PKN ORLEN Group – company overview

PKN ORLEN Group – company overview
March 2011
1
Agenda
Company overview
Key segments
New businesses entry
Summary
2
Leading refining & petchem company operating in the biggest market in CEE
PKN ORLEN – POLISH KEY PLAYER IN CEE
LEADING DOWNSTREAM COMPANY
Strategically located on key pipeline network. Access to
the crude oil terminals in Gdańsk (Poland) and Butinge
(Lithuania).
Operates 7 refineries in Poland, Lithuania and the Czech
Republic, including the largest and highly advanced one.
Capable of processing in all refineries any kind of crude
oil. Currently the most economic is REBCO.
Petrochemical assets fully integrated with the refining
operations.
Operates ca. 2 600 retail sites in Poland, Czech Republic,
Germany and Lithuania.
KEY FACTS
SHAREHOLDERS STRUCTURE
State Treasury
27,52%
Free float
72,48%
PRODUCTION:
Refining
Petrochemical
ca. 30.0 mt/y
ca. 3.5 mt/y
FINANCIALS IN YEAR 2010:
Revenues
EBITDA
PLN 83.5 bn
PLN 5.5 bn
Net profit
PLN 2.5 bn
3
The strategy for 2009-2013 assumes further core business development,
divestment of non-core assets and entry into new attractive business areas
Main objectives of PKN ORLEN Group
Debt
reduction
Efficiency
improvement
and key
investments
execution
Release of capital employed through
working capital optimisation, assets
disinvestment in chemical and telecom
segments, solving the issue of obligatory
reserves
Efficiency improvement as well as
development and extension of the
value chain in core areas of activity refining, retail and petrochemical
segments
Entry into
Diversification of activities,
new
strengthening the Group by limiting
business areas the downstream contribution to the
Priorities
2009 – 2010
Preparation for further
growth: actions to
improve financial
performance, increase
efficiency, reduce debt
and finalize investments in
core areas of activity
2011 – 2013
Further efficiency of
core assets,
investments in new
segments in order
to increase the
company value
business
4
Agenda
Company overview
Key segments
New businesses entry
Summary
5
Refining segment
NELSON COMPLEXITY
ASSETS
Supersite (Plock)
Mazeikiu (10.2; 10.3)
Gold
Silver (MN, Litvinov)
Bronze (Kralupy)
Litvinov (5.5, 7.0)
Plock
(15.1; 9.5)
Trzebinia (0.5)
Kralupy (3.4; 8.1)
Jedlicze (0.1)
Paramo (1.0)
Niche
Trader
Speciality (Paramo)
Closure-Candidate
N/A (Trzebinia,
Jedlicze)
Refinery (production capacity mt /y; Nelson complexity index)
Refinery classification according to Wood Mackenzie (2007)
KEY FACTS
PKN ORLEN processing capacity: ca. 30 mt/y (Plock plant in Poland – 15.1 mt/y, Unipetrol – 5.3 mt/y and ORLEN Lietuva
– 10.2 mt/y).
Market share*: gasoline (PL: 65%, CZ: 35%, LT: 79%) and diesel (PL: 60%, CZ: 28%, LT: 84%).
Nelson complexity index: Plock 9.5, Kralupy 8.1, Litvinov 7.0, ORLEN Lietuva 10.3.
Refinery flexibility to process many kinds of crude oil.
Fuel production in line with 2009 Euro standards in all refineries.
* As of 31.12.2010
6
Petrochemical segment
ASSETS
CORE BUSINESS – GROWTH DRIVERS
PX/PTA
Polyolefins
Strengthening position through full
integration with refinery.
Investments in world class assets.
Building regional leader position.
NON STRATEGIC BUSINESS - EXIT
PVC
Fertilizers
Limited synergies with refining activity.
Release of capital employed through
Anwil sale.
KEY FACTS
PKN ORLEN production capacity: ca. 3.5 mt/y (Plock - 1.9 mt/y, Unipetrol - 1.6 mt/y).
Full integration of petrochemical assets with refining facilities.
Depending on the product we have between 40% to 100% of market share in domestic consumption.
Polyolefins sales within Basell network.
PX/PTA technological start up is pending (start of products sales in 2q2011). Planned capacities: 400 kt and 600 kt
respectively.
