gas emissions consisted in tests and analyses performed on gas installations with a view to eliminating any leaks. Furthermore, the company plans to upgrade the facilities that have demonstrated the highest emission levels and assess the resulting contribution to the reduction of adverse impact on the natural environment. In the reporting period, GAZ-SYSTEM S.A. obtained three decisions enabling the participation, as of 2013, in the emission trading scheme and implemented the relevant procedure for Monitoring and reporting on CO2 emission levels and supervision of measurement systems used for the monitoring of CO2 emissions. [EN26] Significant air emissions generated by the company include nitrogen oxides, sulphur oxides, volatile organic compounds and particulate matter. The respective emission volumes in 2011 are presented below: nitrogen compounds Mg, sulphur compounds Mg, volatile organic compounds Mg, Total natural gas consumption (value as at ) Total consumption of electricity from non-renewable sources (value as at ) 2,838, GJ 224, GJ particulate matter Mg. In the reporting period, there were no occurrences of any significant uncontrollable spills or other emergencies that would pose a risk to human health or life, or have a negative environmental impact

43 Water GAZ-SYSTEM S.A. continuously monitors and strives to reduce its water consumption. Water withdrawal volumes for the reporting period are presented in the following table: Total withdrawal of water used directly by the organisation by source Total volume of water withdrawn from the organisation and intermediaries (e.g. utility) regardless of the source includes also water used for cooling - directly by the reporting organisation (e.g. from own wells) 203,933 cm - by intermediaries (e.g. utility companies) 29,426 cm Total volume of water in cubic meters per annum withdrawn from groundwater 174,507 cm (only water withdrawn and used directly by the organisation) Effluents In 2011, the production of effluents dropped by 16.8%. The produced and treated domestic and process effluents were primarily discharged either to water or to the ground, and alternatively to sewage utility networks. A small portion was disposed to septic tanks. The charges for effluent disposal in the reporting period amounted to PLN Waste The total volume of waste produced in the reporting period was 3397 Mg. All waste is sorted, neutralised or recycled in accordance with the applicable regulations, and collected by authorised recipients. In 2011, the waste collected for recycling, including scrap metals, used oils, paper and cardboard and other mixed packaging waste, constituted 20% of all the waste. The remaining waste is collected by other entities for neutralisation or disposal. The reduction of the produced waste volumes is archived, among other things, through increased recycling rates for scrap metals and paper. Total weight of waste by type and disposal method Total weight of waste, of which: Hazardous waste (as defined in national legislation) Non-hazardous waste Total weight of recycled waste 3, Mg Mg 1, Mg Mg Total volume of effluents by quality and ultimate place of disposal Total volume of liquid waste 83,404 cm Total volume of effluents by place of disposal, of which: Effluents discharged to sewage system 27,735 cm Effluents disposed of by vehicles to waste water treatment plants 3665 cm Effluents discharged to surface waters (lake, river, etc.) 51,812 cm Effluents discharged to groundwater 0 Effluents discharged through the soil 192 cm Total volume of effluents by method of treatment, of which: Processed by a municipal waste water treatment plant 31,400 cm Processed by the organisation 52,004 cm 82 83

44 Environmental Charges In compliance with the applicable laws, in 2011, the company paid environmental charges in the total amount of nearly PLN 2 million. The charges for tree and shrubbery removal were the largest cost item and reached over PLN 1.1 million (over 61%). The charges for waste disposal added up to PLN 370 thousand, which represented 19% of the total costs. The company paid over PLN 170 thousand (9%) for environmental surveys. The fees for administrative decisions in respect of environmental protection totalled PLN 25 thousand, i.e. 1% of the environmental protection expenditures. Specification Value at Environmental charges in thousand PLN Total charges 183 Charges for gas or particulate emissions to the atmosphere 160 Charges for surface water groundwater withdrawal 16 Charges for effluent discharge to water or to the ground 7 Innovative technology solutions GAZ-SYSTEM S.A. appreciates the growing role modern technologies play in the company s growth, which is best demonstrated by investments in the implementation of new gas quality measurement technologies. GAZ-SYSTEM S.A. has an in-house Gas Quality Measurement Laboratory which operates advanced equipment for the measurement of gas quality parameters, noise and vibration levels. The laboratory has one of the most sophisticated units in Poland that enables the characteristics adjustment of dewpoint transducers. It also performs analyses of sulphur compounds in natural gas. In addition, GAZ-SYSTEM S.A. is in the process of building a laboratory for gas meter calibration under working pressure. The gas meter calibration station will be set up at the compressor station in Holowczyce and will be the first its kind in Poland. The calibration of gas meters under working pressure will improve the accuracy of gas volume measurements in settlements with customers at exit points. At the same time, it will enable more precise determination of balancing differences. The improved credibility of customer billing and more accurate determination of the volume of transported gas responds to the expectations of the market. The project completion is planned for

