Poland : MAREK GRZYBOWSKI
PKN ORLEN is building a strong multi-energy concern. Saudi Arabian Oil Company is a partner of the venture. The consolidation of PKN ORLEN with LOTOS and PGNiG, and, earlier, with the Energa Group, would be an opportunity to build an integrated and diversified fuel and energy group with a total market capitalization of around PLN 78bn.
A multi-energy capital group with a strong financial position will ensure Poland’s energy security as well as stable and attractive energy prices for customers.
‘The merger between PKN ORLEN and the LOTOS Group will mark the inception of a single strong group capable of delivering environmentally friendly energy to the Polish economy and meeting the challenges posed by the fuel and energy transition’ says Daniel Obajtek, President of the PKN ORLEN Management Board.
‘Our business objectives for oil and chemicals are closely aligned with PKN ORLEN, and we are exploring additional opportunities in the European petrochemicals market, as well as in R&D’ says Mohammed Al Qahtani, Aramco Vice President for Downstream.
LOTOS refinery and Port of Gdansk
The Grupa Lotos refinery is located near the Port of Gdańsk. Poland imports crude oil and fuels from the Middle East and other overseas countries through the Port of Gdańsk. LOTOS Exploration and Production Norge AS (LOTOS Norge) received 4 new exploration and production licenses. The Norwegian government announced its decision on January 18, 2022. Upon their acceptance, LOTOS Norge’s portfolio in Norway will increase to 34 licenses.
– We reloaded 52 million tons of cargo in 2021 – said Łukasz Greinke, President of the Port of Gdansk. Reloading of liquid fuels resulted in a record result in the supply of cargo at Port of Gdańsk. 18.8 million tonnes of liquid cargo were reloaded at the fuel terminals of the Port of Gdansk – emphasizes Greinke.
It was over 5 million tons more than in 2020. A year-on-year increase of 37.9%. 17 million tons – this is an absolute record of Naftoport, an organization dealing with fuel transshipment in Gdańsk.
Naftoport belongs to the PERN Group. It is a key company in Poland that ensures the diversification of crude oil supplies to Poland. It is the only sea crude oil transshipment terminal in Poland. It is one of the largest and most universal terminals for handling refined products. It is one of the largest transshipment terminals in the Baltic Sea region.
PKN ORLEN and Saudi Aramco
PKN ORLEN and Saudi Aramco have signed agreements opening up the possibility of strategic cooperation in both petrochemical and R&D projects. PKN ORLEN has guaranteed possible exchange of selected service stations for other locations in Slovakia and entry into a completely new market, that is Hungary. Following the transaction, PKN ORLEN would join the leading fuel retailers on both those markets – informed PKN ORLEN.
‘These acquisitions will support the diversification of Aramco’s product portfolio across the hydrocarbon value chain — including a focus on liquids-to-chemicals pathways. Our expanding global network of refineries and chemical joint ventures allows us to reach new markets with our products, and strategically place crude oil volumes across different geographies,’ says Mohammed Al Qahtani, Aramco Vice President for Downstream.
MOL in Poland
‘For MOL, the transaction is a major step in its strategic transformation journey commenced in 2016, which we fast-tracked last year with our updated strategy. The acquisition of ACG assets in Azerbaijan, the construction of a new polyol plant in Hungary, and the entry into Poland represent important milestones on the way to achieving our goals.
With this acquisition, we will gain a foothold in the largest economy of Central and Eastern Europe, reaching nearly 40 million potential customers. The Hungarians and Poles share historical experiences and have a common goal of ensuring secure energy supplies in Central and Eastern Europe. I believe that the North-South energy corridor will be further strengthened through this agreement,’ says Zsolt Hernádi, President of the Management Board and CEO of the MOL Group.
‘Selection of these investors and the agreements signed with them is a crucial step in the process of creating a multi-utility group. The consolidation is a response to the challenges of the future, also at a time of macroeconomic headwinds. We are confident that our contribution to building the group will help deliver ambitious investment and development plans based on both our refinery in Gdańsk and the competence centers built around the LOTOS Group,’ notes Zofia Paryła, President of the LOTOS Group Management Board.
‘The partner of the newly built group is a leading global oil and gas company. The other investors are also guarantors that, once completed, the remedy implementation process should receive full approval. This is also vital information for our employees, who are now aware of the stature of the companies they will pursue their further careers with,’ she adds.