7
Retail segment
ASSETS
OPERATING DATA
2008
2009
EBIT
PLN m
2010
- 6%
641
880
Sales volumes
th t
6 229
825
+ 5%
6 713
7 025
KEY FACTS
Biggest retail network (no of filling stations)*: Poland - 1714, Germany - 515, Czech Republic - 337, Lithuania - 35.
Market share*: Poland - 32%, Czech Republic - 14%, Lithuania - 4% and Northern Germany - 9%.
Two-tier branding strategy (premium and economy)
„FLOTA POLSKA” & DKV/ORLEN fleet card for corporate customers; and „VITAY” loyalty card for individual
customers – ca. 8 m participants*
* As of 31.12.2010
8
Agenda
Company overview
Key segments
New businesses entry
Summary
9
„Multi-utility” is a foundation for further PKN ORLEN’s value growth
Strategic rationales
PKN ORLEN faces serious barriers for the
further dynamic growth in the oil sector...
The dynamic growth through acquisitions and
geographic expansion in 2002-2006
Concept of „multi- utility”
New
segments
Focus on organic development and efficiency
improvement
Higher profitability
Stable cash flows
Strong competitive pressure and high volatility in
margins
Electric power
generation
Refining
Strong competitive pressure and high volatility in
margins
…hence the perceived growth opportunities in
the new areas of growth…
Upstream (E&P)
Current PKN
ORLEN’s
areas of
activities
Petrochemicals
Logistics
Sales of fuel and
petrochemicals
Operational synergies and diversification of activities
PKN ORLEN’s security
Integrated fuel - energy
company
10
Growth of PKN ORLEN in upstream segment is based on three pillars
Examples
Targets
Regional
focus
Organic and
inorganic growth
Cooperation with
partners
Limitation of (mostly geopolitical) risks
Building capabilities in stable
environment
Gradual development of diversified
assets portfolio
Opportunity for rapid growth of
know-how and competencies
Acquisition of mainly minority equity
stakes
Participation in existing projects,
including cooperation with external
partners
Current exploration and production
projects
Adjustment of activities to the
available budget
Central and Eastern Europe
North Africa (?)
North America
Limitation of
project risk
Focus on most
prospective assets
11
At present, PKN ORLEN is involved in a relatively small number of E&P
projects and of limited risk, but the project portfolio is to grow
Description of selected projects
1
Off-shore project on Baltic shelf (Latvia) on one of the
biggest oil fields in the Baltic Sea
Large hydrocarbon reserves: 250m bbl
Project is being realized in cooperation with a Middle
East partner - the biggest private E&P company from
Kuwait
2
On-shore E&P project in Poland (Lublin area)
of exploration activities conducted by the biggest oil
companies: Chevron and ExxonMobil
3
4
Shale gas exploration licenses
On-shore E&P project in Poland (Sieraków area)-JV with PGNiG
The most prospective exploration area in Poland, next to the largest
discovered reserves of oil and gas in Poland
Exploitable resources up to 26m bbl
KAMBR
project
Shale gas exploration project in Poland
Five exploration licenses secured by PKN ORLEN in the most prospective
areas (Lublin province and the southern part of Mazovia)
PKN ORLEN aims to engage with an experienced partner for further
exploration (letters of intent already signed with about 15 companies)
Wood Mackenzie’s estimations of 1.36 trillion m3 of unconventional gas
stretching across northern and central Poland (Poland’s annual gas
consumption is 14 bn m3, 72% of gas imported)
12
Building new segments
UPSTREAM PROJECTS
ENERGY
Latvian shelf – work out data from exploration gathered so
far.
Advanced preparation of investment in Włocławek, final
decision to make in 3q 2011
The drill is planned at the turn of 2011/2012.
Polish lowland – exploratory drill has been started.
Process of the power plant builder selection is in
progress.
Next 2 appraisal drills are planned at the turn of
2011/2012.
We have the environmental decision and agreement for
connection to the energy network.
Decision about the selection of the contractor to be made
at the turn of 3/4q2011.
Start up of building in Włocławek in 2012.
Start-up in 2014, investment at the level of PLN 1,5
billion.
Lublin region – seismic and hole data integration is finished.