45 Financials 86 87

46 Opinion of an independent expert auditor To the Shareholder and the Supervisory Board of the Gas Transmission Operator GAZ-SYSTEM S.A. We conducted an audit of the financial statement of the Gas Transmission Operator GAZ-SYSTEM S.A. with it seat in Warsaw at ulica Mszczonowska 4, comprising of the introduction to the financial statement, the balance sheet drawn up as at 31 December 2011, the profit and loss account, the statement of changes in equity, the cash flow statement for the financial year starting from 1 January 2011 until 31 December 2011, and the notes to the financial statement. On 29 February 2012, we issued an unqualified opinion concerning the said financial statement. The financial statement that was inspected by us constituted the grounds for preparing the attached abridged financial statement. In our opinion, the attached abridged financial statement is compliant in all significant aspects with the full version of the financial statement constituting the grounds for the abridged financial statement for the year ending 31 December The full version of the financial statement that was the subject of our audit, contains an introduction to the financial statement and notes to the financial statement that were not presented in their entirety in the attached abridged financial statement. For the purpose of gaining a better understanding of the financial condition of the Company as well as the financial result obtained thereby in the 2011 year, the attached abridged financial statement should be read in unison with the full financial statement and with our opinion and the audit report. The Company Management Board and the Supervisory Board are responsible for preparing the abridged financial statement compliant with the binding provisions of the law. The Company Management Board and the Members of its Supervisory Board are required to ensure that the abridged financial statement, the financial statement and the Management Board Report meet the requirements foreseen under the Accounting Act of 29 September 1994 (Journal of Laws of 2009, No. 152, item 1223 as amended). Our task was to ensure compliance of the abridged financial statement with the full financial statement. Piotr Sokołowski Key Expert Auditor conducting the audit Licence No Persons representing the entity Warsaw, 21 September 2012 DELOITTE AUDYT Sp. z o.o. Al. Jana Pawła II 19, Warszawa tel. (22) fax (22) NIP REGON entity authorised to audit financial statements entered on the list of entities authorised under No. 73 held by the NATIONAL CHAMBER OF STATUTORY AUDITORS 88 89

47 In the reporting period GAZ-SYSTEM S.A. demonstrated excellent financial performance. During the financial year, the company generated a net profit of PLN 416 million maintaining very strong net profitability around 27%. In addition the values of current and quick ratios deserve to be noted as the stand at exceptionally safe levels of, respectively, 5.36% and 5.15% The company demonstrates a good level of financial safety, which contributes to its capability to fulfil the current and future obligations. Adam Bryszewski, Director of Financial Division Key Financial Ratios (%) ROR The following financial figures summarise the performance of the company in All the information in this section is consistent with the statutory financial report of the company. ROA Key Financial Ratios (PLN bn) Comparison of Key Financial Indicators (PLN bn) Balance-Sheet Total Equity EBIT EBITDA Profit Before Tax Profit After Tax /2009 Sales Revenue /2010* 2011 *2009/2010 the financial year in this case comprised 20 months due to the realignment of reporting periods