The largest multi-utility group in this part of Europe
‘This is a watershed moment for the Polish fuel industry. We are about to finalize the acquisition of LOTOS Group, a deal intended to benefit the entire Polish economy, both companies involved, their respective customers, employees, and shareholders. Ever since the process was launched, we have emphasized that the priority is to derive additional benefits from the merger remedies, and we have achieved just that. If the merger is followed through, it would provide an opportunity to ensure supplies to Poland of crude oil of sustainably high quality from Saudi Aramco.
Such international partnerships are crucial to our vision of building the largest multi-utility group in this part of Europe. In the retail area, we have negotiated with our Hungarian partner an asset exchange deal, which will directly advance our plans of geographical expansion by strengthening the retail chain in Slovakia, but also through the entry into a completely new market of Hungary’ says Daniel Obajtek, President of the PKN ORLEN Management Board.
‘Keeping two separate companies with the same owner in one market would increase competitive pressures. On the other hand, their integration would improve operational efficiency-boosting financial performance and would give the combined group more capacity to invest in new promising areas. The acquisition and newly forged partnerships with strong partners would facilitate foreign expansion, as a result of which the ORLEN eagle would come to be recognized throughout the region of Central and Eastern Europe,’ says Jacek Sasin, Deputy Prime Minister, Minister of State Assets.
The consolidation
The acquisition of the LOTOS Group by PKN ORLEN would provide a real opportunity to diversify the sources of feedstock supplies. If the acquisition is finalized, PKN ORLEN will guarantee, under a long-term agreement, crude oil supplies from Saudi Aramco at the level of 200 to 337 thousand barrels per day. It is estimated that post-merger this would cover up to 45% of total oil demand from the entire ORLEN Group, in Poland, Lithuania, and the Czech Republic – informed PKN ORLEN.
The consolidation of PKN ORLEN with LOTOS and PGNiG, and, earlier, with the Energa Group, would be an opportunity to build an integrated and diversified fuel and energy group with a total market capitalization of around PLN 78bn, leveraging the unique strengths of each company as its key advantage. Integration of their assets would help expand the scale of operations and improve financial stability. These would in turn enable the energy transition and provide resilience to market changes, including those triggered by the EU climate policy – underlined PKN ORLEN.
The transaction structure was already confirmed in May 2021 under a memorandum of understanding between the Ministry of State Assets, PKN ORLEN, LOTOS Group, and PGNiG. The selected merger structure guarantees the stable financial condition of the new strong company and takes into account the needs of all shareholders, including those holding minority interests. This means that, upon the acquisition, shareholders of LOTOS Group and PGNiG will acquire new shares in the increased share capital of PKN ORLEN and become its shareholders. As a result, the equity interest held by the Ministry of State Assets in PKN ORLEN would increase.
PKN ORLEN – 2021 EBITDA of PLN 14.2 billion
PKN ORLEN (6 refineries in Poland, Czechia, and Lithuania) is the first oil company in Central Europe to declare aspiration to achieve emission neutrality by 2050. In order to reach this goal, by 2030 the company will reduce CO2 emissions from its current refining and petrochemical assets by 20% and emissions from power generation by 33% CO2/MWh.
The Group’s key growth area over the next decade will be power generation, based mainly on renewables and supported by gas-fired sources. By 2030, the Group intends to achieve 2.5 GW of installed RES capacity, including 1.7 GW in offshore wind farms and 0.8 GW in onshore (wind power and solar PV) sources.
In 2021, PKN ORLEN (29,5 million tonnes of crude oil annual throughput) posted a net profit of PLN 10.2 billion and a LIFO-based EBITDA of PLN 14.2 billion. The main contributor to the record results was the petrochemical segment, followed by power generation and refining operations. The Polish retail segment accounted only for 13% of the Group’s profit. Despite a marked decline in fuel margins in the Polish market, sales revenue amounted to PLN 131.6 billion.
In 2021, PKN ORLEN consolidated its position and maintained financial ratios at safe levels. Since 2021, sound financial foundations have also been supported by green bond issues. In line with the ORLEN2030 strategy, acquisitions and development projects were continued. Major investment projects, such as the Research and Development Centre in Płock and the green glycol unit in Trzebinia, were put in operation.
Sources: PKN ORLEN, Port of Gdańsk, LOTOS