Data analysis and choice of drills’ locations is in progress.
The drill is planned in the 2 half 2011 and next one in
1H2012.
Shale gas– seismic works are started.
First analysis findings in mid 2011.
Drills planned in 2H2011.
13
PKN ORLEN is developing Energy segment through engagement in new
projects and efficiency increase of existing assets
Implementation of strategy
Involvement in new projects
in the energy sector through co-participation in the
construction of new generating units
Strategy’s directions
Achieving maximum synergies
with refining part
Assurance of energy safety of
PKN ORLEN
Infrastructure adaptation to more
stringent environmental
requirements
Modernization of current
infrastructure for further
development of energy activity
A construction of a new gas-fueled power plant
in Włocławek (460 MW)
Potentially other unit in Płock
Efficiency improvement of existing assets
thanks to optimization of current activities
Investment program in power plant in Płock
(~1 bn PLN), which will improve efficiency, meet
environmental standards (emitted emissions are
to be reduced by ~ 90%), lead to the increase in
power capacities (up till 2017 planned 20%
increase in electricity production capacities and
7% in thermal power) and balance the needs of
PKN ORLEN
Restructurization and modernization of energy
assets in Unipetrol
Optimalization of repairs in other foreign
assests
14
Agenda
Company overview
Key segments
New businesses entry
Summary
15
PKN ORLEN is an attractive investment
STRENGTHS
DEVELOPMENT OPPORTUNITIES
Attractive market of new EU countries with growth
potential.
Efficiency improvements through operational
excellence and integration of assets.
Leading position in the Central and Eastern EU
region in the downstream refining and
petrochemical.
Further development in the core business and
value chain extension.
World class refinery assets integrated with
petrochemical business.
The largest retail network.
Release of capital employed through the sale of
non core assets.
Development of new segments through
cooperation with sector partners.
Strategically located on key pipeline network.
Access to the crude oil terminal in Gdańsk
(Poland) and Butinge (Lithuania).
We take pole position for further growth
16
Thank You for Your attention
For more information on PKN ORLEN, please contact
Investor Relations Department:
telephone: + 48 24 256 81 80
fax:
+ 48 24 367 77 11
e-mail:
ir@orlen.pl
www.orlen.pl
17
Agenda
Supporting slides
18
From domestic leader to EU regional player
Domestic Business to 2002
Estonia
Estonia
Estonia
Latvia
Latvia
Latvia
Poland
Merger of Petrochemia Plock (Polish
largest refinery) with CPN (Polish largest
retailer) created PKN.
IPO of 30% of equity on Warsaw Stock
Exchange and London Stock Exchange.
Introduction of the new brand ORLEN.
2000
Second public offer of PKN ORLEN on
WSE and LSE increased free float up to
72%.
Poland
Germany
2002
Expansion into German retail market.
Joint venture with Basell –
Basell Orlen Polyolefins.
2005
Acquisition of majority stake in Unipetrol
(Czech holding).
Introduction and start of PKN ORLEN
Retail Sales Development Plan for
Poland.
Introduction and start of Unipetrol
Partnership Program.
Poland
Germany
Czech Republic
Czech Republic
1999
Lithuania
Lithuania
Lithuania
Germany
Regional Business 2006+
„Internationalization” 2002-2005
Czech Republic
2006 +
Acquisition of Lithuanian refinery Mazeikiu Nafta (renamed in 2009 into
ORLEN Lietuva).
Implementation of segmental
management.
Implementation of two-tier branding
strategy in retail segment in Poland and
the Czech Republic.
New strategy of PKN ORLEN Group for
2009-2013.
CAPEX, OPEX, working capital and
headcount optimization.