48 Ratio Value for 2011 Additional information Ratio Value for 2011 Additional information Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments Income Operating expenses Net income from sales and equivalent income, including income from affiliates Other operating income Costs of operating activities Net income from product sales Change in product stock Cost of products for own needs Net income from sales of goods and materials Profit on sale of non-financial fixed assets Subsidies received Other operating income Depreciation Consumption of materials and energy Contracted services Other allocated costs Value of goods and materials sold PLN 1,524,934,531 (PLN 6,115,694) PLN 529,903 PLN 10,500,866 PLN 0 PLN 3,020,531 PLN 67,012,369 PLN 368,013,545 PLN 136,533,960 PLN 237,261,813 PLN 23,210,519 PLN 2,965,369 Payroll and employee benefits Payments to investors Payments to the government Community investments Taxes Total cash expenditure on employee compensation and benefits Social insurance and other benefits Dividends paid to all shareholders Interest paid to creditors; Interest on any form of loans and credit (not only long-term) and outstanding dividends owing to holders of privileged shares Corporate income tax Taxes and levies, including excise tax Voluntary contributions and investment of funds for the benefit of the general community PLN 188,619,710 PLN 57,940,242 PLN 64,864,956 PLN 86,330,279 PLN 85,768,943 PLN 78,499 WZS profitsharing payment to the State Treasury Cash donations made for community organisations Other operating expenses Loss on sale of non-financial fixed assets PLN 9,996,298 Retained economic value Direct economic value generated minus distributed economic value (A-B) PLN 784,409,606 Revaluation of non-financial assets PLN 3,208,397 Other operating expenses PLN 30,276,577 Financial expenses Interest payable, including interest payable to affiliates Loss on sale of investments Revaluation of investments Other PLN 246,808 PLN 0 PLN 0 PLN 3,759,

49 The following tables present the details concerning the financial performance of GAZ-SYSTEM S.A. based on the Financial Statements for the financial year 2011 together with the auditor s opinion and report. Asset and financial position of the Company The following tables present the key figures from the profit and loss account and the financial indicators reflecting the financial result of the Company, as well as its financial and asset position compared to last year s results. Key figures from the profit and loss account (PLN thousand) /2010* Sales revenue 1,529,850 2,455,929 Costs of operating activities 1,100,314 1,751,616 Other operating income 70,033 82,143 Other operating expenses 43,481 29,518 Financial income 66,683 92,281 Financial expenses 4,006 39,181 Extraordinary profits (losses) 0 0 Corporate income tax 102, ,582 Net profit (loss) 416, ,455 Profitability ratios /2010* - margin on sales 34% 33% - net margin on sales 27% 27% - return on equity (net) 8% 15% Performance indicators /2010* - asset turnover ratio 0,25 0,43 - days receivable ratio days payable ratio inventory turnover ratio Liquidity/Net working capital /2010* - debt ratio 11% 11% - asset to equity ratio 89% 89% - net working capital (PLN thousand) 1,284, ,117 - current ratio 5,36 3,55 - quick ratio 5,15 3,41 Balance Sheet (PLN) No. Title Note At 31/12/2011 At 31/12/2010 A NON-CURRENT ASSETS: 4,572,743, ,484,278, Intangible assets 3 34,913, ,789, Plant and equipment 3,822,907, ,734,886, Long-term receivables Long-term investments 674,347, ,572, Long-term accruals 40,574, ,030, B CURRENT ASSETS: 1,579,587, ,260,068, Inventories 62,033, ,144, Short-term receivables ,834, ,615, Short-term investments 1,443,383, ,690, Short-term accruals 7 2,336, ,618, TOTAL ASSETS 6,152,330, ,744,347, No. Title Note At 31/12/2011 At 31/12/2010 A EQUITY 5,488,362, ,141,060, Share capital 8 3,771,990, ,741,886, Supplementary capital 382,869, ,869, Other capital reserves 981,805, ,421, Accumulated profit (loss) Net profit (loss) 416,561, ,454, Write-off on net profit during the financial year (64,864,956.00) (101,571,082.00) (negative value) B LIABILITIES AND PROVISIONS FOR LIABILITIES 663,968, ,286, Provisions for liabilities 163,378, ,914, Long-term liabilities ,602, Short-term liabilities 216,106, ,045, Accruals ,483, ,724, TOTAL EQUITY AND LIABILITIES 6,152,330, ,744,347, *fiscal year from until

