list prezesaDear Ladies and Gentlemen,
This is the second time that I have the pleasure of conveying, on behalf of the Management Board, the Consolidated Annual Report of GAZ‑SYSTEM S.A., drawn up in accordance with the international standards developed by the Global Reporting Initiative. The 2012 report presents the financial results and the non-financial value of the company based on sustainability criteria.

For several years now, the company has consistently and systematically developed its stakeholder efforts in the context of corporate social responsibility. In 2009, GAZ‑SYSTEM S.A. joined the UN Global Compact, declaring respect for its ten principles on human rights, labour relations, the environment and anti-corruption. Our next step was the incorporation of the sustainable growth dimension into the mission and vision of the company as an important element of the management strategy. Our present view is that CSR should not be limited only to social actions that promote pro-environmental attitudes, but it should rather be treated as an integral part of management. Accordingly, in 2011 we included sustainability to our strategy as the fifth strategic direction. In order to effectively implement and coordinate activities in this area during the 2012 reporting year, we implemented a new management structure for various aspects of sustainable development within the company.

The responsible business behaviour of GAZ‑SYSTEM S.A. is reflected in its successful relationships with the stakeholders. We engage in regular dialogue with local communities and most of our investment decisions take into account the views of a wide range of stakeholders. Therefore, in this year’s report we devote a lot of attention to the relations with our stakeholders, i.e. customers, business partners, as well as local authorities and landowners in the areas where our investments are located. We are going to great efforts to meet the expectations of our partners and continuously monitor the level of satisfaction with our services. At the same time, we attach a lot of importance to communication, as it constitutes the basis for dialogue and ensures the transparency of our endeavours.

As the three-year term of the current Management Board of GAZ‑SYSTEM S.A. came to an end in 2012, I personally feel that the time has come to review our work so far and assess the company’s performance.

In 2011, we developed our long-term strategy until 2020 and have since consistently worked towards the achievement of its objectives. One of them is to create optimal conditions for the development of a liberalised gas market in Poland. The year 2012 was a turning point in this regard. GAZ‑SYSTEM S.A. developed a new Transmission Network Code which, following the consultations with market participants, was approved by the President of the Energy Regulatory Office. The new document introduces significant changes, which are the basis for the liberalisation and development of Poland’s gas market. It also harmonises the rules of the system with the standards developed by European transmission system operators. At this point, I would like to thank the staff involved in this project for their commitment and efforts put into preparing the new code. Let me also use this opportunity to thank our customers and business partners for all the comments made in the consultation process of the new gas market rules. Your support has been a valuable contribution to improving the concept of a new gas market model in Poland.

The projects we have launched in the last few years will soon have a tangible impact on the gas market reality, not only in Poland but also in this part of Europe. In 2012, intensive efforts were made by all those involved in the delivery of the key investment for the regional gas market, namely the construction of an LNG Terminal in Świnoujście. The construction of the Świnoujście – Szczecin gas pipeline, which will serve primarily for connecting the LNG terminal with the domestic transmission network, is also underway.

In 2012, we also continued with our plan for the expansion of the Polish transmission network by 1000 km of new pipelines by 2014. Notable achievements in this respect include the completion of the construction and commissioning of the Jeleniów – Dziwiszów pipeline, an important connection to enable increased imports from the West. With a full review of the 2010-2014 investment program pending in 2014, we may already confirm at this stage that steps taken so far have enabled us to increase the technical capacity for gas imports into Poland by about 40%.

It is a great satisfaction to report that the company has consistently demonstrated a high level of financial security over the last years, and in 2012 once again achieved robust financial results. The loan agreement with the European Bank for Reconstruction and Development concluded the process of arranging the financing for GAZ-SYSTEM’s strategic investments. The total value of investments in 2010-2014, including the LNG Terminal in Świnoujście, gas transmission pipelines and interconnectors, amounts to approximately EUR 1.96 billion. The sources of funding for these projects include the company’s equity, EU funds, as well as loans from the European Investment Bank, the European Bank for Reconstruction and Development and a consortium of commercial banks.

We are now able to focus on new investment challenges and on securing adequate funding for them. There is no doubt that continued development of the transmission system and construction of further transmission pipelines are a necessity, resulting from both the need to integrate transmission networks in Europe, as well as the demands of the Polish economy, including the plans for the construction of new power generation capacity and the expansion of chemical plants. Without our investments, no further development of companies within these industries would be possible.

For several years now, GAZ‑SYSTEM S.A. has been building its position on the natural gas market in Europe. In 2012, GAZ‑SYSTEM S.A. hosted a prestigious industry event – the 10th Annual Gas Infrastructure Europe Conference, which was held in Kraków. The conference was an excellent opportunity to exchange views between the European TSOs, the industry leaders and decision–makers and provided a platform for discussing different visions of the future of the gas industry in Europe.

Our company has been consistently working to deliver its plans to expand interconnections with the adjacent transmission systems, which are a necessary component of the North-South Gas Corridor supported by the European Union. The corridor is intended to connect the gas transmission systems of Poland, the Czech Republic, Slovakia, Hungary and Croatia and make Poland’s transmission infrastructure an important part of the European system. To this end, we are planning to expand the national network by nearly 1000 km of gas transmission pipelines in the years 2014-2020.

I firmly believe that GAZ‑SYSTEM S.A. will live up to the expectations of the market participants. We are equipped with appropriate technology and management systems necessary for the effective implementation of our plans. It has been particularly gratifying to observe a steady growth of the competence and commitment levels of our company’s 2000-strong staff. This trend provides an assurance of the high quality of the operations and services provided by GAZ‑SYSTEM S.A. The successes that the company has managed to achieve in various employer rankings demonstrate that job satisfaction in our company is at a very high level. May I thank all our staff for their efforts in 2012. My sincere gratitude goes out to all those who are engaged in ensuring the security of the network and transmission infrastructure, to those making sure that our investments are effectively implemented and everyone whose day-to-day efforts contribute to the ongoing development and success of our work.

In conclusion, on behalf of the Management Board of GAZ‑SYSTEM S.A., let me express my gratitude to our business partners, customers and all those who worked with us in 2012. We hope that you will enjoy reading this report.

Yours sincerely,

Jan Chadam
President of the Management Board, GAZ‑SYSTEM S.A.