19
Supply Routes Diversification
Sea Oil Terminals in Gdansk and Butinge Guarantee Alternative Supply Routes
Sea terminal [capacity]
Oil pipeline [capacity]
Projected Oil pipeline
(70) Primorsk
[
Ca
60
]
Kirishi
(18) Ventspils
Rostock
Holborn
Gdansk
(3.8; 6.1) Schwedt
(10.7; 10.2) (10.5; 10.0)
Harburg
(4.7; 9.6)
[Ca 27]
Leuna
(11.0; 7.1)
[Ca 22]
Naftoport
(30)
Butinge
(14)
[Ca 45]
[Ca 18]
Mazeikiai
(10.2; 10.3)
DRUZHBA
Plock
(15.1; 9.5)
DRUZHBA
[Ca
34]
Novopolotsk
(8.3; 7.7)
[C
a2
5]
Mozyr
(15.7; 4.6)
[Ca 55]
]
[Ca 80
]
Litvinov (5.5, 7.0)
34
a
TrzebiniaJedlicze
[C
Kralupy
Drogobich
(0,1)
Brody
(0,5)
Ingolstadt IKL [Ca 10] (3.4; 8.1)
(3.8; 3.0)
[C a
22]
(5.2; 7.5)
Bratislava
DRUZHBA
Burghausen [Ca 9] (6.0; 12.3) [Ca 20]
Bayernoil
(3.5; 7.3)
[Ca 9]
(12.8; 8.0)
[Ca 3,5] Tiszaojvaro
Schwechat
s
Duna
(10.2; 6.2)
Petrotel
Rafo
(8.1, 10.6) (2.6; 7.6)
ADRIA
(3.4; 9.8)
Yuzhniy
(ex4)
Petrobrazi
Rijeka
Odessa
Triest
(4.4; 5.7)
Novi Sad
(3.4; 7.3)
ADRIA
(3.8; 3.5)
Arpechim
Sisak
(4.0; 4.6)
(ex 12)
(3.6; 7.3)
(3.9; 4.1)
Pancevo
Petromidia
(4.8; 4.9)
(5.1; 7.5)
[Ca 120]
Kremenchug
(17.5; 3.5)
[ Ca 29]
[ Ca 24]
Refinery of PKN ORLEN Group
Refinery (capacity m tonnes p.a.;
Nelson complexity index)
Yaroslavi
[Ca 78]
[Ca 30]
Kherson
(6.7; 3.1)
Novorossiys
k
(ex 45)
Neftochim
(5.6; 5.8)
Izmit
(11.5; 6.2)
Thessaloniki
(3.2; 5.9)
Elefsis
(4.9; 1.0)
Aspropyrgos
(6.6; 8.9)
Corinth
(4.9; 12.5)
Lisichansk
(8.5; 8.2)
Izmir
(10.0; 6.4)
Kirikkale
(5.0; 5.4)
Batman
(1.1; 1.9)
Source: Oil & Gas Journal, PKN Orlen own calculations, Concawe,Reuters, WMRC, EIA, NEFTE Compass, Transneft.ru
20
Unipetrol – continuation of operating efficiency improvement
ASSETS
ethylene
Litvínov
5.5 mt/y
IKL
Pipeline
Kralupy
Pardubice
3.2 mt/y
1.0 mt/y
10 mt/y
Druzhba
pipeline
KEY FACTS
9 mt/y
Mero Crude oil pipelines
CEPRO production pipelines
CEPRO depots
Ongoing strict cost control, leading to positive free cash flow and similar level of CAPEX as in 2009.
Continuation of the long-term trend in staff reduction.
Steadily growing market share in Czech retail to over 14% from below 10% in 2005.
Revival of demand in 2010 is fuelling some optimism to polyolefins, with continuous substitution of traditional materials
by plastics.
21
ORLEN Lietuva - maximizing the possessed potential
ASSETS
Sea terminal
Ventspils
(14
,3 m
(20,0 mt/y)
Latvia
t/y)
Pump station
Sea terminal
Butinge
(14,0 mt/y)
(14
,,0
m
t/y
)
Illukste
(16,4 mt/y)
Joniskis
Orlen Lietuva
Refinery
Mažeikių
Nafta
Biržai
Terminal
Polock
Klaipeda
Klaipeda
Storage depot
Crude pipeline
Products pipeline
(9,0 mt/y)
Lithuania
Rail transport
KEY FACTS
ORLEN Lietuva manages ca. 500 km of pipelines in the territory of Lithuania (both crude oil and product pipelines).
Access to the strategically important crude oil import / export terminal at Butinge.
Products supply within Lithuania is managed by use of railway or tankers.
The potential product pipeline to Klaipeda would improve logistics of final products.
Costs optimization – among others, main turnaround moved to 2011.