50 Income Statement (PLN) No. Title Note Actual performance for Actual performance for Net income from sales and equivalent income 1,529,849, ,455,928, Costs of operating activities 1,100,314, ,751,616, Profit (loss) on sales (1-2)) 429,535, ,312, Other operating income 70,032, ,143, Other operating expenses 43,481, ,518, Operating profit (loss) (3+4-5) 456,087, ,937, Financial income 66,682, ,280, Dividends and shares in profit Interest 58,817, ,022, Profit on sale of investments Revaluation of investments Other 7,864, ,258, Financial expenses 4,006, ,181, Interest 246, , Loss on sale of investments Revaluation of investments Other 3,759, ,939, Profit (loss) on ordinary activities (6+7-8) 518,763, ,036, Extraordinary profits (losses) Profit (loss) before taxation (9+10) 518,763, ,036, Income tax ,201, ,582, Other obligatory deductions from profit (increase of loss) 14. Net profit (loss) 416,561, ,454, Statement of Changes in Equity (PLN) No. Title At 31/12/2011 At 31/12/ Equity at beginning of period 5,141,060, ,889,684, Equity at beginning of period, adjusted 5,141,060, ,889,684, Share capital at beginning of period 3,741,886, ,019,393, Changes in share capital 30,104, ,492, Share capital at end of period 3,771,990, ,741,886, Supplementary capital at beginning of period 337,869, ,769, Changes in supplementary capital 45,000, ,100, Supplementary capital at end of period 382,869, ,869, Other reserve capital at beginning of period 511,421, ,933, Changes in other reserve capital 470,383, ,488, Other reserve capital at end of period 981,805, ,421, Accumulated profit (loss) at beginning of period 549,883, ,588, Accumulated profit at beginning of period 549,883, ,588, Accumulated profit at beginning of period, adjusted 549,883, ,588, a increase (on account of) b appropriation of accumulated profit c decrease (on account of appropriation of 549,883, ,588, accumulated profit) 9. Accumulated loss at end of period Accumulated profit (loss) at end of period Net profit 351,696, ,883, Write-off on net profit (negative value) (64,864,956.00) (101,571,082.00) 13. Equity at end of period 5,488,362, ,141,060,

51 Cash Flow Statement (PLN) No. Title Note A Cash flow from operating activities 1. Net profit (loss) 351,696, ,883, Total adjustments 493,508, ,025, Net cash from operating activities (1±2) 845,205, ,176,908, B Cash flow from investment activities 1. Receipts 421, ,057, Outflows 403,781, ,260,999, Net cash flows from investment activities (1-2) (403,359,632.65) (997,941,928.43) C Cash flow from financing activities 1. Receipts 127,669, ,545, Outflows 101,922, ,898, Net cash flows from financing activities (1-2) 25,746, (98,352,819.32) D Total net cash flow (A.1 ± B.3 ± C.3) 467,592, ,614, E Balance-sheet increase/decrease in cash and cash 472,693, ,832, equivalents, of which: - effect of foreign exchange rate change 6,320, ,219, F Cash and cash equivalents at beginning of period 969,228, ,614, G Cash and cash equivalents at end of period (F+D) 1,436,820, ,228, Investment and environmental expenditures (PLN) Expenditures planned within 12 months following the balance-sheet date Total investment, including*: 2,773,031, Non-financial fixed assets 2,374,951, of which intangible assets including planned expenditures on 85,203, the acquisition of transmission rights-of-way Value of capital investments 398,080, Environmental protection 0.00 * The presented figure includes the approved Investment Plan for the period from 1 January 2012 until 31 December 2012, according to the resolution of the Management Board no. 487/Z/2011 of 22 November 2011 Financing of strategic investment projects Form of financing Project Currency 1. OPI&E Strategic projects (gas pipelines) Total expenditures Co-financing agreement allocated funds Funds received 2010 Funds received 2011 PLN 3,755,073, ,095, ,483, ,423, EEPR Interconnectors EUR 149,790, ,905, ,000, ,296, PLN 599,162, ,620, ,062, ,472, TEN-E Baltic Pipe EUR 8,620, ,310, , PLN 1,007, OPIE Development and implementation of gas meter calibration technology for medium and high pressure PLN 35,770, ,021, ,

