PGNiG Falls Most in 14 Months as Gazprom Row Escalated to Court

Shares in Poland’s dominant gas company fell the most in 14 months after it failed to achieve a price cut in six months of negotiations with Russia’s OAO Gazprom and resorted to arbitration.

Polskie Gornictwo Naftowe i Gazownictwo SA, or PGNiG, slumped as much as 6 percent and traded 4.9 percent lower at 6.38 zloty by 10:53 a.m. in Warsaw, the biggest decline on a closing basis since March 2014. The benchmark WIG20 index fell 0.5 percent.

Warsaw-based PGNiG, Gazprom’s third-biggest client in the European Union with Russian gas imports worth more than $3 billion last year, filed a case with Stockholm’s Arbitration Institute concerning a long-term supply contract dating from 1996, it said in a regulatory statement late on Wednesday. The company, which didn’t disclose the amount sought in court, needs a discount to compete with a growing number of rivals who may pay less for gas.

“Starting an arbitration means lack of a price cut from Gazprom in the near future, which had been expected,” Monika Kalwasinska, an analyst at PKO Bank Polski SA, said by phone on Thursday. “PGNiG faces pressure on margins as the liberalization of Polish gas market continues, while the cost of gas imports could rise with oil prices.”

Gazprom’s press office declined to comment on the case on Thursday.

The arbitration procedure doesn’t exclude further talks and a “conciliatory end of the dispute” with Gazprom, the Polish company said Wednesday.

PGNiG gained a price discount of about 15 percent when it reached an out-of-court agreement with Gazprom in November 2012 after starting arbitration proceedings a year earlier.

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