22
Relatively low rate of energy consumption per capita and need for new power
plants indicates high potential for growth in the energy generation sector
Electricity consumption in Europe, 2000-2007
Developed
countries 1
PKN ORLEN’s
markets 2
Forecast for supply and demand for peak power in
Poland, 2005-2020, GW
Rest
Demand
Supply
38
36
34
32
30
Electricity consumption
CAGR 2000-2007, %
4,1
2,1
1,5
Electricity consumption
per capita, 2007, ths. KWh
6,8
3,9
28
26
2,7
24
2005
2010
2015
2020
Currently energy consumption per capita on PKN ORLEN’s market is by ~ 40% lower than in developed countries 1. Forecasts indicate 2-3% increase in
the electricity demand in Poland until 2030 p.a.
The profitability of the sector is increasing in the result of the expected imbalance between supply and demand
44% of existing power plants in Poland is over 30 years. Old units of 11-15 GW (~30-40% existing capacity) have been planned to be closed. Power
capacities increase planned until 2020 of ~20 GW (includes both modernization of existing and construction of new plants). Top Polish energy companies
(i.e. PGE, Tauron, Enea, Energa) have announced plans of extensive capital investments into increase of capacities, summing up to ~90 bn PLN
Despite the current economic slowdown, an increase in the wholesale electricity prices is expected in the coming years
1)
Developed countries comprise: EU-15, Norway, Switzerland and Slovenia. 2) PKN Orlen’s markets comprise: Poland, Czech Republic,
Source: EIA, IMF, PKN ORLEN analysis
23
New power plants are mostly required in the northern Poland
Existing and planned generation capacity until 2015
Cable from
Sweden
Concentration of
generation sources
Brown coal power stations
Power Plant Gdańsk (Lotos, PGNiG, Energa)
(200 MW)
Hard coal power stations
Planned capacity
El. Szczecin
(800-1000 MW)
Planned LNG terminal
El. Opalenie
(1600 MW)
PGE (800 MW)
Dolna Odra
PGE ZEDO
Energa
Ostroleka
Ostrołęka
Włocławek
PAK
PAK
PGE
Turów
(500 MW)
PGE Turów
Jamal gas pipeline
PKN ORLEN
Płock refinery
PGE
(833 MW)
PGE Belchatów
Bełchatów
BOT
Energa
(1000 MW)
Enea
Kozienice
KozieniceEnea
(2000 MW)
Electrabel
Polaniec
Połaniec
Northern Poland has a
historical power deficit.
PGE
(1600 MW)
Tauron Tauron
Tauron Wola
(2000 MW)
PKE PKE
(400 MW)
Blachownia
Blachownia Łagisza
Tauron
Lagisza
PGEOpole
Siersza
Siersza
Halemba
Halemba Jaworzno
(920 MW)
Stalowa Wola
Jaworzno
Łaziska
Laziska
EdFRybnik
/EnBW
CEZ Skawina
Rybnik
Rybnik
CEZ
Skawina
(900-1000 MW)
(400 MW)
RWE
(800 MW)
PGE Opole
The current production capacity
is concentrated mainly in the
south of the country.
Some of the planned
greenfield capacities are
located north, near Anwil plant
in Włocławek.
24
Dividend policy:
PKN ORLEN aims to pay dividends equal or higher than 50% of FCFE
Net profit
+ amortization
Reference point for dividend policy – PKN
ORLEN investment goals and opportunities:
taking into account mergers and
Debt structure
adjusting to optimal level
acquisitions
FCFE
allowing for maintaining the optimal
capital structure determined by the
following ratios:
Capex
Covenant: Net Debt/EBITDA max.
Net working
capital change
3.5
Gearing: Net Debt / Equity of 30% -
40%
Dividend payout ratio 1999 - 2009
Dividend per share 1999 - 2009
3
50
40,0
40
30,0
30
1
3,0
0,0
0,0
0,0
0,0
0
1999
2001
1,62
1,5
15,4
3,3
2,13
2
25,1
20,3
20
10
2,5
2003
2005
2007
2009
0,5
0
0,05 0,05
1999
0,12 0,14
2001
0,65
0
2003
2005
0
0
2007
0
2009
25
Polkomtel
Non-core investment of significant value
Dividends
Shareholders’ structure
21.83%
24.39%
Dividend for
the year:
Paid in:
PLN m
2006
2007
202
2007
2008
245
2008
2008/09
305
2009
2009/10
137
2010
2010
123
4.99%
24.39%
PKN ORLEN
KGHM
PGE
24.39%
Vodafone
Węglokoks
PKN ORLEN has 24.39% stake in Polkomtel as a non-core investment.