52 Long-term financial assets held in affiliated entities (PLN) Current reporting period Previous reporting period 672,520, ,520, Net income from sales of products, goods and materials, by category (PLN) Income from sales of products by type Current period Previous period Transportation services (subject to licensing) 1,477,873, ,428,051, Asset lease 1,470, ,246, Re-invoicing 4, , System management Third party network maintenance 42,323, ,738, Third party services 3,262, ,887, Other 10,500, ,713, Total 1,535,435, ,500,878, Net income from sales of products, goods and materials, by geography (PLN) No. Title Current period Previous period a Net income from product sales 1,524,934, ,499,225, country 1,524,497, ,499,186, exports EU 437, , b Net income from sales of goods and materials 10,500, ,652, country 10,500, ,652, exports EU TOTAL 1,535,435, ,500,878, GRI Content Index Table GRI indicator Global Compact Principle Indicator Page 1.1 Statement from the most senior decisionmaker of the organisation (e.g., CEO, chair, or equivalent senior position) about the relevance of sustainability to the organisation and its strategy. 1.2 Description of key impacts, risks, and opportunities Name of the organisation Primary brands, products, and/or services Operational structure of the organisation, including main divisions, 14, 58 operating companies, subsidiaries, and joint ventures. 2.4 Location of organisation s headquarters Number of countries where the organisation operates, and names of 14 countries with either major operations or that are specifically relevant to the sustainability issues covered in the report. 2.6 Nature of ownership and legal form Markets served (including geographic breakdown, sectors served, 14, 19 and types of customers/beneficiaries). 2.8 Scale of operations. 12, 13, Significant changes during the reporting period regarding size, 14 structure, or ownership Awards received in the reporting period Reporting period Date of most recent previous report. Not applicable 3.3 Reporting cycle Contact person Process for defining report content, including: Determining materiality of specific topics for the organisation and its stakeholders 2 Prioritizing topics within the report Identifying stakeholders the organisation expects to use the report

53 3.6 Boundary of the report (e.g., countries, divisions, subsidiaries, leased facilities, joint ventures, suppliers). 3.7 Statement concerning any specific limitations on the scope or boundary of the report. 3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other entities that can significantly affect comparabilityfrom period to period and/or between organisations. 3.9 Assumptions and techniques underlying estimations applied to the compilation ofthe indicators and other information in the report Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such re-statement (e.g., mergers/ acquisitions, change of base years/periods, nature of business, measurement methods) Significant changes from previous reporting periods in the scope, boundary, or measurement methods applied in the report. 2 There are no limitations on the scope or boundary of the report Not applicable 3.12 Table identifying the location of the Standard Disclosures in the report. 3, , Policy and current practice with regard to seeking external assurance 2 for the report. If not included in the assurance report accompanying the sustainability report, explanation of the scope and basis of any external assurance provided. 4.1 Governance structure of the organisation, including committees 25 under the highest governance body responsible for specific tasks, such as setting strategy or organisational oversight. 4.2 Indication whether the Chair of the highest governance body is also 23 an executive officer (and, if so, their function within the organisation s management and the reasons for this arrangement). 4.3 The number and gender of members of the highest governance 23 body that are independent and/or non-executive members (for organisations that have a unitary board structure of the supervisory board/highest governance body). 4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body Linkage between compensation for members of the highest governance body, senior managers, and executives (including departure arrangements), and the organisation s performance (including social and environmental performance). 4.6 Processes in place for the highest governance body to ensure 27 conflicts of interest are avoided. 4.7 Process for determining the composition, qualifications, and expertise 25 of the members of the highest governance body and its committees, including any consideration of gender and other indicators of diversity. 4.8 Internally developed statements of mission or values, codes of 22, 26 conduct, and principles relevant to economic, environmental, and social performance and the status of their implementation. 4.9 Procedures of the highest governance body for overseeing the 23 organisation s identification and management of economic, environmental, and social performance, including relevant risks and opportunities, and adherence or compliance with internationally agreed standards, codes of conduct, and principles Processes for evaluating the highest governance body s own 23 performance, particularly with respect to economic, environmental, and social performance Explanation of whether and how the precautionary approach or 76 principle is addressed by the organisation Externally developed economic, environmental, and social charters, 17 principles, or other initiatives to which the organisation subscribes or endorses Memberships in associations (such as industry associations) and/ 17 or national/international advocacy organisations in which the organisation: Has positions in governance bodies; Participates in projects or committees; Provides substantive funding beyond routine membership dues; Views membership as strategic List of stakeholder groups engaged by the organisation Basis for identification and selection of stakeholders with whom to 16 engage Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group ,

54 4.17 Key topics and concerns that have been raised through stakeholder 30-31, engagement, and how the organisation has responded to those key topics and concerns, including through its reporting. EC1 Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments. EC5 1 Range of ratios of standard entry level wage by gender compared to 39 local minimum wage at significant locations of operation. EC6 Policy, practices, and proportion of spending on locally-based 78 suppliers at significant locations of operation. EC7 6 Procedures for local hiring and proportion of senior management 38 hired from the local community at locations of significant operation. EC8 Development and impact of infrastructure investments and services 30, provided primarily for public benefit through commercial, inkind, or pro bono engagement. Impact of these activities on the community. EN3 8 Direct energy consumption by primary energy source. 80 EN4 8 Indirect energy consumption by primary energy source. 80 EN8 8 Total water withdrawal by source. 82 EN16 8 Percentage and total volume of waterrecycled and reused. 81 EN20 8 NO, SO, and other significant air emissions bytype and weight. 81 EN21 8 Total volume of effluents by quality and ultimate place of disposal. 82 EN22 8 Total weight of waste by type of waste and disposal method. 83 EN23 8 Total number and volume of significant spills. 81 EN26 7, 8, 9 Initiatives to mitigate environmental impacts of products and services, 81 and extent of impact mitigation. EN28 8 Monetary value of significant fines and total number of non-monetary 80 sanctions for noncompliance with environmental laws andregulations. EN30 7, 8, 9 Total environmental protection expenditures and investments by type. 82, 84 LA1 Total number of employees according to the type of employment contract, position and region, broken down by gender. LA2 6 Total number and rate of new employee hires and employee turnover by age group, gender, and region. LA3 Benefits provided to full-time employees that are not provided to temporary or part time employees, by significant locations of operation. LA4 1, 3 Percentage of employees covered by collective bargaining agreements , LA7 1 Rates of injury, occupational diseases, lost days, and absenteeism, 46 and total number of work-related fatalities, by region and by gender. LA8 1 Education, training, counselling, prevention, and risk-control programs 45 in place to assist workforce members, their families, or community members regarding serious diseases. LA9 1 Health and safety topics covered in formal agreements with trade 45 unions. LA10 Average hours of training per year per employee by gender, and by 42 employee category. LA11 Programs for skills management and lifelong learning that support the 41 continued employability of employees and assist them in managing career endings. LA12 Percentage of employees receiving regular performance and career 42 development reviews, by gender. LA13 1, 6 Composition of governance bodies and breakdown of employees 38 per employee category according to gender, age group, minority group membership, and other indicators of diversity. LA14 1, 6 Ratio of basic salary and remuneration of women to men by 39 employee category, by significant locations of operation. LA15 Return to work and retention rates after parental leave, by gender. 41 HR2 1, 2, 3, 4, 5, 6 Percentage of significant suppliers, contractors, and other business partners that have undergone human rights screening, and actions taken (a significant or contractor is among the top 10 key suppliers or subcontractors of the company). HR4 1, 2, 6 Total number of incidents of discrimination and corrective actions taken. HR5 1, 2, 3 Operations and significant suppliers identified in which the right to exercise freedom of association and collective bargaining may be violated or at significant risk, and actions taken to support these rights. HR6 1, 2, 5 Operations and significant suppliers identified as having significant risk for incidents of child labour, and measures taken to contribute to the effective abolition of child labour. HR7 1, 2, 4 Operations and significant suppliers identified as having significant risk for incidents of forced or compulsory labour, and measures to contribute to the elimination of all forms of forced or compulsory labour (a significant or contractor is among the top 10 key suppliers or subcontractors of the company). SO1 Percentage of operations with implemented local community engagement, impact assessments, and development programs. SO2 6 Percentage and total number of business units analysed for risks related to corruption , 79 38, 79 38, 79 27,

55 Acknowledgements SO3 10 Percentage of employees trained in organisation s anti-corruption 27 policies and procedures. SO4 10 Actions taken in response to incidents of corruption. 27 SO5 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 Public policy positions and participation in public policy development and lobbying. SO6 10 Total value of financial and in-kind contributions to political parties, politicians, and related institutions by country. PR5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction. PR6 Programs for adherence to laws, standards, and voluntary codes related to marketing communications, including advertising, promotion, and sponsorship. PR7 Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship by type of outcomes. PR8 1 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data. PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services Acknowledgements: We would like to thank everyone who contributed to the preparation of the first integrated report of GAZ-SYSTEM S.A., and in particular the employees of the respective divisions and branches. Published by: Gas Transmission Operator GAZ-SYSTEM S.A. Project coordinators: Małgorzata Polkowska, Spokesperson, Aneta Szczepańska, PR Coordinator Cooperation: Hubert Kabulski, Aneta Świeca, Rafał Sieracki, Wioletta Knapik, Daniel Cebula, Stanisław Brzęczkowski, Kamil Magier, Waldemar Wrzesiński, Bartłomiej Szczepaniak, Paweł Mońka, Adam Marzecki, Piotr Kuś, Artur Woźniak, Dariusz Nojszewski, Marta Miziołek, Grzegorz Sikora, Agnieszka Maksymowicz, Maria Rochna, Joanna Milczarek, Przemysław Gan, Dorota Bagińska, Marzena Szkałuba, Joanna Szostek, Iwona Dominiak, Iwona Kaszuba-Zając, Renata Gierszewska, Katarzyna Sikora, Anna Ciskowska, Magdalena Mechlin, Dorota Marek, Marcin Chimiczewski, Łukasz Kulon, Aleksandra Zientek, Aleksandra Ciwis-Dronszczyk, Katarzyna Noskowicz, Barbara Marczyńska-Górska Photographs: Archive of GAZ-SYSTEM S.A. Sent to press on 18 October