PKN ORLEN’s intention is to dispose all shares hold in Polkomtel.
Polish Shareholders, i.e. KGHM Polska Miedz S.A., PKN ORLEN, PGE Polska Grupa Energetyczna S.A. and
WĘGLOKOKS S.A. currently hold in total over 75% of registered capital of Polkomtel S.A.
26
Effective execution of two-tier branding strategy as a response to market
polarization
PKN ORLEN branding strategy
PREMIUM
Poland
ECONOMICAL
Successful rebranding of heritage network of
mixed brands into premium ORLEN and
economical BLISKA networks.
Market research is to help to determine the final
branding strategy.
Czech Republic
Building a solid foundation for the future
development of high quality ORLEN network.
Lithuania
Focus on economical STAR network with
competitive prices and superior customer service.
Germany
27
Disclaimer
This presentation (“Presentation”) has been prepared by PKN ORLEN S.A. (“PKN ORLEN” or “Company”). Neither the Presentation nor any copy hereof may be copied,
distributed or delivered directly or indirectly to any person for any purpose without PKN ORLEN’s knowledge and consent. Copying, mailing, distribution or delivery of this
Presentation to any person in some jurisdictions may be subject to certain legal restrictions, and persons who may or have received this Presentation should familiarize
themselves with any such restrictions and abide by them. Failure to observe such restrictions may be deemed an infringement of applicable laws.
This Presentation contains neither a complete nor a comprehensive financial or commercial analysis of PKN ORLEN and of the PKN ORLEN Group, nor does it present its
position or prospects in a complete or comprehensive manner. PKN ORLEN has prepared the Presentation with due care, however certain inconsistencies or omissions might
have appeared in it. Therefore it is recommended that any person who intends to undertake any investment decision regarding any security issued by PKN ORLEN or its
subsidiaries shall only rely on information released as an official communication by PKN ORLEN in accordance with the legal and regulatory provisions that are binding for PKN
ORLEN.
The Presentation, as well as the attached slides and descriptions thereof may and do contain forward-looking statements. However, such statements must not be understood as
PKN ORLEN’s assurances or projections concerning future expected results of PKN ORLEN or companies of the PKN ORLEN Group. The Presentation is not and shall not be
understand as a forecast of future results of PKN ORLEN as well as of the PKN ORLEN Group.
It should be also noted that forward-looking statements, including statements relating to expectations regarding the future financial results give no guarantee or assurance that
such results will be achieved. The Management Board’s expectations are based on present knowledge, awareness and/or views of PKN ORLEN’s Management Board’s
members and are dependent on a number of factors, which may cause that the actual results that will be achieved by PKN ORLEN may differ materially from those discussed in
the document. Many such factors are beyond the present knowledge, awareness and/or control of the Company, or cannot be predicted by it.
No warranties or representations can be made as to the comprehensiveness or reliability of the information contained in this Presentation. Neither PKN ORLEN nor its directors,
managers, advisers or representatives of such persons shall bear any liability that might arise in connection with any use of this Presentation. Furthermore, no information
contained herein constitutes an obligation or representation of PKN ORLEN, its managers or directors, its Shareholders, subsidiary undertakings, advisers or representatives of
such persons.
This Presentation was prepared for information purposes only and is neither a purchase or sale offer, nor a solicitation of an offer to purchase or sell any securities or financial
instruments or an invitation to participate in any commercial venture. This Presentation is neither an offer nor an invitation to purchase or subscribe for any securities in any
jurisdiction and no statements contained herein may serve as a basis for any agreement, commitment or investment decision, or may be relied upon in connection with any
agreement, commitment or investment decision.
28
For more information on PKN ORLEN, please contact
Investor Relations Department:
telephone: + 48 24 256 81 80
fax
+ 48 24 367 77 11
e-mail: ir@orlen.pl
www.orlen.pl
29