56 Evaluation Questionnaire Selected response I represent of the following stakeholder groups of GAZ-SYSTEM S.A.: Employees Customers Business partners Government Local communities Students Other:.. I found the content presented in the first integrated report of GAZ-SYSTEM S.A.: Very interesting Interesting Rather little interesting Not interesting I found the following section most interesting: GAZ-SYSTEM S.A. as the champion of the transmission system integration in Europe Sustainable Development Energy Security Market Development European Partner Effective Management Finding the information I needed in the report was: Intuitive Rather easy Difficult The activities described in the report: I already heard about them I have never heard about them before In general, I find the integrated report of GAZ-SYSTEM S.A.: Very interesting Interesting Rather little interesting Not interesting In the next report I would like to find out more about: Please, send back the questionnaire to the following address: Gas Transmission Operator GAZ-SYSTEM S.A. Communication Team ul. Mszczonowska 4, Warsaw

57 Contact Address of the registered office Management Board Gas Transmission Operator GAZ-SYSTEM S.A. ul. Mszczonowska Warszawa [email protected] phone: fax: Spokesperson/Communication Team [email protected] phone: fax: Questions concerning sustainable development should be addressed to the Spokesperson Divisions Commercial Division [email protected] phone: fax: National Gas Dispatching Division [email protected] phone: fax: Audit and Safety Division [email protected] phone: fax: Operation Division [email protected] phone: fax: Finance Division [email protected] phone: fax: IT Division [email protected] phone: fax: President of the Management Board [email protected] phone: fax: Member of the Management Board for Technical Issues [email protected] phone: fax: Member of the Management Board for Investment [email protected] phone: fax: Managing Director [email protected] phone: fax: HR Division [email protected] phone: fax: Legal and Organisational Division [email protected] phone: fax: Development Division [email protected] phone: fax: Investments Division [email protected] phone: fax: Procurement and Administration Division [email protected] phone: fax: OHS Services [email protected] phone: fax: LNG Division [email protected] phone: fax:

58 Branches Gas Transmission Operator GAZ-SYSTEM S.A. Branch in Gdańsk ul. Wałowa Gdańsk phone: fax: Gas Transmission Operator GAZ-SYSTEM S.A. Branch in Poznań ul. Grobla Poznań phone: fax: Gas Transmission Operator GAZ-SYSTEM S.A. Branch in Rembelszczyzna ul. Jana Kazimierza Nieporęt, Rembelszczyzna phone: fax: Subsidiary company Registered office Polskie LNG S.A. ul. Fińska Świnoujście [email protected] phone: fax: Office in Warsaw ul. Mszczonowska 4 Building C Warszawa [email protected] phone: fax: Gas Transmission Operator GAZ-SYSTEM S.A. Branch in Świerklany ul. Wodzisławska Świerklany [email protected] phone: fax: Gas Transmission Operator GAZ-SYSTEM S.A. Branch in Tarnów ul. Bandrowskiego 16A Tarnów [email protected] phone: fax: Gas Transmission Operator GAZ-SYSTEM S.A. Branch in Wrocław ul. Gazowa Wrocław [email protected] phone: fax: Representative Office in Brussels Gas Transmission Operator GAZ-SYSTEM S.A. Brussels Office Boulevard Saint-Michel Brussels [email protected] phone: fax:

59 Operator Gazociągów Przesyłowych GAZ-SYSTEM S.A. ul. Mszczonowska 4, Warszawa tel , faks